The Importance of Pay Transparency

Photo by Christina @ wocintechchat.com on Unsplash 

Over the last few years, multiple states across the country have begun to enact pay transparency laws. These laws vary from state to state: some require companies to post minimum and maximum salaries for each job they post, others require recruiters to disclose salary ranges to candidates when asked, and others require companies to report the pay ranges and demographic data of all of their employees. As a recruiter who has worked with a wide variety of companies, I know from personal experience that pay transparency can make employers very nervous. I have been told that compensation is “personal, private information” and that discussing salaries amongst your coworkers is unprofessional. I have also seen the way this mindset leads to large disparities in pay among team members who are in the same role, working with similar levels of experience. 

Based on my past experience, I am very excited about this trend toward pay transparency. I believe that these laws will obviously have an impact on the lives of tech employees, but I think that pay transparency will be very beneficial to employers as well. Here are some of the major benefits of pay transparency:

It can close the gender and race pay gaps

Unfortunately, there is still a pretty significant pay disparity when it comes to both gender and race in tech. Although companies are working to close these gaps (and making some progress), a culture of secrecy around compensation is preventing those gaps from closing completely. In fact, there are many managers that don’t know about pay disparities on their own team (largely because pay is determined by an entirely separate organization within their company). These pay disparities can also follow people throughout their careers.

If you want to build and retain a diverse workforce, pay equity is going to have to play a very big role in your company’s culture. Pay equity can also help your employer brand when it comes to attracting top talent, and it can make a big difference in the overall well being of your team. In a world that can still be pretty unfair when it comes to compensation, your employees will feel more satisfaction knowing that they’re not being underpaid based on their race or gender. 

Pay transparency can help you stay ahead of market trends…

Hiring in tech is, and has always been, incredibly competitive. There are many compensation benchmarking tools that you can use to understand what the current market rates are for the roles that you are trying to fill, but we have often found that these benchmarks are slightly below what top candidates are looking for. There have been many instances where one of our clients has begun a hiring process with what they thought was a competitive salary range, only to find that the candidates with the experience level they were looking for wanted more than what they were offering. Being transparent about compensation early in the hiring process has allowed these companies to course correct before wasting too much time. Having a highly competitive salary posted to your website will not only attract more applicants, but sourced candidates will also be more likely to respond to your outreach. 

…and retain top talent

It is pretty well known that the best way to get a big raise is to switch jobs; in fact, workers that switch jobs are likely to see a raise of around 10%, while workers that stay in their roles tend to see a loss of 1.7% after inflation. As a result, many workers are always casually looking for a new role, even when they’re happy in their current position. When employees know that they’re being paid fairly both within their team and within the general job market, they are more likely to stay loyal to their current company. Employee retention will help your organization thrive because you won’t have to worry about a loss of institutional knowledge. Retention can also help you save money; recruiting a new hire can cost you tens of thousands of dollars and lots of interviewer time and resources.

What if your team doesn’t have pay equity now?

At the end of the day, while pay equity might be a priority for your company, there often will be instances where pay disparities unintentionally pop up. Maybe your salary range has changed, and now your current employees are making less than your new hires; maybe one of your employees negotiated a bit harder than their counterparts. The good news is that pay transparency can help you (and your employees) recognize and remedy these disparities earlier. Usually, this will involve giving your underpaid employees raises (and if possible, back pay to cover the length of the disparity). Sometimes, this may also mean you’ll need to clearly redefine responsibilities and salary ranges for each salary level. Either way, this work will go a long way toward improving your company’s culture and your team’s happiness. 

As always, if you have questions about pay transparency in hiring, let us know! Email us at info@weenvisioninclusion.com.