Pay transparency laws are making headlines — and for good reason. These regulations aim to promote pay equity and reduce wage discrimination by requiring organizations to be open about their compensation practices.
With new pay transparency laws being introduced across the U.S., Europe and other regions, we will see increased focus on this topic in job postings and during salary negotiations.
What is pay transparency?
Pay transparency refers to the practice of openly sharing salary information to internal and external candidates. Companies disclose salary ranges for specific roles and share detailed compensation data, including bonuses and benefits. By promoting pay transparency, companies aim to
- reduce pay disparities
- build trust among employees
- foster fair and inclusive workplaces
Pay transparency laws by state
In California, the Fair Pay Act requires employers to pay employees who perform substantially similar work equally. In several states — including Hawaii, Kentucky and Nevada — salary history bans prohibit employers from asking job candidates about their previous earnings.
In Colorado, employers must list the pay range and benefits for every job opening. And in Europe, the recent Pay Transparency Directive includes both measures and introduces mandatory reporting.
Benefits of pay transparency
Companies that adopt pay transparency signal their commitment to fair pay and workplace equality by publishing:
- salary ranges
- bonuses
- benefits
Young people see transparency and openness as a crucial element to create trust and consider these companies more attractive employers.
But it’s not limited to young people: a recent Visier study found that 79% of employees want some form of pay transparency, while 68% said they would switch employers for greater pay transparency.
How pay transparency supports DEIB
Employees want to know that their employer treats everyone equally. Deloitte research shows organizations with strong diversity, equity, inclusion and belonging (DEIB) practices have higher levels of:
- employee engagement
- innovation
- financial performance
And that’s good for everyone involved.
When you peel back the layers, pay transparency supports DEIB in the workplace in the following ways:
1. Bridging the pay gap
Transparent pay practices expose pay disparities between workers and resolve them, resulting in an environment where workers feel that they are rewarded fairly and equally.
The Society for Human Resource Management notes that 91% of employees who believe their organization is transparent about how pay decisions are made also said they trust their organization pays people equally for equal work, regardless of gender, race and ethnicity.
2. Promoting inclusive policies
Pay transparency forces organizations to evaluate and adjust their compensation policies to ensure equity for all employees, regardless of:
- background
- gender
- age
- experience
3. Fostering belonging
When employees feel that they are compensated fairly and their employer is open and transparent about pay, they are more likely to feel a strong sense of belonging and commitment to the organization.
In fact, 70% of employees across seven countries believe salary transparency is good for employee satisfaction, according to Glassdoor. And that is a promising step.
Pay transparency helps businesses achieve DEIB goals by ensuring all employees — regardless of their background or role within the company — are compensated fairly and have access to the technology and information they need to understand their pay.
Read this blog post to learn more about tech’s role in pay transparency and best practices.
DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.
