Is Salary Transparency a Good Thing?

Although talking about wages at work has long been frowned upon by employers and considered a faux pas among employees, salary transparency is becoming increasingly popular among businesses. Some states even mandate salary transparency. 

While pay transparency laws vary by state, even businesses not required to implement salary transparency practices are electing to do so. 

Keep reading to learn more about salary transparency, whether you may be required to practice salary transparency by law in your state, and whether or not salary transparency is a good thing.

What Is Salary Transparency?

Salary transparency is just what it sounds like: the practice of being transparent about employee pay and salaries within a company. However, how salary transparency is implemented may vary across different organizations, as there are multiple types of salary transparency, including: 

• Communications transparency, in which employees are entitled to speak to their coworkers about how much money they make
• Process transparency, in which employees are informed about how the company's payroll system is processed
• Outcome transparency, in which the compensation employees receive or the pay range for specific roles is made known to all staff

Which States Require Salary Transparency by Law?

Communications transparency is mandated by federal law, which means employers in all states are not legally allowed to prevent or dissuade employees from talking to their coworkers about how much they make. 

However, other salary transparency laws vary by state. States that have pay transparency laws include:

• California
• Colorado
• Connecticut
• Nevada
• Rhode Island
• Maryland

Other states, like New York and Washington, are set to implement salary transparency laws shortly.

Pros and Cons of Adopting Salary Transparency as a Company Policy

If you don't employ people in a state that requires salary transparency by law, but you're still considering implementing the practice, consider the following pros and cons. 

Pros

• Salary transparency builds employee trust. More than 90% of employees report that if their company is transparent about decisions regarding salaries, they trust their organization not to have pay disparities regarding gender, ethnicity, or race. This could result in improved employee morale, retention, and loyalty.
• If more companies implement salary transparency policies, there could be a significant reduction in wage gaps. Transparency brings accountability, so it's safe to assume that companies implementing pay transparency policies will need to explain any noticed wage gaps that could be interpreted as existing due to race, gender, or ethnicity. Even if you're confident your company pays its employees equitably, normalizing the implementation of pay transparency policies may force other companies to be held accountable. 

Cons

• Pay transparency may cause tension and competition among employees. Although salary transparency can create a sense of fairness and equity among your team, it may also cause tension. Some employees may feel frustrated when they learn that their coworkers make more than them, while others may feel uncomfortable talking about their own salaries or having others know how much they make. If you choose to roll out a pay transparency policy at your company, you should be prepared for some friction among your team.  

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How to Roll Out Salary Transparency at Your Company

Communication is key to effectively rolling out a salary transparency policy at your company. Prepare your middle management and human resources department ahead of time, as employee questions will most significantly affect them. 

Consider holding a town hall alerting employees to the new policy and encouraging them to ask any questions they may have. 

Salary transparency policies are intended to promote a culture of inclusion and transparency, so try to be as inclusive and transparent with your employees as possible when implementing your new policy. 

Questions and Concerns You Should Expect From Staff

Employees will have questions and concerns even when you effectively roll out a salary transparency policy at your company. You should be prepared for questions like the following:

• What is pay transparency?
• Is salary transparency a good thing?
• Why do other employees make more than me?
• What is your pay scale for my role?
• What are you basing my pay on?

Be sure to treat employees with respect and compassion during this time, as it can be very frustrating to find out you're making less than your coworkers. Answer questions honestly, and prepare for common questions ahead of time to provide employees with consistent information. 

Implementing Salary Transparency Policies

Even if you're not legally required to have a salary transparency policy in your state, the practice promotes pay equity and is positively received by most employees. 

If you're considering implementing salary transparency at your company or have other topics regarding employee relations, retention, and satisfaction you'd like to learn about, visit iHire's resource center for employers.