Understanding what fundamentals of pay transparency are essential in 2024.

We're here to help you sort through all the noise/ Pay transparency is no longer something employers can put on the back burner. In recent years, job seekers, job board websites, and even governments have pushed for changes in the way employers present and share pay information.

In mid-March 2023, the U.S. House of Representatives introduced the Salary Transparency Act. If passed, the bill would promote pay transparency and equality by requiring employers to provide pay ranges for all public and internal job postings. Several US states have already passed their own pay transparency laws though, so staying on top of the current rules and regulations is critical.

Now is the time to carefully consider your organization’s approach to pay transparency so you can stay competitive and attract and retain the top talent you need, while also ensuring that you remain compliant.

Let’s start with the basics.

What is pay transparency?

Simply put, pay transparency is when employers share salary information about a job with job applicants or current employees. The goal of pay transparency is to promote fairness, equity, and accountability in compensation practices. By being upfront and open about pay and salary information, your organization can foster a culture of trust and openness, where employees feel valued and encouraged to advocate for fair compensation.

New laws require employers to disclose pay ranges and other salary information. The requirements vary by state, with some requiring more transparency than others, particularly for companies that operate nationwide. The approach to pay range disclosure should accommodate the most stringent requirements as you prepare for these requirements to become more widespread.

What states have pay transparency laws?

As more states and local governments pass pay transparency laws, employers must be prepared with the appropriate data.

While the laws vary from state to state, and sometimes even city to city, most pay transparency laws, at a minimum, require employers to share the expected salary range of a job with job applicants. Many laws also support internal pay transparency by allowing employees to discuss their pay without fear of punishment.

Since 2020, at least 15 states and localities have passed significant pay transparency laws. These include:

With these new laws, employers should, at a minimum, include the expected pay range of all job postings, including internal promotions and transfers. In some states, like Hawaii, the pay transparency law also helps promote pay equity by prohibiting discrimination based on protected categories and compares employees who perform “substantially similar work.” In Washington, D.C., employees will have the freedom to discuss their compensation with each other.

The benefits of pay transparency

Transparency impacts talent acquisition, compensation management, pay equity, and the overall employee experience. It can help your organization build trust and strengthen its relationship with your employees and it can equip managers with the knowledge that helps them have more constructive career development conversations. In the U.S., a handful of major businesses, including Buffer, SumAll, and Whole Foods, have adopted salary transparency policies and have seen success in the realms of recruiting and retaining.

Recent studies have shown that pay transparency has helped improve pay equity by reducing pay gaps across gender, ethnicity, and other categories. It may also help boost productivity. Better, more transparent pay leads to improved performance and overall employee morale. Pay transparency can help boost employee retention, as well as help increase the number of candidates who apply for a job. Sounds like a win-win to us!

How Mercer’s salary survey data can help you improve your pay transparency

With pay being revealed to employees, potential employees, and the general public in a variety of ways, it’s more important than ever that you are using accurate data, supported by your compensation strategy, to establish the right pay for your jobs.

While base pay is the foundation and must be competitive, it’s only one part of the total rewards package. Employers will be revealing one element without the context of what portion of the total rewards package and overall experience does it represent?

Setting base pay without understanding the value of total compensation, never mind total rewards, is a mistake. Mercer’s salary surveys typically provide you with elements beyond base pay, although you may have to rely on other sources to get a full picture of employee experience elements such as flex working (we’ve got a survey for that too).

While the world and the labor market seem to be a bit of a roller coaster lately, take comfort in the fact that you always have support — whether in the form of data or a trusted advisor — from Mercer. We thrive on helping you build a team that is motivated to help your company thrive. Our consultants are waiting to help you navigate your talent challenge.

Ready to tackle pay transparency head on? Give us a call at 1-855-286-5302 and talk to one of our consultants today.