It seems that suddenly pay transparency — the degree to which companies disclose the compensation for current and prospective job roles — is top of mind for many state and local governments as well as for major corporations. This movement continues the pandemic-era trend of attempting to correct many of the disparities of past working conditions such as the pervasive pay gap experienced by women and people of color.
Pay transparency requirements are currently on the books in several states and cities, with more poised to join the ranks. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island, and Washington, as well as localities in New York, New Jersey, and Ohio, have all enacted laws that require employers to provide salary ranges to applicants and employees. In addition, large enterprises such as Microsoft are making headlines by implementing their own pay transparency mandates.
Meanwhile, a survey of nearly 400 employers by the advisory firm WTW found that while only 17% say they currently post salary ranges in locations where there is not a legal requirement to do so, an additional 62% say they are either planning to or considering voluntarily adding pay ranges to job postings even in places where it’s not required by law.
The many advantages of pay transparency for workers — improved visibility into their companies’ pay structure, more informed level-setting for the salary range of a professional’s position, more targeted job searches — are easy to identify. But what benefits does greater pay transparency bring to employers? And how could implementing a pay transparency strategy enhance your organization’s recruiting and retention initiatives?
Winning the Talent Wars
Of course, some employers aren’t ready to reveal these highly sensitive salary figures to the internal and external employment ecosystems for a range of reasons. Nearly half of organizations in the WTW survey cited the reactions of employees as a reason they were holding back on communicating specifics about salaries, and a quarter pointed to a lack of clear job titles and pay structures as reasons for not revealing more.
However, human resources experts predict companies won’t be able to dodge the pay transparency question for too long, due to employee expectations about enhanced equity in their organizations. These increased demands for fairness is the chief reason why businesses should consider improving their pay transparency policies.
Recent research shows that the vast majority of workers are in support of salary transparency, which makes the practice a powerful tool in winning today’s heated talent wars. More than half of respondents revealed that they wouldn’t even apply for a job that doesn’t disclose the salary, even in states where it’s not required. Companies that are ahead of the curve will attract and retain talent over those that continue to keep things close to the vest.
Pay transparency is also beneficial for sourcing the right candidate out of the gate; by having open and honest conversations about salary upfront, employers can weed out unsuitable applicants, speeding up the hiring process and greatly aiding in setting realistic employee expectations and enhancing talent retention.
Pay Transparency and Your Organization
If your company is looking to implement or improve your pay transparency efforts, either because its is mandated by law in your area or because you recognize the inherent value in increased clarity around your employees’ salaries, there are several ways you can get started:
- Weigh internal vs. external strategies. If you’re not ready to share your company’s salaries publicly, consider an internal approach. Employers can coach their employees in successful ways to openly discuss their salaries. By increasing pay visibility within your ranks, you remove speculation and misconceptions and build employee trust.
- Connect your company’s pay to credentials — without exception. Basing your pay structure on the skills, capabilities, and backgrounds of your aspiring and existing employees removes any subjectivity or accusations of favoritism from the equation.
- Conduct regular pay audits. Nearly 3 in 5 (58%) of U.S. organizations voluntarily conduct pay equity reviews to identify possible pay differences between employees performing similar work. Of those organizations, 83% adjusted employees’ pay following a pay equity review, according to survey data from the Society for Human Resource Management. Regularly assessing your organization’s pay structure can help bring to light any disparities and allow for critical adjustments.
- Recognize that pay transparency is an honest reflection of your company culture. Increasingly, employees are looking to join organizations that align with their values. By openly sharing salary information, including each of the factors that are taken into consideration in determining pay, employers can show that they respect and represent integrity and fairness.
Salary Is Just Part of the Talent Puzzle
Issues such as pay transparency are constantly evolving in today’s rapidly changing world of work. Devising a successful hiring strategy requires deep understanding of the movements that are shaping our workplaces.
Helping to shape the future of work requires an executive search partner who can help you navigate the current landscape of talent management. Count on the 20/20 Foresight Executive Search team, who has been guiding organizations for almost 30 years on making the right hiring decisions at the right time, to be that ally.