3 Reasons Compensation Transparency Gives Your Business A Leg Up

If you’ve been in the workplace, it’s likely you’ve had conversations around pay. These conversations, whether it be with coworkers, your manager, or recruiters, can be challenging and sometimes uncomfortable. Increasingly, more companies are choosing, or are being pushed, to practice compensation transparency. However, to understand why businesses are implementing compensation transparency businesses must understand what compensation transparency truly means. Compensation transparency is a pay communications practice in which an organization voluntarily provides pay-related information to employees, which in effect reduces pay uncertainty. With compensation transparency exceedingly gaining traction within businesses, organizational leaders have the obligation to understand how pay transparency will play a role in their company. 

1) Understanding Changing Laws

In 1935 the National Labor Relations Act was passed, giving private sector employees the right to discuss their salaries and wages. Despite legislation, informal pay secrecy policies have increased in recent years catalyzing today’s lawmakers to increase protections. Currently, there are 17 states in the U.S. that have laws around pay transparency and the list continues to grow. Some cities have even taken matters into their own hands. For example, New York City’s Wage Transparency Law will take effect Nov. 1, 2022 and will require employers to post the salary range for every job opening they have, including promotions and transfers. It’s important to ensure your business is set up to comply with local, state, and federal laws, and understand that each municipality may have slight differences.

2) Employee Expectations Are Shifting

As younger generations enter the workplace and advance in their careers, expectations for transparent salary discussions are increasing. LinkedIn’s Workforce Confidence survey reveals that feelings for U.S. workers are largely dependent on age.  The survey found 75% of Gen Z and Millennials agree that “People sharing their pay information (salary/bonus) will lead to better equality in pay,” whereas Gen X responded 50% in agreement, and Baby Boomers only 30% agreed.  Similarly, when a technology company conducted a recent poll of 1,000 U.S.-based, full-time employees and asked survey participants about their desired level of pay transparency, 79% said they wanted some form of transparency, with 32% asking for total transparency in the form of publicizing all employee salaries. This shifting landscape positions pay transparency as a topic that organizations can’t ignore. 

3) The Company and Employees Benefit

Research suggests that pay transparency may have important benefits for both employees and organizations, including increased pay equity, perceptions of trust and fairness, and higher productivity. For example, according to a survey by PayScale, most occupations where participants agreed that their organization engages in pay transparency close the gender wage gap, especially in male-dominated industries. Similarly, openly sharing pay might also address inequities of pay tied to race, disability, sexual orientation, or other areas of potential implicit bias. This sense of trust not only benefits the employee experience, but also the company in perception and approval. This is especially important in a time where transparency is growing and feedback, along with self-disclosed salaries, is openly posted on professional social media and review sites for candidates and customers to see when researching organizations.

Where to go from here?

With expectations for compensation transparency only increasing, why aren’t all companies publishing salaries? Shifting from historical norms, organizations will need to take a hard look at internal pay equity, and while laws continue to change it will be critical to get ahead on this. Some ways companies can begin early adoption of compensation transparency are by internally publishing salary ranges tied to roles and levels, rather than individuals. This allows for a holistic view of compensation transparency, while still protecting the privacy of individual employees. Additionally, sharing information around bonuses, profit sharing, 401k matching, core and supplemental benefits will raise awareness on the total investment the company makes for each employee. 

Companies like Pepper Foster Consulting, have navigated implementing compensation transparency across the board. By balancing the expectation of transparency and candor, businesses can provide employees with knowledge and exposure to factors tied to pay, while also allowing space for privacy and opting-in to disclosing one’s own salary. With the shifting legislature and workforce, it’s necessary for leaders to determine what approach to compensation transparency will work best for them so they can get started on creating a more transparent work environment.

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