The Benefits of Pay Transparency

Written By: Stephanie Burford, PHR, M.S., HR Manager at Advisor HR

Over the past few years, pay transparency has become a widely popular topic of discussion that doesn’t appear to be going away anytime soon. Employers are often hesitant and skeptical about adding this policy to their handbook, but in certain states, employers no longer have a choice. For years, pay transparency has been a very private topic, but recently, the laws have changed.

The purpose of pay transparency is not generally to disclose one employee’s exact salary to another. The goal is to provide clarity and consistency without violating confidentiality.  In certain cases, and in some states, employers are required to provide pay ranges or general compensation information. The definition and requirements of pay transparency vary from state to state. It can be defined by sharing pay ranges in job postings to make internal salary structures available to employees, outlining how pay is determined, what criteria increase the likelihood of a bonus or raise, or how employees can progress through salary bands.  Without a defined process, employers risk potential pay inequities and wage discrimination.

This is not only important from a legal standpoint, but also from an employee engagement perspective. Employees want to know how pay decisions are made. They want to be a part of the process and understand how their efforts can result in a maxed bonus. They want to understand where they fall within the pay bands and how they can increase their salary and/or move up within the organization. The transparency of this information will reduce uncertainty, improve employee morale, build trust, and promote fairness in compensation. Additionally, it will protect the organization from legal risks around wage discrimination.

Pay transparency is becoming a legal requirement and not just a workplace trend. More and states are introducing laws around transparent compensation practices, and employers should adopt practices to reflect the new standard of fairness and accountability. While some states require more transparency than others, by adopting the pay transparency policy and basing pay on objective, equitable criteria, employers will:

1.        Mitigate pay inequities and discrimination

2.        Build trust with employees

3.        Empower career development

Do you live in a state that requires pay transparency, but haven’t updated your employee handbook to reflect the new requirements? Advisor HR offers a full handbook review along with recommendations to ensure your handbook is compliant, addressing local, state, and federal laws. Reach out today if you are interested in learning more about how we can help make your organization is compliant!