Here’s Why Many Employers Believe in Pay Transparency

Employers commonly, and actively, discourage workers from discussing compensation and salaries. This hush-hush culture around pay creates immense inequalities for women, minorities, and people of color.

Some employers promote pay transparency to address pay inequality, build trust with employees, and create a more productive dialogue about value.

Pay transparency also can boost recruitment and retention, helping employers attract and retain top employees who know the value of their work — and their neighbors’ contributions. Top talent want to work where there is an open dialogue about equality, benefits, bonuses, and salary ranges because it shows the employer values openness and trust.

Several states have enacted laws mandating employers to disclose wage ranges to their employees. These laws are designed to promote transparency and ensure fair compensation practices. Providing employees with information about the wage ranges for specific positions enables them to understand their earning potential, negotiate salaries more effectively, and help address pay inequality and discrimination. These measures seek to create a more equitable and informed labor environment.

When it comes to pay, there are three levels of transparency:

• Full transparency: Employees have access to all salary information. Fully transparent employers make this information widely accessible to avoid pay gaps, motivate employees, avoid salary negotiations, and improve employee morale.
• Partial transparency: Companies practice varying levels of transparency. Although this model can allow for inequities, it does help employers motivate employees with basic salary information. 
• No transparency: Employers do not disclose salary ranges or compensation practices, which can lead to potential inequities and wage gaps.

Pay transparency shines a light on compensation practices. It levels the playing field and encourages fairness in how employees are compensated. Further, it addresses the long-standing issue of wage gaps and helps combat discrimination based on gender, race, or other factors. 

There’s no doubt pay transparency can come with challenges. Openness often reveals new issues. Employees might feel confused or frustrated by the information. If so, it’s the employer’s responsibility to promote trust and feedback instead of conflict. After all, poor communication is one of the main reasons why employees leave to find another job.

Strategies to overcome the challenges of pay transparency include:

• Ensuring local and national legal compliance
• Spending time creating clear expectations for each pay bracket
• Holding regular compensation reviews for all employees
• Focusing on employee performance and experience
• Setting clear expectations during hiring and onboarding processes
• Addressing problems and offer meaningful solutions
• Collecting and monitoring confidential employee feedback 

One of the main issues pay transparency addresses is the gender wage gap. That gap arises from various factors, such as occupational segregation, unconscious bias, and discrimination. Women often earn less than their male counterparts for the same job. This can lead to reduced financial security, hindered career advancement, and a diminished overall lifetime income. 

The initial step in implementing pay transparency is determining the company’s goals for greater transparency in compensation practices. This involves identifying objectives such as reducing pay disparities, enhancing employee satisfaction, and fostering a more inclusive work environment. 

Once the goals are established, the rollout of pay transparency should occur incrementally, starting with internal pay transparency, which involves making compensation information accessible to employees within the organization. This can be followed by external pay transparency, where companies disclose salary ranges and compensation structures to potential candidates during the hiring process. 

By adopting a step-by-step approach, organizations can build trust and adapt to the changes by pay transparency, ultimately fostering a more equitable and transparent workplace.

Bob Helbig is media partnerships director at Energage, a Philadelphia-based employee survey firm. Energage is The Washington Post’s survey partner for Top Workplaces.