For all the effects that greater pay transparency appears to be having on the workplace, from a rise in job applicants to enhanced worker productivity, a recently released survey shows there's another consequence: More than half of employers are communicating with employees about pay policies—even organizations that aren't legally required to do so.
Six in 10 of the 448 U.S. employers surveyed by consulting firm WTW in July are disclosing job levels to their employees, and roughly half (48 percent) are communicating how individual base pay is determined and progresses.
More than one-third of companies (36 percent) are disclosing individual pay ranges to employees, while an even larger number (46 percent) are planning to or considering doing so in the future.
"Many U.S. organizations are providing more visibility into their pay programs and practices," said Mariann Madden, North America Fair Pay co-lead at WTW. "Boards of directors are taking ownership for pay equity and pay transparency and are looking for organizations to define, monitor and report on their commitments and priorities. Pay equity and transparency are closely linked. It will be very difficult to have confidence in one without the other in place."
The survey data helps detail the effect that new pay transparency laws—as well as general calls for more pay information for employees and prospective employees—are having on organizations.
States including California, Colorado, Connecticut and Maryland, as well as cities such as New York City, have recently started requiring some employers to add salary information to job postings.
Regulatory requirements are the primary reason employers are offering greater levels of pay program communication, cited by 81 percent of employers, according to the WTW survey. Other commonly cited reasons include company values and culture (55 percent), employee expectations (54 percent), and environmental, social and governance as well as inclusion, equity and diversity agendas (53 percent).
In fact, WTW found that nearly two in five respondents are communicating or planning to communicate pay rate or pay range information to prospective employees, regardless of legal requirements. Of the 91 percent of companies communicating or planning to communicate pay ranges, 65 percent are disclosing a hiring rate or range for the job. A majority of organizations are using a consistent approach to what is shared and what pay range or rate is disclosed.
Part of a Greater Picture
Other observers have noticed employers communicating more openly about pay.
Data released by jobs site Indeed in March found that more than 40 percent of U.S. job postings on the platform now include employer-provided salary information, an increase of 137 percent in the past three years.
Other reports released this year have examined the effects of pay transparency on both employees and employers. Payscale found that pay transparency can prompt current employees to stay, while a pair of studies suggested that if employees are aware of how their salaries compare to those of their colleagues, it may compel them to work harder to prove their worth. Another report from ResumeLab indicated that pay transparency attracts job candidates, with four out of five workers saying they are unlikely to apply to a job that doesn't provide a pay range.
Employers 'Need to Get Their House in Order'
Although pay communications is experiencing big boosts in the workplace, it's not without its challenges.
WTW analysts noted that many organizations struggle to educate their managers and employees effectively on pay and pay equity, while employers fear getting more questions and are concerned about their effectiveness in educating their workforce on the topic.
Half of employers said they believe communicating pay rates or ranges will spark more questions from current employees, the survey found, while 47 percent expressed concerns over manager effectiveness regarding pay communication. Although managers are the most common channel for communicating pay program information (84 percent), just 38 percent of organizations report being effective at educating managers about pay communication and transparency.
But given that the U.S. is "at a tipping point with pay transparency," employers will need to address those challenges despite the difficulties, said Lindsay Wiggins, WTW North America Fair Pay co-lead.
"Organizations need to get their house in order by developing and actively managing foundational job architecture and leveling frameworks and conducting equal pay, pay gap and pay driver analyses to uncover and address areas of risk," she said. "Understanding their current state will support businesses in their efforts toward addressing the various legislative requirements but also in providing greater transparency into their talent and rewards programs and practices."