Pay Transparency: What It Is & How to Navigate New Laws

There’s been a lot of buzz lately around the topic of pay transparency as more and more states across the U.S. have begun enacting legislation that requires employers to make salary information more accessible for both current employees and job seekers.

But the pay transparency landscape is fraught with questions: What is the driving purpose of pay transparency laws? Are these policies actually helping to make the working world more equitable and fair? And what does your organization need to do to be more transparent about how you pay your employees?

These are tough questions to answer, but one thing is clear: Employees are expecting more from their employers in terms of transparency, honesty, and fairness. To help your organization successfully adapt to a world more focused on transparency, we’ve created this guide to cover the following topics:

• Frequently Asked Questions About Pay Transparency
• Pay Transparency Laws to Be Aware of (By State)
• 7 Effective Strategies for Implementing Pay Transparency In Your Organization
• How a Compensation Consultant Can Help with Pay Transparency

Even if the state in which your organization operates hasn’t yet adopted pay transparency legislation, you should be doing all you can to move in the direction of more openness when it comes to how your employees’ pay is determined. In doing so, you’ll be a step ahead of the curve when pay transparency does become law in your local area.

Ready to learn the ins and outs of pay transparency? Let’s dive in.

Frequently Asked Questions About Pay Transparency

On the surface, pay transparency sounds simple: Share salary information in job postings and communicate to your current employees how their pay is determined. However, there’s a bit more to it than that. Let’s begin by tackling some frequently asked questions.

What is pay transparency?

Pay transparency is the practice of openly sharing information about how you compensate employees with both current staff and job seekers. Depending on the laws in your area, your organization’s approach to pay transparency, and the culture you have surrounding compensation, you might share any of the following information internally or in public job postings:

• Exact salaries for specific roles or at least salary ranges/bands
• Salary structures (including base pay, incentives, bonuses, and more)
• Performance criteria and how it affects compensation
• Market data or benchmarks
• Information about pay equity assessments, gender or diversity pay gaps (and what you’re doing to close them)
• Your organization’s guiding compensation philosophy

For employees, this information might be shared in individual compensation conversations, within departments, or with the organization as a whole. For job seekers, the process of sharing this may look a little different. Some organizations may opt to share exact salaries or salary ranges in job postings, share compensation information during the interview process, or disclose details only upon request.

Is pay transparency a new trend?

While pay transparency may feel like a hot new topic in the workplace, this perception is likely driven by the recent passing of pay transparency laws in California and New York.

Legislation requiring employers to be more open, honest, and fair with employees has been around for a while. Here are a few examples:

• The National Labor Relations Act of 1935 gave employees the right to talk with other employees at their organizations about pay without retaliation from their employers. Many states have also passed laws further preventing pay secrecy in the workplace.
• The Equal Pay Act of 1963 prevented sex-based pay discrimination, making it law that individuals in the same workplace must be given equal pay for equal work. Of course, large gaps still persist despite this legislation. According to the U.S. Department of Labor, “In the U.S., women who work full-time, year-round, are paid an average of 83.7 percent as much as men, which amounts to a difference of $10,000 per year. The gaps are even larger for many women of color and women with disabilities.”
• In 2016, the Equal Employment Opportunity Commission enacted a program to collect pay data from employers with the goal of using the information to help end pay discrimination. This initiative was discontinued in 2019, but some states like California and Illinois have begun requiring employers to provide this information to certain agencies.
• According to the Women’s Bureau of the U.S. Department of Labor, as of January 2023, 16 states and many cities and counties have enacted salary history bans, rules put in place to ensure that employers don’t ask about or rely on an employee’s past compensation when making hiring decisions.

Clearly, the U.S. has a long history of grappling with pay transparency and striving toward pay equity. In 2023, the recent laws we’ve seen passed regarding pay transparency are mainly focused on disclosing salary ranges to both current employees and job candidates. But sharing salary ranges is just one piece of the pay transparency puzzle.