If you work in talent acquisition, you’ve probably heard of the term “pay transparency.” It’s a trending topic for TA teams across the U.S. But what does it mean, and how does it affect the way you do your job?
To fully understand what pay transparency means for your team, let’s start at the beginning. The old notion of shying away from talking about money and how much you make is fading away quickly. Even just a few years ago, discussing salary and pay was difficult for many employees—even with friends and family, not just fellow colleagues—because no one wanted to appear like they were showing off if they made more than others or they had failed because they weren’t making as much.
Thanks to a rise in both Millennials and Gen Z entering the workforce and in leadership positions, that stigma is disappearing, and it’s even being signed into law. Enter: pay transparency.
But what is pay transparency? Put simply, pay transparency laws enforce the practice of publicly sharing compensation and pay ranges on job descriptions. Some laws require partial transparency—only revealing a pay band or salary range—while some require full transparency, listing specific compensation for each active employee.
It’s unsurprising that compensation is brought up often during interviews—65% of them—but that’s historically involved a lot of back and forth between recruiters and candidates. The candidate journey has a few broken pieces at the moment when it comes to compensation; people don’t know their market value and don’t know how to advocate for themselves. Women are often more susceptible to this than men.
There’s a lot of information out there on how to carefully navigate the question of what you feel you’re worth as a candidate and what a company can actually pay. To combat that, many states across the country are proposing pay transparency policies that companies will need to follow to remain compliant.
But what exactly do talent acquisition teams and hiring managers need to know about these laws, and how can you prepare for them appropriately?
Overview and timeline of pay transparency laws
The concept of pay transparency isn’t necessarily a new one. Business transparency has become increasingly more important in the past decade, and it was only a matter of time before it reached compensation.
Even though discussing salary and pay is a historically touchy subject, salary has always been fraught with confusion and issues, particularly when it comes to pay equity, eliminating discrimination, underbidding or underselling candidates just to fill open roles, and other instances of interviewer bias. Pay inequity is ignored by many companies, and this clashes with the fact that the large majority of employees want at least some form of pay transparency from their employers.
The very first thing to know about complying with pay transparency laws is that they differ from state to state—and each law impacts employers intending to hire remote employees in each state. As of November 2022, these are the states with pay transparency laws either active or signed into law, where employers are required to provide pay bands:
- Rhode Island
New York City has also passed a bill requiring companies to post the salary range for each open role for both external and internal candidates, with a policy for the entire state of New York expected to follow.
Pay Transparency Timeline
Here are some of the important moments in the last few years around pay transparency:
2016: California passes the Equal Pay Act and becomes the first state to pursue and solidify pay transparency laws
2019: Washington passes the Equal Pay and Opportunities Act, which requires employers to provide salary ranges when requested by employees for transfers and promotions, as well as provide pay bands for candidates when an offer is made
2020: Maryland’s 2016 Equal Pay for Equal Work Act is updated to add information on pay transparency, requiring companies to provide pay bands when asked
2021: Colorado passes the Equal Pay for Equal Work Act, the most aggressive pay transparency law in practice, requiring companies to list the salary range and detailed benefits of every job opening regardless of whether that role is remote or in-office, based in Colorado or somewhere else in the U.S.
2021: Connecticut passes HB 6380, requiring employers to provide pay bands when asked, with the additional requirement of disclosing salary ranges for internal promotions or transfers
2021: Nevada passes SB 293, requiring employers to provide salary ranges after an initial interview with a candidate, but employers are not required to provide salary ranges for internal moves unless asked
2021: Rhode Island passes the Equal Pay Law, requiring employers to disclose a pay range when asked by a candidate or employee, although the law does not go into effect until 2023
2022: New York City passes a pay transparency amendment to the NYC Human Rights Law, requiring employers to disclose a pay range in job descriptions and postings
There are a few different elements of pay transparency bills in play, and some states only have a handful of them:
- Employers are prohibited from asking candidates about current or past compensation.
- Employers must provide salary bands for net new roles, promotions, and internal transfers (either when asked or on public job descriptions and postings).
- Employers must provide salary bands for all roles that could be filled within the state, even with a fully remote workforce.
- Employers must provide salary bands for every single open role if they have any active employee in the state, regardless of whether or not the open role will be filled within the state.
- Employers cannot discriminate against candidates who refuse to provide past compensation in any way.
- Employers are required to list exact compensation for every active employee, whether they choose to do so online internally or externally as well.
7 things TA teams can do to prepare for pay transparency
Successful pay transparency requires a lot of work from talent acquisition teams, hiring managers, and leadership…It’s a full-company effort. There are specific things companies can do in order to remain compliant and provide the best candidate experience in the business:
1. Successful pay transparency starts from the top by gaining leadership buy-in.
Shifting policy and processes to comply with pay transparency laws is no easy feat, so getting leadership buy-in from the start is vital for success. This is especially true if your company is looking to make pay transparency a common practice for every role and location.
In order to make pay transparency a pillar of recruitment and the company as a whole, leadership needs to live and breathe the value first.
2. Figure things out internally before promoting ranges externally.
It can be harmful to start promoting pay ranges externally before making internal employees aware of the information—especially if it makes them feel underpaid or underappreciated. TA teams need to ensure the pay ranges for current employees are both accurate and accessible, and they need to communicate the plan for pay transparency to every active employee.
3. Decide how you’re going to handle any pushback.
No matter what path you take, you’re never going to please everyone. There are some employees who can’t cope with knowing what everyone around them makes, while others crave the information simply because they want to know.
Managers, department heads, and recruiters should always have access to these pay bands, but it’s up to you whether or not your company makes an internal announcement for everyone to see. As long as you make the information available if someone wants it, it’s up to the individual employee to decide whether or not they want to know.
For the rest of the pushback you might receive along the process, prepare for any questions in advance so your TA team can show off all of the research they’ve done to get these numbers right.
4. Make a decision on your pay transparency strategy and messaging.
Want to make salary ranges available to anyone who asks? Do it. Want to make transparency a core part of the company ethos? Make it so. Whatever you do, create the appropriate strategy and messaging around it.
One of the biggest wins from pay transparency is the ability for recruiters to focus more on marketing the overall benefits package. There will always be a company that could pay a candidate more, so what does your business provide that they can’t get elsewhere?
Focus your messaging on educational stipends, yearly vacation bonuses, PTO, healthcare packages, and so on—because compensation is so much more than salary. By removing the secrecy of pay, candidates are better able to evaluate every benefit.
Once you have your strategy and messaging in place, update your job postings accordingly. Consider adding a salary range to each posting as part of these updates. Regardless of whether or not you’re required to disclose salary ranges by law, research shows that including them in job postings can reduce your cost-per-click.
5. Provide ample training for recruiters and hiring managers.
You’ve made salary ranges available for employees and candidates to see. What do you want them to do with it? What do you want them to take away from it?
By providing proper training for recruiters, hiring managers, and interviewers, you’re able to better set everyone up for success and eliminate any confusion from candidates along the way.
Consider creating one-pagers for recruiters on what to say during initial phone screens or technical interviews, or providing information to hiring managers on how to handle difficult conversations around pay ranges and benefit packages. In addition, host virtual or in-person training for everyone involved in your hiring process on pay ranges and career ladders, the research done to get to those numbers, and how to discuss pay transparency overall.
6. Lay the foundation for career ladders so candidates and employees know how they can grow.
By providing a salary range before an offer is made, employers help candidates know where they land within that range and, if they aren’t at the max, know how far they can grow before they’re eligible for a promotion or internal transfer.
Not only does this help candidates. It also helps employees better visualize a career path for them at your company, and know that with increased domain knowledge and expertise, time at the company, and team impact, they’ll get closer and closer to that max salary.
7. Be committed to fix problems as they arise and iterate as you need.
Like everything in recruiting, no solution or process is static. If a problem arises, you can’t hide from it—you have to face it head on and enact the appropriate solution. Often, that solution involves adjusting or iterating a part of your processes to reduce the possibility of that problem repeating itself.
Pay transparency changes often—new laws are proposed, amendments are made, and opinions shift. The economy, too, is constantly changing. The messaging and strategy your company makes for pay transparency will need to change in response.
A pro example of a TA team with comprehensive pay transparency policies
As you’ve probably realized, a successful pay transparency initiative is a massive undertaking, especially with larger company sizes and complex organizations.
Pendo, a product engagement and experience platform, prides itself on transparency being one of its core values. Pendo’s Director, Head of Global Tech Recruiting, Bryan Machado, shared with us that pay transparency and philosophy have always been a topic of conversation for the company.
Once Colorado and New York City passed their laws and Pendo was affected, the team all had the same thought: If we need to be transparent for a couple of locations, why don’t we just be transparent around compensation as a whole? This birthed a company initiative to talk about pay transparency and Pendo’s philosophy about it.
Bryan’s advice for other teams tackling pay transparency is to be real. “When you start out creating your philosophy about compensation and the structure for how you’re paying people, just be honest and real about it. We’ve always had candidates and employees at the forefront of everything we do. There are no smoke and mirrors here, even if candidates didn’t see the range upfront. All they have to do is ask.”
Pendo’s first step? They began by working on internal transparency. This was a huge team effort involving the compensation team, HRBPs, HR systems, and many others. The teams spent a significant amount of time making sure every employee understood how Pendo compensated and had a forum to ask questions.
Second: Perform the market research to make sure the pay bands you put in place are aligned with career frameworks and viewed through a lens of diversity, equity, and inclusion. Then, educate employees on the ranges they’ll see. It’s especially important for recruiters and hiring managers to know these ranges and how they were created. Create a level playing field for candidates and let recruiters focus on the full package of benefits.
And finally, use pay ranges to motivate candidates as well as employees to climb their career ladder within your company. When candidates can see a max compensation in a pay range, they now know where they can go with the company.
Pay transparency reinforces a candidate-first mentality
It’s only a matter of time before pay transparency becomes legally enforced across the board. The companies that prepare now and create excellent candidate experiences will stand out and boast greater employee happiness and retention in the long run.
TA teams from any industry and company size will benefit from embracing pay transparency, and the candidates you meet with will love you for it, too.
Make sure your team is prepared for pay transparency by downloading our Pay Transparency Checklist.