Salary Transparency

Compliance

Oct 17

What is Salary Transparency?

Salary transparency (also known as pay or compensation transparency) is a strategy used by companies to open visibility for current and prospective employee salaries. This practice is meant to provide employees with a full understanding of their own compensation compared to their coworkers in an attempt to move closer to pay equity.

The idea of salary transparency can be very uncomfortable for both employers and employees. Traditionally, discussing salary has been taboo. Mindsets like “Employees’ paychecks are their own business” can be difficult to break. As with many traditional business practices, however, they’ve been rooted in a system that has prevented growth and equality for many. It is time for a major change in the way companies build their compensation strategies, and opening visibility is a great way to begin this process!

Let's take a moment to break down salary transparency and explore how it can help you build a stronger and more equitable compensation foundation for your own company.

Benefits of Salary Transparency

Pay Equity

One of the main forces behind salary transparency is the elimination of discriminatory pay gaps. The Equal Pay Act of 1963 was meant to abolish wage disparity based on sex or gender, yet according to a 2022 study, women still earn 83 cents for every dollar earned by men, with Black women, Latinas and Indigenous women earning even less. In that same study, we find that Black men earned 76% of what white men earned in the first quarter of 2022 and Latinos earned 75%. It's become clear that in order to make any sort of drastic impact on this problem, drastic measures must be taken. If a company is forced to confront inequality then they are much more likely to address the issue.

It Forces Your Company to Build a Strong Compensation Strategy

If salary transparency is meant to shed light on pay inequality, then naturally this strategy is also a catalyst for building a stronger and smarter foundation for compensation for your entire company. When you set a clear trajectory for promotions and tenure or merit based pay increases, then you not only remove the guesswork, but you remove any variants or human error that could cause inequity.

Encouraging Trust and Growth with Current and Prospective Employees

Having full pay disclosure amongst a team isn't just a chance for employees to see what their pay is compared to the market. It is also an opportunity to give employees an understanding of where they are, where they came from and where they can go in your company. Many employees are more motivated to stay at, or be more dedicated to, a company when they know the future of their salary.

Posting salaries in job descriptions is another great step towards building trust with employees before they've even been hired. Candidates searching for jobs are more likely to apply when they have an understanding of the salary they are applying for. This also lets candidates know that your company doesn't adjust salary based on educational history, personality or other biases.

It's the Wave of the Future

A number of US states and cities have made salary transparency a legal requirement. For example, NYC and the state of California now require job descriptions to include the salary. For a full list of salary and pay transparency laws by state, check out this guide.

Beyond legal requirements, studies show that younger workers are more likely to share their salary with their peers, and a majority of surveyed employees of all ages showed that they would prefer to have full salary transparency in their company.

Why Salary Transparency is Not Enough on Its Own

Unfortunately, simply revealing salaries is not the answer to solving pay gaps; this is merely the jumping off point. The goal is to use this system as a means of holding yourself and your company accountable. Let's take a look at some of the ways to implement salary transparency and what needs to happen next:

How to Implement It

The first step of implementing salary transparency is taking a moment to confirm you are ready for the follow through. Before revealing them, dissect the salary discrepancies amongst your team. Are there any notable gaps? Do you have a plan in place for promotions or pay increases? You should get a general sense of what you are working toward before moving forward.
Get input from the team. Are your employees on board? Do they understand the purpose of salary transparency? Are managers and company leaders on the same page?
At this point, you can begin making a plan for your new compensation structure. Comparing your current compensation strategy with that of other companies in your industry is a good place to start.
After you develop your new compensation structure, address the notable pay gaps. This could mean raising or possibly freezing employees salary, depending on the data you've used to make your new plan. The most important thing is to fully explain the reasoning behind the change, acknowledge that the inequity existed and fix it.
Once your strategy is set and you have addressed any gaps in pay, prepare to reveal the new strategy and the company salary information to your employees. Consider who will be relaying the information. Are managers equipped to answer the inevitable questions that come with the reveal? Have you prepped employees for the information that they will be receiving?
Have a conversation with employees to explain the process and function of salary transparency.
1. Reveal the employee’s current salary. This will likely already be known.
2. Explain how you determined the employee's salary. Show the data that you used to build your compensation structure.
3. Show the employee where they can go from here. Explain what raises or promotions are or will be available, and the different directions they can pursue.
4. Shed light on why your company pays the way that it does. This will likely tie back to your company values.
5. Finally, reveal the whole team's salaries and explain how and why your employee should use this information in the future.
Determine how and where your data will be shared and stored. Salaries can be listed in a spreadsheet, displayed publicly on company wiki, shown during a meeting, made available when asked for, etc. You need to determine the system that works best for your company and your team. These numbers can become a distraction to some, so making them available upon request is not unheard of.

Summary

Salary transparency is a great tool to help restructure the way your business runs. You must approach this topic with tact, respect, and, most importantly, with your employees at top of mind.

We hope that you have gained some insight and tools to help you achieve pay equity, employee dedication and a competitive edge for hiring through the use of salary transparency. Please let us know in the comments what your experience with salary transparency has been, or what your plans are to move towards the ever brightening future!As always, if your company is in need of assistance crafting your compensation philosophy or making a plan to implement salary transparency, contact HENSLEE HR using the “Get In Contact” button at the top of the screen. We are here to support your journey towards pay equity!

Thanks for joining and remember to do what you say you'll do! ⚖️