Shining a Light on Fairness: 10 Steps to Establish Pay Transparency

Pay transparency—the practice of openly sharing information about employee compensation and benefits—is getting a lot of attention lately. At least eight states and localities have recently passed laws requiring employers to publish salary ranges in job postings. In some cases, businesses must also report salary data to government entities.

With these new laws and similar legislation proposed in other states, employers must take notice. If you operate (or offer remote work opportunities) in a covered state, failure to comply with these regulations puts you at risk for severe financial penalties. Even if your organization isn’t currently legally obliged to share salary ranges, these laws could prompt your employees to discuss wages with their co-workers and request information about company pay practices from their managers.

How Pay Transparency is Coming to Light

While federal regulations make it unlawful for employers to prohibit employees from discussing their pay with coworkers, companies have historically tried to keep this information confidential. This secrecy often leads to disparities and wage gaps between employees performing the same or similar roles. It also contributes to a lack of trust between employers and employees and can make workers feel undervalued and underpaid.

The movement for pay transparency is driven by the belief that salaries should be based on the value and productivity of an employee and not their gender, race, age, or any other class/characteristic. As such, it has gained momentum as a potential solution to close pay gaps and increase employee satisfaction.

Pay transparency is becoming widely seen as an essential tool to promote fairness, equality and trust within an organization. The proof is in the statistics:

• Glassdoor’s Global Salary Transparency Survey found that 70% of employees believe salary transparency is good for employee satisfaction.
• A Visier’s survey found that 68% of employees would leave their job for a company with greater pay transparency. This was regardless of whether compensation were the same.
• In a SHRM survey (Pay Transparency Improves Business Outcomes, Could Close Wage Gap), 82% of U.S. workers responded that they’re more likely to consider applying for a job if the salary range was listed on the job posting.

It’s easy to see why more and more companies are adopting pay transparency policies. Providing employees with information regarding pay rates and benefits throughout their organization promotes honest communication and helps build trust. It can also improve employee satisfaction and productivity by creating a work environment that motivates employees to work harder because they feel their work is valued and rewarded fairly.

In addition, pay transparency helps you attract and retain top talent. When potential employees understand salary expectations, they can have confidence in your organization and make more informed career decisions. This can lead to better job performance and a stronger commitment to your company’s goals.

10 Steps to Establish Pay Transparency in Your Organization

Introducing pay transparency can come with risks—for example, possible tension between employees over significant differences in compensation. These risks can be mitigated with careful planning that takes fairness and communication into account.

1. Conduct an internal pay audit.Start by reviewing your organization’s pay practices to identify any possible pay disparities. Gather information on pay scales and ranges, and look for discrepancies within different roles and departments.
2. Address pay disparities.Use the data gathered in the pay audit to address any pay disparities within the organization. Ensure that pay is fair and equitable across all roles and departments.
3. Develop a pay philosophy.Establish a clear and consistent approach to making pay decisions. This philosophy should align with the organization’s values and be communicated to employees.
4. Determine pay ranges. Develop ranges for each job based on market data, industry standards and your organization’s financial capacity. Establish minimum, median and maximum pay rates for each job.
5. Develop pay scales within those ranges.Outline each job’s salary or hourly rate based on experience, performance and other relevant factors. Establish a clear pay progression system for employees.
6. Create a pay transparency policy.Develop a policy outlining how pay information will be shared with employees. It should include information about who can access pay information and how it will be communicated.
7. Communicate pay ranges.Once you have your policy down, share the pay ranges for each position with employees. This can be done through job postings, team meetings or other forms of communication.
8. Train managers.Educate them on how to discuss pay (including how it was determined) with their employees.
9. Offer opportunities for feedback.Allow employees to provide input on pay practices and how they can be improved. This can be done through surveys, focus groups or one-on-one meetings.
10. Monitor and adjust.Pay transparency is an ongoing process. Continuously monitor the pay structure, guidelines and feedback channels to ensure your policies work effectively. Adjust as needed to improve the process.

Implementing pay transparency can have a significant positive impact on your employees’ happiness, job satisfaction and performance. By establishing clear criteria for determining salaries, making salary information available to employees and continually reassessing your pay practices, you can create a stronger, more cohesive workplace culture that benefits everyone involved.

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