Pay transparency is about a company’s willingness to open up about how employees are compensated for their work. At least 67% of organizations say pay transparency is important, but only 23% of employees say they see it put into practice.
“Employees believe a culture of transparency builds confidence, a better workplace experience, and more equitable pay outcomes,” says Lauren Winans, CEO and Principal HR Consultant of Next Level Benefits. “Overwhelmingly, today’s employees are clamoring for disclosure. But while companies are willing to talk the talk, few are willing to walk the walk.”
What is the pay transparency movement?
A growing number of employees feel transparency is the best means of ensuring fair treatment for women and people of color; they are no longer satisfied with lip service, with at least 79% saying they want some form of pay transparency. Institutional investors are also calling for more public disclosure. This year, almost 60 percent of Walt Disney Co. shareholders approved a request to increase pay transparency.
The pay transparency movement stems from a desire for a fairer society in the wake of #MeToo and Black Lives Matter movements, as well as the COVID-19 pandemic. “These momentous events laid bare pay inequities that have been ignored for far too long,” Winans explains. “Employers continue to pay women and people of color less than white men. When they open up about salary information, they will equip everyone in the US workforce to negotiate for the compensation they deserve.”
The US Department of Labor says women earn 82 cents for every dollar earned by men. That gap expands when comparing the salaries of white men to the salaries of women of color. Black women earn 65 cents, and Hispanic women earn only 59 cents for every dollar a white man earns. These inequities decrease buying power for women and people of color, especially in times of high inflation.
Why the corporate sector is slow to change
Despite the obvious disparity, pay inequity remains largely ignored. Only 21% of the 928 largest public US companies conducted some type of gender pay gap analysis in 2021. Of those, only 58% came forward to report results.
Companies examining pay policies are reluctant to publicize results for many reasons. Discussing salary can feel taboo, and there is not currently a standard plan for measuring and reporting data related to compensation. Companies may also worry that sharing this information will affect their bottom line, or even incur lawsuits, though most of these fears are groundless in light of what real pay transparency seeks to achieve.
“Transparency doesn’t have to mean publishing a list of every employee’s salary,” Winans remarks. “Openness about compensation is more productive when companies discuss pay ranges for each role and the factors that go into calculating these ranges. This level of transparency enables workers to understand why they earn what they do and how they can advance.”
Legislation spurs the pay transparency movement forward
To date, 14 US states and five cities have passed laws requiring pay transparency. An update to the Equal Pay Act was signed into law in 2018, and Congress revisited the legislation this year. Changes effective January 1, 2023, require businesses with at least 15 employees to publish salary ranges, benefits, and other compensation in job postings.
“Despite the promise of more legislation to come, transparency isn’t the magic bullet that will automatically correct pay gaps,” says Winans. “However, making pay equity a cornerstone in company values does offer benefits. Employees who know they are being treated fairly experience higher job satisfaction, engagement, and productivity. Companies that engage in open conversation about compensation and advancement promote equity and build better workplace culture. It’s time for company leaders to discover what their workers want to know about pay policies, establish salary ranges, conduct payroll audits to resolve salary discrepancies, and train managers to discuss the information with their employees.”
