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.

Why is pay transparency important?

Pay transparency promotes fairness and equity in the workplace. When employees and job seekers can trust that employers are being open and honest about their compensation approaches and the pay details for individual roles, employees and job seekers can be confident that they’re being compensated fairly (or being offered fair compensation) for their work. In turn, this can help build more trust between employees and employers.

Is pay transparency a good thing?

At face value, pay transparency may sound like an all-around good practice, but there is some nuance to it. Let’s compare the benefits and challenges of pay transparency:

So, while pay transparency is rooted in the goal of making the workplace better for everyone, there are some challenges that come along with it. Your organization can mitigate these challenges by being aware of them and creating a robust strategy for implementing pay transparency (more on this below!).

Pay Transparency Laws to Be Aware of in 2023 (By State)

As of June 2023, eight states have enacted salary transparency laws, with 16 others considering their own pay transparency laws, according to CNBC. Let’s take a closer look at the eight states with pay transparency laws that are already in effect or will go into effect this year.

Note that we’ll be specifically looking at states with laws that require the sharing of salary information in job postings, as this is the most recent development in pay transparency efforts in the U.S. As mentioned above, other states (as well as many cities and counties) have enacted other forms of pay transparency laws, like salary history bans. SHRM offers a comprehensive rundown of these and other pay transparency laws.

California

• Date Law Went Into Effect: January 2023
• Details: Organizations with 15 or more employees are required to share salary range information in all job postings, including postings shared through third-party firms.
• Bill Text

Colorado

• Date Law Went Into Effect: January 2021
• Details: Employers are required to disclose hourly and salary compensation, or a range of compensation, as well as a description of the benefits and other forms of compensation being offered for the job.
• Bill Text

Connecticut

• Date Law Went Into Effect: October 2021
• Details: Employers are required to share the pay range for a given position in these situations:
  • When a job applicant or employee requests it
  • Before or at the time of extending a job offer
  • When an employee changes positions
• Bill Text

Maryland

• Date Law Went Into Effect: October 2020
• Details: Employers are required to provide applicants with the wage range for the position they’re applying for when it is requested.
• Bill Text

Nevada

• Date Law Went Into Effect: October 2021
• Details: Employers are required to provide the salary range or pay rate for a position to job applicants who have interviewed with the organization, including those who interview for promotions or transfers.
• Bill Text

New York

• Date Law Went Into Effect: Goes into effect September 2023
• Details: Employers with four or more employees must share pay or pay range for all jobs, including promotions and transfer opportunities. Temporary staffing firms are not covered under this law.
• Bill Text

Rhode Island

• Date Law Went Into Effect: January 2023
• Details: Employers are required to provide the pay range or rate for a position to job applicants when requested and to employees when requested.
• Bill Text

Washington

• Date Law Went Into Effect: January 2023
• Details: Employers with 15 or more employees must disclose the salary range and a description of all benefits and other forms of compensation in all job postings.
• Bill Text

7 Effective Strategies for Implementing Pay Transparency In Your Organization

Whether your organization is preparing to comply with applicable pay transparency laws or simply wants to take steps toward being more transparent with both employees and job seekers alike, you need to have the right approach in place for implementing pay transparency. Let’s walk through seven strategies to help you get started.

1. Identify your guiding philosophies.

Your guiding philosophies are the why behind the compensation decisions your organization makes, at both the individual and big-picture levels. As you begin incorporating pay transparency into your organization’s everyday practices, ensure that your efforts are aligned with these guiding philosophies and values.

For example, your organization may take a total rewards approach to compensation, in which you incorporate both direct forms of compensation (salary, incentives, bonuses, etc.) and indirect forms of compensation (health insurance, retirement plans, PTO, etc.) into compensation packages. So, you could determine that it’s important to give a little context about this approach in all of your job postings as you list salary range and a benefits overview. Or, you could encourage managers to have quarterly meetings with their direct reports to answer any questions about their compensation packages and total rewards.

Additionally, you may have specific organizational values you want to keep in mind while designing your approach to pay transparency. For instance, you may prioritize having an open-door policy when it comes to communicating with your employees, and, as a result, encourage them to talk to their managers any time they have questions about the compensation they’re receiving.

2. Take a critical look at how compensation is working at your organization.

As you look for ways to be more transparent with your employees and job candidates about compensation, you’ll also have the opportunity to examine what is and isn’t working in your compensation strategy and make important fixes.

Here are some specific ways you can critically examine your compensation approach:

• Conduct regular audits. A general audit of your existing pay structures and systems can help you assess the overall state of your compensation strategy. For example, you might find that your approach to determining annual bonuses could be better, or that you could enhance the benefits that you offer.
• Conduct salary surveys. When you conduct a salary survey, you gather information about the wages for a specific industry or role. This data can help you determine if your current approach to compensation for certain roles is competitive and fair.
• Pay close attention to executive compensation. Executive compensation can be a complicated and controversial topic. Examine your organization’s executive compensation approach and how you can fine-tune it and better communicate your approach to all of your employees.
• Ask employees for feedback. Instead of wondering what your employees think about your current approach to compensation, why not ask them? Try sending out surveys or gathering feedback from one-on-one meetings between managers and their direct reports. This is a great way to gauge how well your strategy is working and identify areas for improvement.

As you work to assess and improve your current compensation approach, consider working with a consultant. These experts can bring an objective third-party view to the table, helping you determine the next steps to strengthen your approach and assisting you in implementing new policies and practices.

3. Decide on your level of transparency.

If there is a local law in place regarding pay transparency in your state, county, or city, you should make plans to comply with that law. Determine how you’ll reach full compliance and what support you’ll need to do so.

If your state, city, or county doesn’t have specific legislation in place regarding pay transparency, you’ll need to determine on your own the level of transparency your organization will adopt.

Here are some questions to ask yourself as you decide how transparent you’ll be:

• What specific compensation details will we share? For example, some organizations may choose to share salary ranges or pay rates, while others may choose to publish exact salary amounts.
• When will we share compensation information? Some organizations choose to share salary information in job postings, upon request during interviews, during the hiring process, or upon request at any time during employment.
• What will remain confidential? Because of the sensitive nature of compensation information, some employees might not be comfortable with certain efforts to be transparent. For example, employees might not want to share their exact salaries with the rest of their team but would be comfortable knowing the organization’s salary range for their job. Take into consideration these and other privacy concerns.

Once you’ve determined to what extent your organization will be transparent about pay information, you can begin designing the policies you need to put into practice. Remember to be consistent and fair in how you incorporate your pay transparency measures.

4. Train managers and HR leaders.

Your organization’s managers and HR leaders will be instrumental in helping your organization roll out your pay transparency policy and ensure that all employees are on the same page regarding your compensation approach.

Educate your managers and HR leaders on your pay philosophy and the new policy that you’re rolling out. This will empower them to answer employees’ questions and address any concerns. You should also cover any relevant labor laws, privacy laws, and data protection regulations.

Take your training a step further by coaching these leaders on bias awareness. This can set them up to minimize bias when making compensation decisions and having compensation-related conversations with employees.

5. Roll out your policy.

Once you’ve developed your policy and your leadership and management teams are ready to implement it, it’s time to roll it out and communicate it to your employees. Here are some tips for doing this effectively:

• Provide plenty of context behind why you’re implementing a pay transparency policy. For instance, you might explain your state’s new law or your goal to make your workplace more equitable and fair.
• Tell employees what information they have a right to. Let your employees know that they can ask questions about their salaries—this will help them feel empowered to do so. You could even explain that they can talk to fellow employees about this information as well.
• Answer any questions that arise. Employees may wonder how your new policy will impact promotions, how you’ll be sharing salary information with job candidates, or what larger diversity, equity, and inclusion goals you’re working toward by implementing this new policy.

A truly successful policy rollout will leave your employees feeling informed and involved in your choice to move toward more transparency. This information shouldn’t be sent in an email or run through briefly in a meeting. Take the time to fully explain your policy and, more importantly, to answer your employees’ questions.

6. Foster a culture of open communication.

The openness with which you roll out your pay transparency shouldn’t just go away after the policy is in place. Continue to encourage employees to talk about compensation, ask questions about compensation, and provide any feedback they might have in conversations with their managers.

You should also communicate openly about compensation during performance review season, explaining the financial, economic, and performance contexts behind why any adjustments are made. This will help reinforce your efforts to make your organization more transparent and fair.

7. Adjust your approach as needed.

As you continue incorporating pay transparency into your organization’s larger compensation strategy, you should monitor how well the policy helps your organization be more transparent and evaluate its impact on employee satisfaction and job performance.

Continue to adjust your approach as needed, and stay informed about any local laws that are being considered or will go into effect that will impact your organization and its policy.

How a Compensation Consultant Can Help with Pay Transparency

As you’re working to comply with pay transparency laws or simply creating your own pay transparency policy, you may find that you need the support of an outside expert. A compensation consultant can help you not only in assessing your current compensation practices but also in designing new policies and helping you effectively communicate those policies to your team.

At Astron Solutions, we provide a number of compensation consulting services. We can help you make sure that your compensation strategy supports your larger goals and ensure you’re offering competitive compensation by conducting custom-designed surveys that will give you the context to better understand the market your employees are working within.

We’ll assist you in taking your compensation approach to the next level and becoming more transparent and open with your current and future employees so that you can make your organization a better place to work.

Wrapping Up

Pay transparency is a hot topic in the world of work, but it will soon grow to be the norm as more and more states adopt legislation focused on making pay information more accessible. Fine-tune your compliance efforts or get ahead of the game today by incorporating pay transparency into your organization’s practices!

Looking for other great articles about HR? Check out these additional resources:

• Nonprofit Compensation Consultants: Hiring the Right Partner. Nonprofits need robust compensation strategies, too! Learn how to work with the right compensation consultant to improve your approach.
• Employee Recruitment and Retention: 10 Winning Strategies. Recruitment and retention are essential to get right if you want top talent working for your organization. Learn more in this guide.
• Nonprofit Human Resources: The Full Guide & Best Practices. There’s a lot of nuance in the world of nonprofit HR. Get all the details here.

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