Stop Panicking! Pay Transparency Helps Employers, Too

Posted by Kurt Rakos on 12/28/22 9:00 AM
Kurt Rakos
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Pay Transparency Laws

 As more employers lift the veil of secrecy surrounding compensation, they’re discovering that the new openness benefits all, (including themselves).

You’ve read the headlines. If you’re like most employers, you’ve probably read them with some level of trepidation, if not outright fear. More states and cities are responding to workforce demands for pay transparency with new legislation that delivers just that. So far, the list includes California, Colorado, Connecticut, Nevada, Washington state, and New York City.

I have no doubt that we’ll soon be seeing similar requirements here in Minnesota, Illinois, and throughout the upper Midwest.

Some Of The New Pay Transparency Requirements

Most of these new laws cover some or all of three critical components of fair and transparent compensation practices:

  1. They require employers to disclose salary pay ranges in job postings;
  2. They make it illegal for employers to require job applicants’ salary histories;
  3. They make it illegal to take disciplinary action against employees who share their compensation information with each other.

Resistance To Pay Transparency Laws

For many long-established employers, these new rules can feel like massive culture shock. Traditional wisdom has long dictated that when employers are able to hide a job’s pay range – while simultaneously demanding that job applicants disclose what they’re currently earning – the employer has the upper hand.

Can’t argue with that. It’s true… kind of. But a growing body of evidence shows us that the “upper hand” argument is actually only true when looking through the most narrow, short-sighted lens of each individual salary negotiation. In reality, this zero-sum thinking - that has long undermined certain groups of job applicants, especially women, people of color, and members of other historically disadvantaged groups – harms employer organizations, too.

Who Benefits Most From Pay Transparency?

Everyone, actually.

Employees and Candidates: The cliché is true; information is power. Knowing what an organization pays for each role type gives employees and candidates the facts they need to accurately gauge how their capabilities are valued in the job market. It arms them to assess and pursue opportunities that are best for them.

Employers: Contrary to current fears, openly shared pay information also delivers potent long-term benefits to employers.  The truth is, pay secrecy breeds mistrust among employees and critically, between employees and their employers.  Ultimately, word gets out. Talented high performers who discover they’re paid significantly less than their peers do express their disappointment and frustration, fueling ongoing suspicions among all.  

When the taboos demanding secrecy are removed, employers become the drivers of more open, trust-based communication throughout their organizations. Employees notice. Candidates notice. And they talk about it. In other words, pay transparency boosts employer brands.

Yet old habits die hard. For many employers, pay secrecy and policies that forbid employees from discussing or comparing their compensation with each other are so deeply ingrained that unspooling them can feel impossible. From a practical point of view, re-engineering such practices and systems can also be time-consuming, even challenging.  

But the rethinking and re-training it demands will be well worth it.

If you would like to discuss how greater pay transparency can help you improve your employer brand, attract higher-quality candidates, and retain your highest performers, please reach out to us at SkyWater Search Partners. We would love to talk with you.


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