HR Glossary | What is pay transparency?
What is pay transparency and what are its pros and cons? Plus, the legal implications and laws in place for pay transparency.
What is pay transparency?
Pay transparency is the act of making the level of pay for a job open to job seekers.
While some employers may choose to reveal levels of pay voluntarily, states are beginning to pass laws requiring pay transparency.
States and municipalities making pay transparency the law
Perhaps not surprisingly, California was the first state to require pay transparency, requiring employers to share pay scales with external applicants if requested—and only following an applicant’s first interview. Other states have followed suit with Maryland requiring disclosure upon applicant’s request; Cincinnati and Toledo after a conditional offer of employment, and Washington state requiring employers to provide pay scales to internal employees as well as external candidates upon request after an initial offer.
Beginning April 2022 New York City will begin requiring employers to include salary ranges in job postings.
Why is there a push for pay transparency?
Pay transparency efforts reflect a desire to address pay inequality that negatively impacts women and minorities. By making pay ranges open to applicants—and employees—they are better able to negotiate salaries that help to minimize gaps that have long existed between white males and other demographic cohorts.
There are both pros and cons to pay transparency.
Pros and cons of pay transparency
The benefits of pay transparency to employees is obvious. It helps ensure that their pay is competitive. But employers also benefit—salary negotiation will be much simplified and pay transparency may also serve to attract higher qualified applicants.
The drawbacks for companies include the additional administrative work required, the potential to lose employees to other companies with better pay, and the possibility that some employees will be concerned that their pay is less than other colleagues.
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