What Does Pay Transparency Actually Mean for You? 4 Things to Know

“Pay transparency refers to a pay communications policy in which a company voluntarily provides pay-related information to employees.” (Harvard Business Review).

Beginning in 2018, California set a precedent for reducing the pay gap between genders. They enacted a bill that removed an employer’s ability to ask how much a job applicant was making during the interview process. Since then, other states have enacted similar statutes and pay transparency laws. For example, Colorado now requires, “all job postings to include salary compensation information.” Since then, it has become a growing trend and, with New York passing similar legislation, it’s bound to continue. 

What does that mean for you as an applicant?

1. Take into account the goal of pay transparency. 

The overarching goal of salary transparency is to reduce the gender pay gap that currently exists in the United States. Ultimately, this should reduce the pay gap if applicants and employers use it the way it was intended. However, this doesn’t necessarily mean that they will - especially if it is a global organization and/or the company does business outside of the areas with active legislation.

For example, many employers will list the salary band or give the information if asked. However, many employers try to capitalize by giving the low-end range of the band or (and I’ve experienced this) giving a full band that applies to a multitude of roles within the company, without noting where the particular roles’ range will fall. This encourages applicants to move through the interview process and receive an offer much lower than anticipated. In sum, we live in a capitalistic society, of course, corners will be cut where possible. 

On the flip side, applicants are sometimes backed into a corner and pressured to disclose their current salary in an interview. Many candidates end up disclosing, and this can harm their earning potential.     

2. Ensure the organization is the right fit.

• Take the salary information given in a job description with a grain of salt. Oftentimes, it may not be the full band or it may be a bigger band than the actual role. My personal suggestion is to know your worth before the interview. If the posted salary band is close to what you would accept for the opportunity, apply and ask more questions in the first round of the interview. If the compensation listed is far from your salary expectations, the organization likely does not need someone with your skillset. 

• Do not disclose your current salary. Do disclose what you are looking for and align to that number in all of your interviews.

You’ve entered a new role or you’ve been with an organization for a while and that decides to enact a pay transparency policy, what does that mean for you as an employee?

1. Be prepared for systemic disruption.

• Any organizational change is associated with the loss of a human being as the body tries its best to stay in homeostasis. In short, this transition will likely cause some turbulence but will be beneficial for the employee experience in the long run and is worth it. Therefore, as an employee, know that your manager is likely hearing it from all angles. Try your best to be patient, especially if your salary isn’t where you believe it should be. It could take some time before discrepancies are handled thoroughly. 
• On the other hand, if you’re a leader, this is the time to influence and disseminate information. Prepare the managers you oversee for this organizational change as much as possible. You should do everything in your power to support your team before the new policy is communicated organization-wide. This could mean collaborating to calibrate current employee salaries or allocating the budget for discrepancies. By doing so you’re mitigating turbulence and, ultimately, attrition. 

2. Participation can happen in a myriad of ways.

• Providing salary bands for each level. 
  • Say your organization has people leveled 1 - 3 in each category: Individual Contributor, Manager, and Director. The pay transparency policy could be as simple as communicating the bands for each level organization-wide or, as complicated as pushing this information to the public. This approach should be pretty straightforward, easy to administer, and would not have many complications (e.g. attrition or fallout).
• Providing salary parameters for job postings.
  • As stated above, more and more states are enacting this policy (e.g. Colorado). This could lead to turmoil on a team or an increase in attrition, especially if there is a listed parameter that a current employee in a similar position does not meet. Therefore, before this is done, the organization should review those at that level for discrepancies. 
• Providing a database organization-wide with salaries and positions for each employee.
  • While this seems drastic, it is already a mandated requirement for all government roles. This is, by far, the highest level of transparency an organization can have around pay. It’s also a strategy that encourages accountability. Usually, organizations that have this capability are medium to large-sized with a heavy hierarchy. Some organizations only have this information available internally whereas government offices or public institutions are forced to share the information. 
  • If your organization is looking to change its pay transparency to this model, be very very cautious. It is likely that this organizational change will be in the works for a year or more and will not be a surprise.

What does this all mean for you?

Turn the data into actionable insights. 

Regardless of what tier of transparency your organization or local government allocates, use what you are given to inform your career strategy and decisions. If you find you’ve been working toward a career goal that doesn’t have a high average compensation within your organization - it might be time to shake things up a bit. Do your due diligence and research industries to find one that values your skillset. Simultaneously, if you don’t know where your career will take you but you know what your strengths are; use that information to your benefit in order to gain the biggest monetary advantage. Additionally, you can always use the transparency policy to fuel discussions with your supervisors, colleagues, and potential employers.

Overall, take this opportunity to calibrate your own skill set, value, and career goals. The continuous development of pay transparency policies in tandem with community evolution (think Glassdoor or Levels.fyi) generates a more accurate understanding of your market value. This becomes another data point for you to consider as you progress in your career. 

Sarah L. Larson is a practitioner and people scientist. With advanced experience as a learning and organizational development leader, she has focused on employee experience, system development, and case study expertise to lead people toward individualized and organizational growth systematically. She is well versed in strategic communication efforts and it is her passion to create innovative L&OD strategies. Connect with her on LinkedIn if you enjoyed this article.

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