Salary transparency is the practice of transparently disclosing wages and other compensation for job positions, allowing both candidates and existing employees to know what a given role at the company is going for. Employers can be transparent on job descriptions, during promotions, and in transfers, or even have an open database of all employee salaries. Employees can practice salary transparency by openly discussing their compensation with colleagues or publicly.
In a survey of seven countries, Glassdoor found that 70% of workers believe salary transparency is good for employee satisfaction, and 72% believe it’s good for business. Amidst this overwhelming support from workers, legislators have stepped up and codified salary transparency into law. Here is everything you need to know about salary transparency, the laws surrounding it, and actionable steps to make pay transparency work in your own organization.
Why does salary transparency matter?
Pay secrecy rules
Companies have commonly used pay secrecy rules to discourage or prohibit employees from discussing salaries with coworkers. These rules can be verbal, implied, or written into an employee code of conduct. In the past, employers were concerned with water-cooler talk, but now companies are worried about employees taking to social media to discuss salary transparency on public platforms like TikTok.
Ostensibly, companies with pay secrecy rules are preventing discord and jealousy at work. The reality is that pay secrecy has some serious negative consequences in terms of DEIB:
- Maintaining gender and racial pay gaps
- Wasting time for both applicants and hiring teams during application and interviewing
- Preventing effective salary negotiation
- Sowing mistrust between employer and employee
- Disengagement from work
Benefits of salary transparency
Salary transparency is a reversal of a long-held taboo, especially in the United States. The potential benefits of salary transparency for building more inclusive workplaces are significant:
- Pay equity — If your company prioritizes pay equity, then salary transparency is a given.
- Trust — 55% of leaders think their companies are very transparent, while only 18% of employees agree. Transparency has a direct impact on building trust in the workplace.
- Talent acquisition — Job descriptions that include the salary range will attract more applicants. Without a salary range, many top candidates won’t even bother going through the application process. Despite that, just 12% of job descriptions in the U.S. had salary ranges in 2022.
- Retention — Transparency builds better relationships. Employees that trust their employer are two times more likely (74%) to be loyal than those who don’t (35%).
- Productivity — 71% of workers who trust their employer report being engaged at work, while the same could be said for only 38% of workers who don’t trust their employer.
Laws about salary transparency
If salary transparency is atypical in the U.S., how do we know all these benefits? Because we have research and proof in other countries. In Norway, all salaries are public information. Unsurprisingly, their gender wage gap is one of the lowest in the world.
While the U.S. is a far cry away from federal legislation, there have been a number of recent state and city salary transparency laws, with more on the way. Here is a breakdown of current salary transparency acts and laws as of June 2023:
California
- Prohibits employers from asking for pay history information
- Upon request, employers must provide an applicant with the pay scale for the position
- Upon request, employers must provide their current employees with pay scales for their positions
- Must include the pay scale on a job posting, including third-party posts
Colorado
Employers must disclose the following in a job description:
- The hourly rate or salary compensation range
- A description of bonuses, commissions, or other forms of compensation
- A description of all employment benefits that the employer is offering
Connecticut
Employers must provide the wage range:
- When requested by an applicant and/or prior to an offer of employment
- For a current employee upon their first request for a wage range, when they are hired, and when they change their position
Employees can also discuss their wages without retaliation from an employer.
Maryland
- Employers must provide the wage range of the position to job applicants upon request
- Employers cannot prohibit or take action against employees that discuss their wages with other employees
Nevada
- Prohibits employers from asking about salary history
- Requires all applicants be provided with a salary range automatically after an interview
- Requires that employees be provided with a salary range for a new position or during a promotion or transfer
Jersey City, New Jersey
Employers that use any print or digital media circulating within the city to provide notice of employment opportunities must disclose:
- A minimum and maximum salary and/or hourly wage, including benefits, in the posting or advertisement.
New York
For all jobs performed fully or in-part in New York, employers must:
- State the minimum and maximum salary for the advertised job position, promotion, or transfer
Cincinnati and Toledo, Ohio
Salary Equity Ordinance, Pay Equity Act
- Employers must provide the pay scale for a position to an applicant who has received a conditional offer of employment
- Prohibits the inquiry and use of salary history in hiring practices
Rhode Island
Employers must:
- Upon request, provide the salary range for the position for which the applicant is applying
- Upon request, provide an employee the wage range for the employee's position at the time of hire when the employee moves into a new position
- Not consider salary history in hiring
Washington
Employers with 15 or more employees must:
- Upon request, provide the minimum wage or salary for the position for which the applicant is applying
- Upon the request of an employee offered an internal transfer to a new position or promotion, the employer must provide the wage scale or salary range for the employee's new position
- If no wage scale or salary range exists, provide the minimum wage or salary expectation set by the employer prior to posting the position, making a position transfer, or making the promotion
- Disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered if hired
Salary transparency examples from industry leaders
There are companies who have been leading the way with salary transparency even before it was the law. Here’s a look at some of the companies prioritizing salary transparency.
Buffer
The social media management platform prioritizes salary transparency using their concept of “Open Salaries.” They offer up exactly how salaries are calculated using this formula:
- Salary = job type x seniority x experience + location (+ $10K if choosing salary instead of equity)
Descriptions and specific calculations are offered for each variable on their website. But Buffer doesn’t stop there. In an effort to be a completely “Open Company,” they publish all their current salaries on a public spreadsheet.
Salesforce
The San Francisco-based software company has committed to equal pay for their employees. As part of this commitment, Salesforce conducts annual equal pay audits across their global workforce. In 2022, their audit found that 8.5% of employees needed some adjustment in their salary, and they spent $5.6 million to address unexplained differences. Salesforce also explains their methodology and publishes their pay equity results.
6 key actions to promote salary transparency
1. Embrace it.
Pay transparency is increasingly becoming the law, but it’s also a leading practice for DEIB-informed workplaces. Leadership should expect that conversations about pay will happen. Don’t view them as conflict or demands for more. Instead, view these conversations as fair requests for information. Build trust and stronger relationships with employees through transparency.
2. Review your organization’s pay policies.
Leadership, supervisors, and HR should have a strong understanding of how salaries are determined in their company.
- How does your organization calculate compensation?
- What are protected factors that account for differences?
- What are factors that are unfair or illegal?
- Are your salaries competitive in the market? What do competitors pay?
- What are the geographical considerations of pay? How about remote work?
3. Establish clear salary ranges for existing positions.
If they don’t exist already, establish salary ranges for existing positions based on your policies and philosophy. Leaving salary decisions up to individual managers opens the door to bias — and leaves the organization vulnerable to public opinion and lawsuits. Salary ranges must be valid and conform to your specific policies, not based on gut feelings. Ranges should be easy-to-understand so that all supervisors can explain and determine base salary ranges for new positions.
Take a cue from Salesforce. Publish your salary ranges and methodology for all employees to see.
4. Revise your applicant material and records.
Remove salary history fields from all job application documents and forms. Don’t forget paper versions. Check your employee code of conduct or other employee forms for clauses about pay secrecy and remove them. Include clauses that specifically state that the discussion of salary is protected by law (where applicable).
5. Conduct a pay equity audit.
Now that your pay policies are clear, review the salaries of your workforce. You’ll have to collect and cross-reference a lot of information, including:
- Demographics
- Salary
- Work history
- Performance reviews
Are there any discrepancies that can’t be explained? Are there discrepancies that align with protected categories? Take immediate steps to compensate these employees appropriately — and retroactively, based on their start date. Dedicated DEIB software can help track the information you need.
6. Avoid outrageously wide pay ranges.
One way that employers have circumvented salary transparency requirements is by putting unhelpfully wide ranges on job descriptions. In some cases, the range has been $100,000 between the bottom and top. This helps no one and defeats the purpose of the law. Keep published pay ranges realistic. A range with $5,000-10,000 of wiggle room is realistic in most cases based on the organization's budgeting allocation. Honestly list what you, as the employer, actually expect to compensate. On that note, always be clear about what would put an applicant in the bottom or top of that range.
Salary transparency is here to stay
Salary transparency isn’t a trend that will blow over. It’s a business practice for efficiency that serves everyone, including applicants, employees, and organizations. For many working Americans, it’s the law. For employers, salary transparency is an opportunity to build trust, streamline hiring, strengthen relationships, and better engage their workforce. When employers are transparent about salary, it helps the organization attract and retain top talent, keeping their business competitive. Search through our resources for employers to learn more about the DEIB practices that will make your organization more efficient.
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