Pay transparency is here to stay: Best practices and action steps for HR

Pay transparency laws, which started gaining steam last year, are becoming more and more commonplace as companies try to keep up with a tight labor market and attract top candidates.

As little as a few years ago, it was somewhat rare to see salary ranges. In fact, a recent Indeed study found that since pay transparency laws took effect across many states and cities, job postings that have included salary ranges nationwide have shot up to 44%, from below 18% pre-pandemic.

Even if you don’t live in a state where pay transparency is legally required, it can be an essential tool to attract top talent, especially if you’re hiring in states that do require salary ranges.

If you haven’t yet implemented pay transparency, or just want to stay up to date, consider these benefits, best practices and action steps.

Benefits of pay transparency

Done right, pay transparency can reap impactful benefits for the employer and the employees. Being upfront about salary ranges in a job description can help save the company and candidates alike time, resources and energy if salary expectations don’t align.

It may also help attract quality candidates in a competitive job market, as 85% Gen Z workers reported that they were less likely to apply to a job if a salary range is not listed, according to Adobe’s Future of Workforce study.

“For organizations, pay transparency can be a competitive advantage, too, improving the recruiting process and lowering recruiting costs,” says Maggie Smith, senior VP of HR at Trailiant. “Further, being open and honest about pay ranges contributes to creating a work culture of trust and transparency.”

And if employers reside in New York, Washington, California or any other state with pay transparency legislation, it isn’t just a nice-to-have – it’s necessary to stay legally compliant.

Best practices for implementation

When implementing a new or updated pay transparency effort, it’s important to balance existing employee expectations with staying competitive for potential candidates. Here are three best practices from Smith to ensure a smooth transition to pay transparency.

Develop a framework. Smith recommends creating a “pay philosophy” to align values and expectations. “When it comes to employee salaries, organizations need to decide, ‘Do we want to lead the market, meet the market in the middle or lag behind?’” says Smith. “While each company is different, it’s important is to create a consistent framework for employee pay and compensation.”

Conduct an internal audit. “Organizations can also benefit from conducting an internal audit and analysis to ensure pay equity for existing employees and take incremental steps to address the findings as needed,” says Smith. This can help manage existing employee expectations and ensure an equitable workplace.

Review data annually. Smith recommends reviewing external salary data annually and comparing it to internal data. An annual review can ensure that compensation packages stay competitive and up to date with current trends.

Action steps for HR

In addition to implementing a competitive and compliant pay transparency policy, here are some additional action steps Smith recommends for HR:

• Ensure there is an up-to-date job description for each role at the organization and ask current employees to review their job description to ensure it is accurate. “The focus should be on job duties and responsibilities, not job title,” says Smith.
• Consider investing in a compensation consultant or compensation tool to track and analyze wage and salary information. “As with any external consultant, it’s important to conduct due diligence to ensure that the data aligns with the roles in your company and is tailored to your organization’s [needs],” says Smith.
• Ensure ranges are accurate and specific. “There has been backlash against companies who have posted extremely wide salary ranges,” says Smith. “Since the laws don’t define range, it’s up to organizations to be honest and realistic.”