Pay transparency has become a hot topic in recent years as employees and job seekers are demanding greater clarity and fairness in their compensation. With the rise of social media and the growing awareness of pay disparities, particularly for women and people of color, employees are calling for increased openness about pay practices and salaries.
In response, companies and organizations are re-evaluating their compensation policies and looking for ways to increase salary transparency. The importance of pay transparency in the workplace has never been higher, and it is rapidly becoming a critical component of a company's overall reputation and success with talent. Below, we weigh the advantages and challenges of pay transparency, and how you can convey your compensation packages in a compelling, clear way.
What is pay transparency?
Pay transparency is a general term for how open an employer is about how they compensate their employees. At a very basic level, pay transparency includes sharing salary and/or wage information, but you will also want to consider:
Who are you sharing pay data with? Is it made available to anyone looking at your job listing, or to passive candidates you reach out to?
What information is disclosed and what information are you asking candidates/employees to disclose? Are you sharing salary ranges for open roles or are you sharing salaries for current employees? Are you including total compensation packages (bonuses, equity, etc.)? Conversations around pay transparency frequently tie into salary history which is asking candidates about what they’ve been compensated in the past.
When and where are you sharing information? Some states already have established pay transparency laws and others are slated to follow suit in the near future. Even if you aren’t legally obligated to disclose pay information on job postings, there are advantages to being transparent about compensation to candidates -- we'll discuss more below!
How do people interact with your pay transparency policies? Is pay transparency a part of your employer brand strategy, or your onboarding process? Consider where people go to learn more about your philosophy behind pay transparency, how pay is structured, and the rationale behind that structure.
Why do you pay what you pay? This question ties into your company’s business strategy and company culture because pay is inherently tied to value. Analyze and outline how your pay structure and communication strategy align with these two areas.
It's important to remember that pay transparency exists on a spectrum. To decide what's right for your organization, first you need to understand compliance and best practices. Check out this guide our partners at Ashby created with the recent launch of their new pay transparency features. Along with any legal requirements, answer the above questions to help you determine how to move forward in communicating compensation.
What are the challenges of pay transparency in hiring?
Transparency with compensation is a noble and worthwhile goal, and it seems simple enough on the surface. However, as with almost anything tied to money, it can be a touchy, complicated subject. A 2022 survey by WTW found that just 17% of US companies are already disclosing pay range information; 62% are looking into pay transparency policies for the future.
Why the hesitation to adopt? Major concerns include:
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Companies just aren’t ready. In the WTW survey, 30% of organizations noted being held back by administrative complexities and 25% said they lacked a clear job structure.
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Fear of blowback and discontent from employees. Especially if pay structures aren’t fairly implemented and clearly communicated, it can lead to resentment between individuals and dissatisfaction overall.
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Reduced candidate pools for companies with less competitive pay ranges. If you do publish pay ranges and they’re below average, candidates may look elsewhere. But it’s not completely hopeless, as we’ll discuss later!
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Increases competition. Especially for in-demand roles and in-demand talent, there’s always someone who can offer more money. Some fear that this could lead to longer negotiation and hiring times, and to companies paying excessively high salaries.
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Increase in pay negotiation and pay compression. Publishing compensation could cause current and potential employees to be more demanding with their salaries. A lack of proper structures and communication sometimes leads to pay compression, in which employees earn similar salaries regardless of experience, level, or skills.
What are the benefits of incorporating pay transparency into the hiring process?
Companies must stay up-to-date on what is legally required of them, so keep an eye on legislation updates to stay compliant in your area. Even if you don’t operate in those locations, being open with candidates about compensation has major benefits:
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Deepens and widens your talent pool. Transparency itself is beneficial: Glassdoor found that 63% of employees would rather work at a company that discloses pay. And that boost in applicants comes, in large part, from underrepresented talent, who otherwise might not have been motivated to apply to the role.
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Increases efficiency in the recruiting process. Not only does sharing salary information attract more candidates – it attracts more candidates who are interested in the role, for the stated range. That means some candidates will self-filter themselves out, and recruiters can focus their efforts on candidates who are a fit, compensation-wise.
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Closes pay gaps and increases pay equity. Wage gaps still exist for women and underrepresented minorities; in fact, women are four times less likely to negotiate their starting salary. More information around fair market compensation and open mindsets about pay will empower individuals to understand their value and ask for the appropriate compensation.
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Improves retention by establishing trust before they even join your team. Trust is a major factor in boosting employee engagement, productivity, and satisfaction with their lives, according to Harvard Business Review.
Sharing compensation data is one way to attract more candidates to your open roles -- check out more creative ways to market your company and your employer brand to top talent.
How to communicate pay transparency throughout the recruiting process
Publish a pay transparency policy that complements your job listings.
“It’s important to note throughout your hiring and recruitment process that your company is complying with the new pay transparency regulations,” says Jarir Mallah, HR Specialist, at Ling App. “This can be done with a simple asterisk and a note that your is compliant and in alignment with pay transparency. Even better, include a link directly to your pay transparency policy.”
Include compensation in your recruiting outreach.
Salary and benefits have a big impact on someone’s interest in a role, and they have the potential to turn passive prospects into active candidates! Including pay info will also help candidates self-select themselves out of roles. “I add the dealbreakers in my messages. All of the potential issues – relocation, visas – I’ll include to save time, and to be relevant,” says Alla Pavlova, Tech and Art Talent Sourcer at Riot Games.
Update your job listings – and let candidates know when they’ve been updated.
“I've approached this in two ways: Ensure every job listing on every platform has been updated and shows the accurate job description including the pay range,” says Karo Guzek, People & Culture Specialist, hiJunior. “Anytime I reach out to passive candidates, I send them the newest, most up-to-date information with a link to the company page so they can be properly informed. It's not rocket science; it's all clear and direct communication.”
Understand candidates’ expectations (and the market) early on.
If you aren’t including salary info upfront, make sure you ask about salary preferences early on. “If you reach out with a misunderstanding of their current compensation, you'll look uninformed and miss your shot. Do your research first and make sure you're speaking to multiple sources,” adds Tim Walsh, Founder at Vetted.
Take a holistic approach that is educational for candidates.
“Although most state statutes focus solely on base salary, Human Resource Management leaders should challenge themselves to openly share more about their perks, benefits, and other financial rewards,” says Tyren Thompson, Compensation Partner at Zoom. “Additionally, they should share their approach to learning and career development. Sharing this broadly will help to build their employer brand and reinforce their position as an employer of choice with passive candidates.
Embracing pay transparency as an organization
Pay transparency can help you attract candidates that are aligned with what your organization offers. However, the why behind your policies is equally as important as the policies themselves, because they will help you get buy-in and adoption across teams. It starts with stakeholders in the recruiting process, like executives and hiring managers, but can also include other HR team members, DE&I experts, and even legal staff.
Your pay transparency approach may change based on external factors like legislative changes and internal factors like new leadership. If you’re in talent, the key is to be able to assess and adapt your communication so that pay transparency is truly transparent, and not confusing for candidates or your current team. Conversations around compensation allow you to build lasting relationships with candidates and advocate for them when the right role comes along.
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