Pay transparency refers to an employer's openness about compensation structures, including salary ranges for positions, bonus criteria and the company's overall approach to pay. It does not require employees to disclose their individual earnings to colleagues unless they choose to. Instead, it is designed to promote fairness and consistency in compensation.
One of the core objectives of pay transparency is addressing pay disparities by ensuring that pay decisions are based on objective criteria rather than subjective or biased determinations.
Despite the importance of pay, a recent survey found that many employees do not understand their employer's pay philosophy, and very few companies have a strategy to improve transparency. This is likely to change as new laws emerge across the country.
Legislating pay transparency
Currently, 14 states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Rhode Island, Vermont and Washington) have enacted pay transparency laws; Michigan, Missouri and Oregon have introduced bills regarding it.
These laws vary significantly: Some require internal transparency, meaning companies must inform employees about salary ranges and job opportunities within the organization, while others mandate public disclosure by requiring businesses to include salary ranges in job postings. With new laws emerging, businesses must stay informed about state-specific requirements and ensure compliance to avoid legal and reputational risks.
Even in states without legal mandates, pay information is more accessible than ever through platforms such as Glassdoor and Indeed. Employees and job seekers frequently share salary details online, meaning that companies that do not proactively manage their compensation messaging may find their pay scales scrutinized.
Changes in attitude
Historically, discussing wages in the workplace was discouraged or even explicitly forbidden by employers, with some fearing that such conversations could lead to discontent or demands for raises. However, attitudes are changing. A recent survey found that 86% of Generation Z workers and 59% of millennials are open to discussing their salaries with colleagues, signaling a shift toward openness about compensation.
Greater transparency can help employees feel confident that their pay is based on objective, fair criteria rather than arbitrary decisions. It can also enhance a company's reputation, making it more attractive to prospective employees who value ethical and inclusive workplaces. It may also allow employees the opportunity to question pay inequities they perceive as discriminatory, leading to greater empowerment.
At the same time, companies must be mindful of potential challenges. Transparency can expose pay gaps that may lead to legal action and/or cause frustration if employees' salaries compare unfavorably with those of competitors. A high number of employees view pay transparency –– even if shared as bands rather than individual compensation –– as a violation of privacy.
With nearly half of U.S. states either enacting or considering pay transparency legislation, businesses must stay ahead of this trend. Proactively developing a clear compensation strategy, ensuring compliance with evolving laws and communicating openly with employees will be key to navigating the future of workplace pay policies.