What to Know About Salary Transparency

By Kaitlin Hurtado on July 18, 2022

As an employer or recruiter, one of the most common questions you will face from job applicants is what the starting salary is for the open position. Each company may have a different approach to these questions. Some will wait until the offer letter is finalized to give a clear picture of the salary, while others will be upfront about the starting salary in the job description. Salary transparency, where the job candidates and current employees know the compensation for every position, is something many candidates are looking for as they go on their own job search.

If your company does not have a current approach or policy regarding salary transparency, keep reading for what you should know about for salary transparency.

Photo: Pixabay

What is salary transparency? 

Salary transparency (also referred to as pay transparency) is the discussion of employee compensation within your company. There are several different approaches to salary transparency — what works for one company may look different than something that works for another company.

With salary transparency, employees are given the opportunity to see how their compensation compares to their coworkers’. Prior to salary transparency becoming more of a workplace norm, discussion about pay between coworkers was more of a taboo discussion topic. Salary transparency promotes that discussion as the company itself is the source of information by being upfront about current compensation in the company.

Even if you aren’t actively practicing salary transparency, your employees have likely participated in some form of discussion around their pay with each other. In a poll conducted by YouGov, 42% of Gen Z workers (aged 18 to 25) and 40% of millennial employees (aged 26 to 41) have shared their salary information with a coworker or some other form of professional contact.

If employees are left to speculate what their colleagues’ compensation is, it may generate distrust and thoughts about unfair pay. If an employee thinks they are being paid unfairly, they will feel unvalued and be more likely to seek employment elsewhere.

How does salary transparency help company culture? 

Many individuals that have not experienced salary transparency in some form may think that it will have a negative impact on company culture. With everyone’s compensation out in the open, there may be conflict about unfair pay, stark differences between compensation, and more. However, salary transparency can help steer your company in the right direction when it comes to promoting and maintaining equal and fair pay among employees.

Adopting salary transparency helps build trust within the company – from current employees to job applicants. Salary transparency promotes accountability for equal and fair pay, as salaries can be accurately compared across departments and positions throughout the entire company.

When employees are aware of what their colleagues’ salaries are, it can also encourage career growth. If they see a better compensation in the role above their current one, or higher compensation in a different department, they are more likely to seek out opportunities for career development to get promoted into that higher role or opportunities to cross-train to transfer into that different department. An employee that feels like they are fairly compensated for the work they do in their current role in the company will be more likely to stay long-term, which will only help the company as you keep a trained employee and avoid having to fill an open position left by a dissatisfied employee.

How can you approach salary transparency? 

One way to approach salary transparency is to start with the hiring process. Being upfront about compensation from the beginning can help save you and the applicants time, effort, and money from the application process. While many companies opt to wait until the offer letter to give applicants a clear picture of compensation, it is a risky business practice. Many applicants have a defined range of what salary they are looking for and if that offer letter doesn’t fit that window, they are going to look for work elsewhere. If the compensation was defined up front, it would have saved you and the applicant several rounds of interviews – giving you the time and resources to look for other candidates and the applicant the time to look elsewhere.

In some states, salary transparency is required by law. Some states will require companies to disclose the pay range in the job posting, while other states will only require companies to provide the pay range if the job applicant requests it.

If you are hesitant to practice salary transparency because you are aware of pay gaps between employees and know it could cause problems, take the necessary steps to resolve the concerns. Software Advice suggests proactively finding and correcting pay discrepancies with a pay equity audit with an HR professional or consulting firm specializing in compensation.

Salary transparency, when executed correctly, can help every party involved. Salary transparency is one practice you can do to promote fair and equal pay for your employees, something that can help build long-term success for your company.

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