How to Navigate the Complex Landscape of Pay Transparency

NOVEMBER 4, 2024

Pay transparency laws are designed to reduce pay inequities and create a more fair work environment. At least 13 states — and numerous cities — have passed legislation requiring employers to include pay ranges in job postings in those affected markets. However, the cost and complexity of compliance has led many organizations to proactively include pay ranges, regardless of location. As these laws make pay information more readily available, employers will need sound compensation strategies to recruit and retain top talent.

Organizations that are not obligated to include pay ranges with job postings may still feel pressure from the marketplace to do so. A recent compensation best practices report found that companies including salary data receive 50% more applications, and their job postings are three times more likely to deliver quality candidates.¹ Additionally, a 2023 survey found that the vast majority (82%) of U.S. workers said they were more likely to consider applying to a job if the pay range was listed, according to the Society of Human Research Management (SHRM).²

Despite good intentions, pay transparency can present employers with several challenges, including:

Exposure to wage gaps – Posting the salary range for new hires can cause conflict with current employees who believe they are being paid unfairly.

Singular view on base salary only – When applying for jobs, candidates may not consider total compensation, which often includes health and welfare benefits, retirement plan contributions and other incentives, as well as non-monetary perks.

Increased competition – Job postings that include pay ranges can make it easier for competitors to lure in employees with higher offers, which may inflate wages.

Regional impact – Different labor markets will have different pay ranges for the same positions. Job postings that do not take the specific labor market into consideration can make it difficult for employers to set appropriate pay ranges.

In an increasingly transparent work environment, how can employers create the fair and competitive compensation programs employees want?

Creating Competitive Compensation Programs

World at Work reports that over 59% of organizations have a formal compensation strategy to guide the design, implementation, and administration of the program, as well as a philosophy statement on how employee pay supports the business mission, culture, and organizational values.³

To help set a competitive compensation structure — and move toward pay transparency — employers should consider the following steps:

1. Develop and document a sound compensation strategy and philosophy that aligns with your company’s goals, values, and culture.
2. Exercise caution when using salary ranges pulled from publicly available job postings. Look at the size, industry, and geographic location of the companies posting the salary ranges, and consider that postings may be outdated.
3. Leverage reliable benchmark data to build salary ranges that reflect your market and account for geographic differentials as needed.
4. Review current employee pay to ensure it aligns with the developed salary ranges.
5. Develop a communication strategy that includes manager training and frequent conversations about pay with employees.

Communication Is Key

According to Gartner, employees who perceive their pay as inequitable have a 15% lower intent to stay with their employer and are 13% less engaged at work than employees who perceive their pay as equitable.⁴

A well-crafted communications strategy is critical, and should include talking points for leadership, managers, and supervisors that discuss the organization’s compensation philosophy and approach:

• Explain that pay is determined by a disciplined and objective approach that takes the competitive market into account.
• Define “performance” and discuss how it includes both work that has already been delivered and future potential.
• Provide details relating to “potential” and what factors are evaluated. These can include the level of contribution and quality of work, reliability and consistency, as well as other factors like initiative for career growth and ability to mentor or train other employees.

Help your company offer the competitive wages employees are seeking. Contact your USI representative or email ebsolutions@usi.com to learn more.

¹ Payscale, 2024 Compensation Best Practices Report
² SHRM, New SHRM Research Shows Pay Transparency Makes Organizations More Competitive, Leads to Increase in Qualified Applicants, 2023
³ World at Work, 2022 Compensation Programs and Practices Report
⁴ Gartner HR Research Finds Only 32% of Employees Believe Their Pay is Fair, November 28, 2022