Everything You Need to Know About Pay Transparency

At some point, we’ve all wondered if we’re being paid enough. However, since discussing salaries openly is considered taboo, many people are left confused as to whether they’re being paid according to the market standard or not.

Many people walk out of their second interviews wondering if their accepted compensation is fair. Yet, how can you possibly know if you should have negotiated your salary? That’s where pay transparency comes in.

In this guide, you’ll learn what pay transparency means, where it’s applicable, and whether your state mandates it. Keep reading to know how much information an employer should disclose about salaries.

What is pay transparency?

The term “pay transparency” is used to describe the act of making pay information public. It could include sharing salary ranges, revealing how much someone was paid for a previous job, or disclosing how bonuses are calculated.

Suppose you’re looking for a marketing associate job. Pay transparency means the employer has to tell the applicants about the salary range either in the job listing or at the time of the interview.

The regulations regarding pay transparency differ across states and organizations. While some companies may be transparent about salaries in job ads, others will only disclose this information if you request it.

Why is pay transparency important?

Pay transparency is essential in the workplace because it can help close the gender wage gap, ensure that employees are paid fairly for their work, and provide employees with a clear understanding of what they should be paid.

The gender pay gap is when women are paid less than men for doing the same role. Pay transparency helps narrow or close the gender wage gap because it allows employees to see what their coworkers are being paid for doing the same job.

In addition, the information can help employees negotiate for better pay and benefits and help organizations identify and correct pay disparities.

Additionally, pay transparency enables managers to understand what their employees are worth to the organization and makes it easier to determine whether someone is underpaid or overpaid.

By understanding what others in similar roles are being paid, employees can better understand whether they are being paid fairly.

Pay transparency is also beneficial for companies since it ensures employee retention. It also improves employee productivity by empowering the workforce.

A 2021 report found that 51% of employees would leave their current job to move to a company with higher pay transparency. That's mainly because pay transparency gives employees an avenue for self-evaluation.

Therefore, they can determine if they are getting fair wages. In addition, when employees know the organization compensates everyone equally, it creates a strong company culture and prevents employee mistrust.

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Are all employers required to practice pay transparency?

Not all companies have to practice pay transparency unless they’re in a state that requires them to do so.

Suppose you're applying for a medical coding job in your state. Your potential employer will only have to disclose salary details if state laws mandate them to do so. Otherwise, they may not share the information with you at all or will only disclose it upon request.

However, companies can be transparent about salaries for their own benefit. For instance, if a company wants to increase employee retention, it should consider being transparent about salaries.

States that mandate pay-scale disclosure

With time, many states have jumped on the bandwagon of passing pay transparency laws to prevent workplace discrimination and ensure employee satisfaction. The following states have some sort of pay transparency laws:

• California

• Colorado

• Connecticut

• Delaware

• Illinois

• Louisiana

• Maryland

• Maine

• Massachusetts

• Michigan

• Minnesota

• New Hampshire

• New Jersey

• New York

• Oregon

• Vermont

• Virginia

All of these states have different clauses in their pay transparency laws. For instance, 14 states make it illegal for employers to inquire about the job candidates' pay histories. Likewise, over 20 states have protections for employees in terms of salary discussions.

Advocates of pay transparency argue that it is a way to ensure equality in the workplace by ensuring that everyone is being paid fairly for their work. Furthermore, they state that it allows employees to have frank discussions about salaries and can help address discrimination issues.

However, some argue against pay transparency. They state that it could lead to envy and resentment among employees and dissuade employers from hiring or promoting specific individuals.

Pay transparency is a complex issue with pros and cons on both sides. What is important is that employees are aware of their rights regarding pay transparency and that they can have open discussions with their employers about their salaries.

The latest state to join the ranks is New York, passing a pay transparency law in January 2022.

What is disclosed in pay transparency?

It varies across states and businesses. For example, the Equal Pay for Equal Work Act in Colorado states that employers have to include benefits and pay ranges in job listings.

Companies also have to post this information for remote jobs. Therefore, employees don’t have to request salary information as it’s readily available in newspaper listings or online ads.

Employers are required to notify their workforce of promotion opportunities within the company. In this way, employees can evaluate the basis on which their colleagues were promoted.

Meanwhile, employers only have to show the salary range if the employee asks for it in Connecticut. Employers have to disclose the pay range with the employees when they hire them, transfer them to a new position, or give them a new role.

Nevada has similar rules. Employers have to share the wage range with their external applicants after the interview. Meanwhile, they must share wage ranges with current employees applying for new roles at the same company.

Maryland also passed the Equal Pay for Equal Work law in 2020. As per this law, employers cannot ask job applicants any questions about salary history. They also have to tell the salary range to candidates if requested.

Washington has slightly different pay transparency laws, which means companies have to disclose wage ranges with both internal and external job candidates. However, they only need to share this information upon request.

Although these laws exist in many states, most job seekers don't benefit from them due to a lack of awareness. Job seekers should be aware of their rights so that they can demand fair wages.

Benefits of pay transparency for employees

It's pretty unfortunate that broad pay transparency is still relatively uncommon. As the graph below shows, the minimal pay-related information shared with employees has increased since 2016. However, it’s still not as common as it should be.

It’s also evident that most companies don’t share information on how pay scales are determined. In fact, the number of companies sharing this information with employees has decreased since 2015.

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Businesses should ensure pay transparency in the workplace to empower their employees and maximize performance. Pay transparency has the following benefits for employees:

• Fair compensation: Pay transparency ensures that employees are paid fairly for the work they do based on their skills, experience, and qualifications. As a result, it can help eliminate discrimination and create a level playing field in the workplace.

• Greater job satisfaction: When employees know they are being paid fairly compared to their colleagues, they are more likely to feel satisfied with their compensation and motivated for the job in hand.

• Better salary negotiations: Employees can use pay transparency to their advantage during salary negotiations. If they know what their colleagues earn, they can negotiate a fair salary.

• Improved workplace morale: Pay transparency can improve workplace morale by creating a sense of fairness and equity. Employees who feel like they are being treated fairly are more likely to be productive and engaged in their work.

• Avoid discrimination: Discriminatory practices in the workplace, such as the gender pay gap, can be addressed with pay transparency. By making salaries public, employers can be held accountable for ensuring that all employees are paid equally.

Benefits of pay transparency for employers

Besides employees, employers can also benefit from pay transparency. Here are some benefits of pay disclosure for businesses.

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• Benchmark salaries: Employers can use salary data to set appropriate salaries for their employees. They can also use this information to determine whether their employees are being underpaid or overpaid compared to others in the same field.

• Inform hiring decisions: Pay transparency can help employers during the hiring process. For example, employers can use salary information when considering candidates to get a better sense of whether a potential employee is likely to accept their offer.

• Attract top talent: Organizations that are open about their pay practices may be more attractive to job seekers, as they can be sure they will be paid fairly.

• Allow focus on other things during interviews: Candidates are often asked about their salary expectations during job interviews. If employers are upfront about their pay ranges, candidates can focus on other aspects of the job during the interview process.

• Build trust: Pay transparency can help build trust between employers and employees. When employees know that they will be paid fairly, they may be more likely to trust their employer, which helps with retention.

How can companies practice pay transparency?

Businesses can disclose pay information in a variety of ways. They can post salary ranges on their website, make them available to employees upon request, or publish them in an annual report.

Also, companies can be more transparent about how they make decisions about raises and bonuses. They can share this information with employees on a regular basis or allow them to submit questions anonymously to HR.

Alternatively, businesses can create a forum where employees can discuss pay openly and honestly. It can help identify any disparities and give employees a sense of empowerment.

Here are some tips to get you started:

Do a pay analysis

A pay analysis will help employers determine pay discrepancies in their organization. Businesses can do this by looking at the salaries of current employees and comparing them to the market rate.

When conducting a pay equity analysis, companies use the following variables:

• Control: The control variables are the variables that are used to explain the variation in the dependent variable. These include job roles and job levels.

• Independent: The independent variables are the variables used to explain the variation in the dependent variable. These include gender, age, and racial background.

• Dependent: The dependent variable is the variable explained by the independent and control variables. In this case, the dependent variable is compensation.

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Make salary ranges available

Employers can make it easier for potential and current employees to understand their worth by publishing salary ranges. That also helps prevent candidates for requesting a salary that’s outside the budget and streamlines the interview process.

For instance, companies can disclose their wage ranges based on the job tier, such as clerk, supervisor, director, or manager. In this way, applicants will have an idea of the salary they can expect at their designated grade, level, or tier.

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Get insights from objective data

Businesses can use online data to benchmark their salaries. It will give them a better understanding of how they compare to other companies in terms of pay.

For instance, websites like salary.com and PayScale offer salary information for specific job titles in specific locations. The data can help businesses see whether they are paying their employees fairly.

Additionally, online data can help businesses benchmark their benefits packages. Websites like BenefitsPro offer information on a variety of benefits, including health insurance and retirement plans.

It’s the era of pay transparency

Pay transparency has become a necessity in the modern workplace. Thanks to the internet, employees can easily compare their salaries to their peers. This has led to increased pressure on businesses to be more open about how they pay their employees.

Pay transparency benefits employees by providing them with the information to negotiate their salaries. Meanwhile, it helps employers improve employee retention and productivity.

If you work in the states listed in this article, look for jobs in your area on Jobcase and ask the recruiters for a salary range to know your earning potential.