The Rising Power of Pay Transparency
Workspan Daily
June 08, 2023
Key Takeaways

  • Increased pay transparency equals increased interest. Research from Payscale and beqom found that applicants are more likely to apply to jobs that include a salary range on the job posting.  
  • Less transparency equals less retention. Research from beqom found that 60% of employees would consider leaving their current job for one with increased pay transparency.  
  • Vital steps to achieve pay transparency. Crafting a compensation strategy that makes sense for the business and includes a robust internal and external pay equity analysis are foundational pieces to implement a pay transparency strategy.  
  • Make the hiring process more efficient. Pay transparency can reduce the likelihood that a candidate will go through the interview process and receive a salary offer that is well below their expectations, causing them to decline the offer. 

The benefits of pay transparency are becoming more evident — especially among younger workers — according to new research. 

Payscale recently found that while pay transparency decreases employees’ intent to quit by 30% when analyzed in isolation, it surprisingly increases job-seeking behavior for Generation Z by 3%.  

This finding is likely due to younger workers being more motivated to change jobs for a larger salary, especially if they see higher pay ranges advertised and don’t understand the rationale behind their current pay.  

Similar research from beqom supported this notion, as it found that 79% of the employees it surveyed were more likely to apply to jobs that included salary ranges in the posting and 60% would consider leaving their current job for increased pay transparency.    

“If organizations want to attract top talent,” said Tanya Jansen, co-founder of beqom, “they’ll increase their chances by adding salary ranges to their job posts.” 

Ruth Thomas, pay equity strategist at Payscale, said that crafting a compensation strategy that makes sense for the business and includes a robust internal and external pay equity analysis are foundational pieces to implementing a pay transparency strategy.  

Once that is accomplished, there should be training for managers and an organizational commitment about how to have meaningful pay communications with employees.  

Course: Performing a Pay Equity Analysis  

“The objective should be for every employee to know their pay is fair and why it’s fair,” Thomas said. “Employers must go a step beyond posting salary ranges to really showing they value their employees while also proving that the company has a positive work culture and bright future.”  

The Value of Transparency  

Aside from the potential positive impact on gender pay equity, pay transparency will have a huge effect on retention and employee engagement — two of the most important objectives for organizations, said Boyd Davis, global head of compensation at human capital software firm Unit4.  

“The perception that salaries are unfair is toxic within an organization,” he said. “The solution to reversing this sentiment is transparent pay practices, providing not just published salary ranges but also clear communication on the factors impacting pay and the rationale for an individual’s compensation package.”  

On the attraction side, organizations with transparent pay policies not only receive more applications, but an accurate salary range will also streamline the hiring process.   

From a retention standpoint, Davis said a lack of internal clarity around compensation and how bonuses, raises and promotions are determined can erode morale, arouse suspicion of inequities and potentially drive talent elsewhere.  

Transparency can also reduce the likelihood that a candidate will go through the entire interview process and receive a salary offer that is well below their expectations, causing them to decline and ultimately waste everyone’s time.  

Slow March to Transparency 

Despite the growing body of evidence about the benefits of pay transparency, there is still a wide range of reactions to the concept, Davis said.  

“Some organizations are embracing it fully [by] sharing real ranges both internally and externally and putting pay into context for existing employees and candidates,” he said. “Others are treating pay transparency as purely a compliance exercise limited to minimal adherence to legislation.” 

Taking into account that several states and municipalities have passed legislation mandating salary ranges in job postings, Jansen said, many employers are doing a better job of making their pay packages more transparent.  

On-Demand Webinar: Pay Rate Disclosures in Job Postings: New Laws, Best Practices and Tips   

For example: The number of job postings with salary ranges has more than doubled since 2020 (18.4% to 43.7%), according to research by Indeed.  

“Employers are cognizant of workforce demands, and recognize the talent attraction advantages that come with increased transparency,” she said. “However, many employers fall short, as the majority of listings still don’t include a salary range.” 

Companies deciding against adding salary ranges to job postings have their reasons, Jansen said. Chief among them is the likelihood of candidates demanding the top end of a salary range, with Resume Builder finding that 68% of candidates saying they would do exactly that. 

Ultimately, pay transparency in job listings goes beyond just compensation.   

“The ideal listing will paint a picture of what life is truly like at a given company by detailing the job functions, perks, benefits, workplace policies and anything else a prospective employee should know,” Jansen said. “This will give organizations the best chance at finding applicants who are right for the job and their culture.” 

Editor’s Note: Additional Content 

For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics: 

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