Pay transparency — the practice of openly sharing information about compensation with employees and candidates — has made headlines in recent years because of a post-pandemic shift toward more openness in the workplace as well as new legislation requiring employers in certain areas to share salary information on job postings.
What Is Pay Transparency?
Also known as salary transparency, wage transparency and compensation transparency, pay transparency involves openly communicating salary information with employees and job candidates. This communication can take many forms, from publicizing individual employees’ salaries to sharing details about salary structure, pay scales or salary bands within a company.
In fact, 65 percent of U.S. professionals have asked or have wanted to ask a coworker how much they earn, according to research by resume-writing company ZipJob. The same percentage of respondents said they would be willing to reveal their current salary if asked by a colleague.
There is value in encouraging open conversations about pay, career growth and performance metrics in the workplace; however, not every company or employee is ready to be so transparent and forthcoming. If you wish to make a case for more pay transparency at your company, carefully consider the pros and cons of promoting such openness before taking any action.
Pay Transparency Benefits
Openly discussing your salary can help you understand how your pay compares with that of those in similar roles, if any wage disparities should be addressed, and whether you and your coworkers can collectively negotiate for better compensation packages.
Employers can also benefit from encouraging a more transparent work culture. Below are some advantages your employer can expect should leadership decide to embrace pay transparency in the workplace.
Increased Trust and Morale
Pay transparency can build trust throughout the organization by demonstrating the company’s commitment to an open and fair work environment. In addition, when employees can trust that compensation and raises are based on objective criteria, rather than secrecy, it can boost overall morale and employee satisfaction.
Improved Retention and Recruitment
Transparent pay practices can help to attract top talent, as job seekers may be more inclined to join a company where compensation is clear and equitable. In fact, a Society for Human Resource Management report revealed that 82 percent of U.S. professionals are more likely to apply for a job if the pay range is listed on the job posting, whereas 74 percent are less interested in applying for a job if it doesn’t list a pay range. Employees are also less likely to seek job opportunities elsewhere if they’re confident that their salary is fair.
Reduced Gender and Diversity Pay Gaps
When companies implement transparent pay policies, it helps them to identify and address gender and diversity pay gaps by highlighting disparities in compensation. Addressing such gaps can boost recruitment efforts among candidates who prioritize employers that are committed to creating a more diverse, equitable and inclusive workforce.
5 Facts About Pay Transparency
- More than half (65 percent) of U.S. professionals would like to or have asked a colleague how much they earn. The same percentage said they are willing to reveal their current salary if asked by a colleague.
- More than half (60 percent) of U.S. states and localities prohibit employers from requesting salary information from job applicants and require employers to disclose the pay range for a position to applicants or employees.
- As of March 2023, nearly 27 percent of the U.S. labor force lives in a state where employers are required by law to list salary ranges in public job postings.
- Eighty-two percent of U.S. professionals are more likely to apply for a job if the pay range is listed on the job posting, whereas 74 percent are less interested in applying for jobs that don’t list a pay range.
- In 2023, the EU Pay Transparency Directive was passed. When it goes into effect, employers with 100 or more employees will be required to publish information on the pay gap between female and male employees, as well as share information on how pay is set, progressed, and managed.
Pay Transparency Drawbacks
Salary discussions with coworkers also can present drawbacks. If the conversation is not carefully handled, or if you discover that one coworker earns substantially more or less than their peers, it could lead to jealousy, tension, and strained relationships within your team.
In addition, those conversations could lead to disciplinary actions if your company has any policies that prohibit discussing salaries with colleagues. Here are some reasons an employer might be reluctant to promote a culture of pay transparency.
Employee Resistance or Discomfort
Although ZipJob’s data indicates that the majority of employees are interested in openly discussing salaries, some employees may feel uncomfortable with the idea, leading to unnecessary tension in the workplace. Indeed, 28 percent of respondents in the ZipJob survey confirmed they would be offended if a coworker asked about their salary.
Higher Risk of Resentment
Pay disparities may become more apparent with such transparency, leading to potential resentment among employees if there are notable differences in compensation. This could be especially damaging to employee morale, team dynamics, employee retention and recruitment efforts if there are significant pay gaps between genders or races. This backlash will be worse if the company is unable or unwilling to close the pay gaps.
Unmet Employee Expectations
Transparent pay practices may create higher expectations among employees for regular and consistent adjustments, potentially putting pressure on employers. If your company is unable to meet such expectations, it could cause a backlash that harms employee morale, retention, and productivity, among other things
Tips for Salary Discussions
Regardless of whether your company decides to disclose more information about pay, you can promote a culture of transparency within your own team. Start by having open salary discussions with your coworkers. Before having these discussions, carefully consider the culture of your workplace, your company’s current policies and your coworker’s personality.
Be Upfront and Honest
Be honest about your intentions when asking a colleague about their salary. Are you concerned about a substantial wage gap among team members? Are you planning to negotiate a raise and want to understand how your salary compares to your coworkers? Whatever your motivation, be ready and willing to share it with your coworker. If your coworker isn’t comfortable sharing such sensitive information, respect their decision and leave it at that.
Alternatively, if a coworker asks about your salary and you don’t wish to share that information, simply say, “I hope you understand, but I prefer to keep my salary confidential,” and then shift the conversation by offering to share general insights you’ve learned about your industry’s salary ranges or other factors that influence compensation.
Timing and Place Count
Schedule this conversation when neither of you is feeling especially overwhelmed or stressed so you can stay professional and give one another your full attention. Choose a location, such as a conference room or offsite lunch spot, that ensures privacy for you and your coworker. If you’re both working virtually, opt for a video conference, rather than a phone call, so you can take note of your coworker’s body language during your talk.
Keep Emotions at Bay
Remain professional when discussing your salary with coworkers. The goal of this conversation is to simply gather data about average salaries at your company, in your industry and among similar positions so you can more effectively negotiate with your manager or a different employer altogether.
If you plan to make a case for greater pay transparency in your company, you’ll need to do more than simply share the benefits of implementing such policies. Use resources such as InHerSight and Built In to identify other companies that are known for offering pay transparency.
In addition, check to see if your company is hiring positions in any of the 30 U.S. states or localities that require (or will require in the near future) employers to disclose the pay range for a position to applicants or employees. While adhering to these laws won’t necessarily make your company open and transparent about all things related to pay, it’s certainly a step in the right direction and serves as a good opening for a larger discussion.
