Pay Transparency Guide: What You Should Know

For decades, it has been common practice for businesses to keep their pay information closely guarded. While it’s not enforceable (federal law prohibits employers from disciplining or firing employees for discussing pay and benefits with coworkers), it is by no means unheard of for employers to attempt to prohibit or strongly discourage their staff from being open about their pay both within the company and the wider world!  

Today, pay transparency is a growingly popular practice throughout the United States, and that practice has extended to the level of state legislature; in 2018, California became the first state to formally adopt pay transparency laws, and more than 23 states have either passed similar laws or are considering eliminating pay secrecy as of 2024. In this guide, we’ll explore what pay transparency is, how it can affect your business, and how to stay on top of the rapidly changing laws that govern it! 

What is Pay Transparency?

On the surface, pay transparency is a straightforward concept; it refers to any practice or set of practices that a business follows to make information about the compensation that they offer available to both current and potential employees. Pay transparency is often used to promote pay equity throughout an organization; by making pay practices transparent, current employees and potential job applicants are able to see and understand what an organization offers, as well as what it takes to move through different salary bands. Being transparent and upfront about employee pay can be an excellent decision for an employer – and in many states, it's quickly becoming the law! 

Benefits of Pay Transparency for Your Business

Legal requirements aside, multiple studies and surveys indicate that greater pay transparency often directly translates to benefits across nearly every level of an organization, from employee retention to company culture and more. If your business operates in a state that has not yet mandated salary transparency, it’s likely still worth making the jump: 82% of job candidates report that they’re more willing to consider applying for a position that has a listed salary. Opening up information about pay policies offers a myriad of benefits that can have as much or more of an impact. 

Boosted Employee Retention

One of the key benefits that organizations across nearly every industry see when they implement pay transparency is an increase in employee retention. Trust between employers and employees is a two-way street, and demonstrating open communication by making salary ranges available to both prospective and current employees can have a significantly positive impact on that relationship. Some studies have shown that being transparent about pay scale and benefits can improve employee retention by more than 30%; when combined with other retention strategies, pay transparency could be the missing piece of your staffing struggles! 

Improved Candidate Experience

As we mentioned earlier, pay transparency can have an impressive effect on your hiring process. Job seekers greatly value and gravitate towards job postings that list salary information such as pay ranges and potential benefits in addition to job descriptions and educational requirements. Additionally, pay transparency can help streamline your hiring process; instead of getting to the end of an interview and discovering that your budget for a role and a candidate’s desired salary aren’t aligned, pay transparency can help those applying for your open positions establish expectations upfront and prevent wasted time on both ends. 

Promoting Equal Pay for Equal Work

One of the primary reasons that states throughout the U.S. are enacting pay transparency laws is to target, among other things, potential gender pay gaps. One of the most significant contributors to the ongoing disparity between men's and women's salaries is pay secrecy – when employees aren't aware or are unable to compare their salaries to their coworkers in similar roles, it becomes much more challenging to identify pay gaps. Pay transparency practices can help ensure that equal pay is given for equal work! 

Stronger Company Culture

Another benefit that can come from making salary information transparent often goes hand-in-hand with the other benefits we’ve covered – a better company culture! By bringing in your team members on the pay decisions and salaries your organization makes, you can help them feel more involved and invested as a whole. In addition, the other benefits of pay transparency — improved employee retention, better hiring practices, and encouragement of pay gap elimination — are universally good things and can improve the mood, morale, and engagement of your team with your company and its curated culture.  

Pay Transparency Can Also Bring Questions and Challenges

Like with any new practice, adopting pay transparency policies can seem daunting and filled with challenges at the outset. Employers tend to have several questions and run into similar roadblocks throughout the process of enacting pay transparency, particularly in states where there are laws surrounding the subject. However, in general, the vast majority of organizations find that the benefits of making salary and benefits information open and available tend to far outweigh any drawbacks.    

Exposing Potential Wage and Pay Gaps

Wage transparency can result in the exposure of pay or wage gaps within your organization. On the surface, this can be more than uncomfortable; when presented with evidence of pay disparities in a company, employees might be tempted to leave and seek work elsewhere. While this is possible, the goal with this obstacle is to look towards the future; think of this as "pay transparency growing pains." Exposing wage gaps and other issues with an organization's salary history has been shown to increase employee retention and applicants for open positions — as long as those issues are properly addressed.  

Renegotiation for Salaries

Another concern that business owners have when deciding to implement pay transparency is the potential for employees to request salary negotiations for their positions. Whether pay gaps have been discovered or employees wish to address salary structure after more information comes to light, salary negotiation can and often will be part of the process of enacting pay transparency. However, this isn't necessarily a bad thing. Take the opportunity to have constructive conversations with your team, listen to their concerns, and develop a plan to get everyone on board. 

States Where Transparent Pay Practices are Mandated for Employers

While there are plenty of arguments for enacting pay transparency policies unprompted, almost half of the United States has either enacted or is considering enacting transparency laws around pay information. These laws and regulations range from mandating employers to disclose salary ranges for open roles to requiring organizations to report pay data to state agencies. If your business or organization operates in any of these states, it's vital that you stay informed of the latest legal developments to ensure you stay compliant. 

New York

As of mid-September 2023, employers in the state of New York with four or more workers are required to list salary ranges for all open and advertised jobs, internal promotions, and transfers. This transparency law was signed in late 2022 and is now effective for both hourly and salaried positions. In addition, the law mandates fines for noncompliance. New York City also has its own set of laws regarding pay transparency that went into effect in late 2022; under these laws, a “good faith” salary listing of an employer’s minimum and maximum rates for a given role must be posted along with a job description in a listing.   

California

California was one of the earliest states to adopt a pay transparency policy. In 2020, a law was enacted that mandates businesses to report pay data to the government in order to identify pay disparities throughout the state. Later, these laws were expanded to mandate including compensation information with job postings and making that same information available to employees. These laws apply to every business with more than fifteen employees. 

Maryland

Maryland is also one of the earlier adopters of salary transparency laws. In late 2020, the state passed a law that requires employers (regardless of size) to provide a pay range to job applicants on request. Additionally, employers are not allowed to ask prospective hires about their previous wage history. Finally, as with other states that have pay transparency laws, employers are forbidden from discriminating against employees through intentional wage disparity. 

Reach Out to Horizon for More Info Regarding Local Labor Laws

Pay transparency laws are relatively new in the United States, and they are in a relative period of flux. In order to ensure you have the most up-to-date information about new laws in the states your business operates in, contact our trusted team at Horizon. We can help keep your organization in compliance, no matter your operating size or industry, to avoid costly fines and other regulatory issues that can arise from violating these policies. 

Horizon is a Trusted Partner for Businesses

Navigating salary transparency laws and other payroll, HR, and benefits challenges can take a lot of time, resources, and effort. Employers throughout the United States have trusted Horizon with their business administration needs for more than 25 years! Our top-rated team of experts is ready and able to handle every aspect of your business so you can get back to doing what you do best.  

Top-Rated Services for Payroll, HR, Benefits, and More

Our industry-leading services are designed to address all of your business management needs. From our comprehensive payroll management solutions to our benefits tracking, HR implementation, and more, our clients trust the paperwork to us so they can spend time on what truly matters. Look up and out instead of down and in with our comprehensive suite of administrative services! 

Hiring and Onboarding Solutions Tailored to Your Company

At Horizon, we recognize that each of our clients has a unique approach to how they do business. We make it our goal to tailor our solutions to your specific needs to maximize the investment you’re making in your organization. Keep what you need and eliminate what you don’t when you work with our top team to design and implement our hiring, onboarding, and other HR solutions.  

Professionals in the Field Since 1997

Horizon has been providing our leading brand of top-rated HR solutions for more than 25 years! In all that time, we’ve learned how to meet and exceed our clients’ needs while delivering undeniable results, industry-leading customer service, and tailored services for a variety of niches and industries. We owe our trusted reputation to the communities we’ve been proud to serve for more than two decades. 

Our Clients and Industries That We Serve

In our 25 years of service, we’ve been proud to work with a variety of clients across a breadth of industries and businesses; from small companies to large entities and more, we strive to offer nothing but the best to our clients.   

Contact Us Today for More Information

To learn more about our top-rated HR services, including payroll management, compliance assurance, and more, contact our top-rated team for more information today!