What is Transparent Pay?

You may hesitate to share a salary range in your job posting or during an initial interview. Here's why you should do it anyway.
What you need to know about pay transparency.

As a business owner, manager, or HR director, you may be hesitant to share a salary range in your job posting or during an initial interview with a prospective candidate. Maybe it feels like giving up too much information, or maybe you worry it will cause problems and resentment among employees. But employees who want a transparent salary are far from a trend. When former President Obama signed an executive order prohibiting federal contractors from retaliating against employees who discuss their compensation, he ensured that salary transparency 

However, true business benefits exist for both you and your employees if you are transparent about pay. Keep reading to find out more about pay transparency (or salary transparency), why it’s a smart business decision, how it helps with the gender pay gap, and what factors to consider when creating salary transparency calculators. Transparent pay is a trend that’s here to stay, just like employees who feel valued and paid appropriately for their position. 

What is Transparent Pay?

Transparent pay, also known as salary transparency, is the practice of being internally or publically open about compensation packages for employees. Companies usually move forward with transparent pay when they want to demonstrate an equity-focused compensation philosophy.

What are the Business Benefits of Transparent Pay?

In the past, only certain positions like government jobs listed a transparent employee salary for a particular job title; private companies avoided the practice. Today, thanks to the Internet and sites like PayScale.com, anyone can find out more about salaries for different types of positions from baristas to project managers. In fact, software compensation company Beqom surveyed its employees in a 2021 report and found 51 percent of 1,000 employed adults surveyed would switch companies to one with more pay transparency. If you want to hire and keep your employees around, it’s time to start being more transparent with pay.

Glassdoor researched the economic impacts of pay transparency on the workplace and company culture in its report, “Is Salary Transparency More than a Trend?” In short, the company found positive results in three distinct areas: job searching, pay negotiation, and on-the-job performance.

Tech companies, in particular, are jumping on the wage transparency wagon due to rising competition in the marketplace and the desire to attract top talent with competitive employee compensation. As seen in this CBS News TechWatch video, benefits include the ability to remove negotiation from the hiring process, which in turn, can lead to better pay equity. No longer will the candidate who has the best presentation skills be in a more favorable position than the other candidates. Companies also reap the rewards of retention due to motivated, content employees, according to this story. 

Overall, here are three of the main benefits you can expect from improved pay transparency:

  1. Better job matches mean less turnover. When you’re transparent with employee salaries, you end up with closer matches for their jobs. This is true for the seeker, too, and can lead to less turnover on both sides. 
  2. More equitable pay helps close the gender wage gap for female employees. A study in the Harvard Business Review says women are less likely than men to get a raise when they ask for one. It’s also common knowledge that American women are generally paid less than men for the same position, and this is even more common for Hispanic women. When you take steps to be more transparent with pay, you can help eliminate the long-overdue bias and inequity in pay for women.
  3. Happier employees equal more productive employees. It only makes sense that when your employees feel that their base salary is fair and based on experience level, job title, and other non-biased factors, current employees will be more content and work harder for your business.

Now that you can see the popularity and benefits of salary transparency, let’s talk about how you can get started being more transparent with current and future employees. Some states such as Colorado are already mandating pay transparency so the time is now.

How do I ensure my salaries are fair?

Social media scheduling tool Buffer has been transparent with company salaries since 2013. Here’s how they approached a salary formula: the job role x cost of living = salary. Sounds pretty simple, but it does require adjustments as each year the cost-of-living changes – especially in the last couple of years of the pandemic, and of course depending on where you and your employees live. Salaries in Silicon Valley, California are vastly different than salaries in Cody, Wyoming. To find the job role salary, Buffer uses Radford, a data company. Here at Guidant, we use PayScale.com for equitable salary calculation.

For a quick, free, and easy option to find out market rates, you can also use the calculator on Glassdoor.com. Simply type in the role, the location, and even a company name if you so desire. A click of a button then gives you the salary. But be careful: Glassdoor has fewer measures in place to ensure truthfulness. They may also have fewer records, skewing the reported salary in one direction or the other.

What else should you consider when creating a calculator for salary transparency? Job search giant Indeed.com discusses salary bands as another way to look at transparency. Salary bands use “experience, education, and level of responsibility” as key criteria and use ranges (high and low). The federal government, for example, uses a salary band, as you can see on its website.

The important thing to remember is that transparency is gaining popularity, and you will need to decide if you want to start slowly and add transparency to certain job levels, or go with full disclosure where everyone’s salary at all levels of the company is revealed. One popular theory based on research from Mercer says that posting the salary from the beginning with the initial job posting is the way to go and transparency is becoming the “new normal.” 

Better Transparency for a Better World

After you’ve done your research on why pay transparency matters, and you’ve considered the factors for making a calculator, it’s time to get started making your own salary calculator. Taking a moment today to increase your salary transparency is the first step in ending the pay gap and improving employee productivity and happiness. 

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