Traditionally, talking about compensation has been taboo. Employers hesitate to reveal their pay practices because it can create perceptions of unfairness and, in worst-case scenarios, reveal previously hidden inequities. While it's illegal for companies to bar employees from discussing salaries, individuals hesitate because the sensitive subject invokes social comparison and sometimes tough emotions.
In an environment where we repeatedly hear pleas for change, the idea of "pay transparency" dominates the HR discussion. Pay transparency is when a company provides pay-related information to employees and, increasingly, to the public. It's a way to uncover and address wage gaps – and can effectively defend against gender bias, racial bias, and orientation bias. Here’s a look at the origins of compensation conversation and the key challenges for talent professionals.
Beyond rules and regulations
This desire in recent years to disclose – and close – the pay gap has led to new, emerging rules and regulations. Nearly 10 U.S. states have adopted laws (and a growing number are considering them) and the European Union proposed a directive regarding pay transparency, aiming to reveal gaps and incentivize employers to address them.
As requirements rise, HR leaders worldwide are grappling with how to respond. There isn't a universally accepted standard for measuring and reporting compensation, so employers apply a wide range of approaches.
Today's work environment has compounded the challenges for TA professionals. As they post, promote, and source talent for open positions, they face new considerations, including:
Meeting candidate demands for greater transparency
Salary is one of the most important insights candidates seek when looking at a job or researching a company. The growing push for pay transparency is especially evident in the next generation of talent, as Gen Z workers make salary discussions the norm. Nearly 90% of employees up to age 25 say they're comfortable discussing pay, while just over 50% ages 58 to 76 agree.
Rising to new employee expectations
The desire job seekers express for greater transparency has emerged internally, too. If pay isn't transparent, employees in your existing workforce may be more likely to leave. Studies indicate that enhancing compensation communication positively impacts employees' perceptions of trust and fairness, even boosting performance.
Making tough decisions in today's tight talent market
Employers faced with shrinking talent pools must often make bold moves to attract and retain people. Offering more competitive wages is a common tactic companies leverage to lure applicants, even when that means bringing in new hires above current pay ranges.
Complying with forced disclosure on job boards
From Indeed to Glassdoor to LinkedIn, more job boards now require a pay range in job postings. On most platforms, if employers don't input salary information, it's calculated by a salary estimation tool. These tools utilize job seeker-provided information as well as job features (like title, experience qualifications, education requirements, and location) to estimate the salary range. But the data may not be accurate and can thwart companies' attempts to shape their employer brands.
Navigating complexity with various pay transparency laws
Laws on pay transparency vary worldwide and even state to state in the U.S. – with just over a handful of states having rules on wage disclosure. Some laws demand employers publish a pay range externally. Others put the burden on candidates or employees to request salary information before an employer must reveal it.
Start paving the way
How do you begin implementing consistently fair compensation practices? Currently, leaders must interpret rapidly evolving requirements. While tactics to achieve compliance can be clear-cut, you need a thoughtful, longer-term strategy to reach greater equity and trust.