Ask an Advisor: The More You Know ... The More You Need Pay Transparency!

Who remembers the public broadcasting commercial “The More You Know”?  The premise was to educate the audience on a topic with the intent of helping them make better decisions.

Could this same premise apply to pay transparency? Employee attraction, retention and engagement are critical factors in today’s labor market, and workers’ understanding of employers’ compensation programs may improve all three factors. The SHRM HR Knowledge Center often receives questions regarding employee compensation, such as whether employers can prohibit salary discussions among employees and what to do about employee complaints that pay rates are not equitable. A new trend of state employment laws requiring employers to share pay ranges with applicants and/or employees has added to the increase in questions on pay equity. So, should employers share salary range information with employees?

The answer is a resounding yes. In fact, a recent SHRM survey indicated that 94% of HR professionals surveyed believe it is important for organizations to be transparent about pay decisions.  

While salaries have long been treated as an off-limits subject in the workplace, shielding an organization’s compensation infrastructure from employees can increase distrust of the employer’s pay practices. Distrust can result in disengaged employees, turnover and increased discrimination claims.

Workplaces are fraught with employees discussing pay with each other, and the National Labor Relations Act (NLRA) prohibits employers, even non-unionized ones, from forbidding such discussions. These pay discussions may result in inaccurate information and assumptions that will further erode employee trust. A SHRM survey indicated that about 1 in 5 workers (19 percent) who found out they were being paid less than a colleague of a different gender or race said they talked to other employees about the pay difference, and more than 1 in 4 (27 percent) started looking for a new job.

On the flip side, most employees (91 percent) who believe their organization is transparent about how pay decisions are made also said they trust that their organization pays people equally for equal work regardless of gender, race and ethnicity, SHRM's research found.

Coming to a state near you? Nevada, Colorado, Connecticut, California, Maryland, Washington and Rhode Island all require some form of salary range disclosure requirements, either automatically or upon request.

To prepare for pay transparency, it is important to conduct a pay audit and implement a plan to clear up any discrepancies. It is advisable to have an attorney conduct the pay audit so attorney-client privilege can be invoked to reduce risk. However, disclosing pay ranges to employees is not enough. Educating employees on an organization’s compensation philosophy, how job worth is determined and how pay ranges are set will also help employees make better decisions around actions based on pay.  

If you want to know more about pay transparency or have other HR questions, we’d love to help! Give us a call or send an e-mail. We’re also available by chat. It’s one of the most valued benefits of SHRM membership!

SHRM’s Ask an Advisor service is a member benefit through which SHRM’s HR Knowledge Advisors share guidance, real-life personal and professional experiences, and resources to assist members with their HR-related inquiries.