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The Importance of Salary Transparency

The Importance of Salary Transparency

Discover the importance of salary transparency, as well as the benefits that exist for both employees & companies, when creating a fair and equitable workplace.

April 4, 2023

Daniella Flores

What do you do and how much do you make? 

People have been asking me the first part of that question ever since I graduated college. However, the second part of that question is still seen as taboo and even “tacky” by many in our society. Salary transparency is here to challenge that idea to create a more equitable world of work. 

Salary transparency is when a company or individual openly shares their compensation. On a company level, its transparent pay policies that include listing salaries on job listings and publishing salaries internally to employees. 

On an individual level, it’s people discussing their pay with each other  – whether that’s sharing it with friends, family, colleagues, officially within their organization, or online to end the gatekeeping culture around compensation. Because the secrecy around what we make at work only hurts the worker, not the company who’s profiting off of underpaid employees.

This is why salary transparency is so important in our ever evolving world of work as we seek to close the gender pay gap – as well as other pay gaps including the racial pay gap, disability pay gap, age pay gap, and LGBTQ+ pay gap – and increase diversity and equal opportunities at work. 


The Rise of Salary Transparency 

In the United States, the concept of salary transparency dates back to the early 20th century, when unions began demanding greater transparency around pay and benefits. Unions have historically been strong advocates for salary transparency, as it allows workers to negotiate better wages, benefits, and helps to keep employers accountable.

In government and public sector jobs, salary transparency has also been the norm for many years. Many federal and state government agencies are required to make some form of wage information publicly available under laws like the Freedom of Information Act (FOIA) and state open records law.

The private sector however, has just started to build momentum in a growing movement towards greater salary transparency. The rise of the internet, social media, and pages like our very own Salary Transparent Street fuels this rise with growing online communities and access to more transparent salary information. 

Employees are now finding out that they were being underpaid at their jobs, including Salary Transparent Street’s founder, Hannah Williams, who found out she was making $20,000 less than her market rate which inspired her to start STS


The Evolution of Pay Transparency Laws

It’s perfectly legal to discuss our pay with each other as employees and employers can’t legally prohibit employees from sharing that information. Remember that the next time you read a company policy that says otherwise.

Under Executive Order 11246, employees have the right to discuss their pay with other employees and applicants. It states that an employee “cannot be disciplined, harassed, demoted, terminated, denied employment, or otherwise discriminated against because you exercised this right,” according to the U.S. Department of Labor.

Congress also passed the National Labor Relations Act (NLRA) in 1935 that provides employees at private-sector companies the right to seek better working conditions and representation without the fear of retaliation. However, public-sector employees are excluded, which are any state employees, local and federal government workers, agricultural and domestic workers, independent contractors, and workers who are employed by a parent or spouse. Air and rail carrier employees are covered under the Railway Labor Act.

Additionally, there are currently 8 states that have enacted salary transparency laws that require disclosure of wage ranges. These states include Washington, California, Nevada, Colorado, Maryland, New York, Connecticut, and Rhode Island. The differing laws vary in definition from state to state. For example, Colorado requires employers to include in job listings “a general description of all of the benefits and other compensation to be offered to the hired applicant,” along with the hourly or salary compensation/range for their position. California, meanwhile, only requires employers to provide the pay scale in the job posting, not information about “compensation or tangible benefits.”

16 other states are now considering pay transparency laws, with legislation being introduced in Alaska, Georgia, Hawaii, Illinois, Kentucky, Maine, Massachusetts, Missouri, Montana, New Jersey, Oregon, South Dakota, Vermont, Virginia, West Virginia, and Washington, D.C. 


Benefits of Salary Transparency

Pay transparency has several benefits for both the employee and employer.

For instance, it helps to attract and retain talent for companies while improving employees’ job satisfaction, trust, and increasing productivity. It also helps to improve the reputation of companies and builds a culture of openness with profound long-term effects. Gen Z candidates now expect transparency, and companies could lose out on top talent by not providing it. 

Salary transparency encourages fair & equal pay while closing several different pay gaps. The most recent significant impact of salary transparency has been its ability to close the gender pay gap by 45% in transparent organizations, according to a study at the University of Utah’s business school. It's also helpful for folks to land some of the highest-paying jobs without a college degree.

While there are several benefits of salary transparency, it also has its drawbacks. An unintended consequence of transparent pay information is that it compresses pay and narrows the pay gap between employees at different levels of an organization or within a specific job category. 

Wage compression happens in two ways; salaries of lower-paid employees are raised to become more equitable with those of higher-paid employees, or when salaries of higher-paid employees are reduced to become more equitable with those of lower-paid employees. The second case is typically for higher-earning employees who have been historically cisgender white men that’ve out-earned other groups for decades 👀.


How Companies Can Embrace Salary Transparency 

Achieving full salary transparency and pay equity will take more than the efforts of workers to break the stigma around talking about money. Three things have to come together to make this work – community, corporate, and congress. Congress and community are starting to do their part, with partial responsibility now shifting to corporate America.

Even though there are no federal laws requiring private employers to disclose compensation information (yet), there are ways they can start embracing salary transparency sooner than later.

A few ways corporations can start building equitable policies around pay include:

  • Conducting a pay audit & using data to set salary ranges: A pay analysis can help ensure pay equity internally for employees. This might include an audit on current compensation across organizations and referring to updated market and competitor pay data to compare to and update pay ranges. 
  • Creating a pay transparency policy: Take into account applicable laws, company culture, and company reputation as you design a pay transparency policy that best fits. Will you need to share pay ranges on job listings and decide how to publish pay data internally to employees? How will you communicate these appropriately both externally and internally? Rolling the policy out in phases may be more beneficial to management than rolling it out all at once. 
  • Preparing managers: Managers are going to be a big part of how a company communicates pay transparency policies to current and potential employees. This may especially change how negotiations work with management and they may be less able to grant personal requests in negotiations as their salaries and benefits are more standardized per each position.
  • Publishing the pay information internally: This is corporate marketing 101. The way that a corporation decides to communicate how they are publishing salary information internally will have an effect on how it’s received by their employees and potential employees.
  • Adjusting & adapting: As you build and publish new pay transparency policies, it will take some time to adapt with the varying personalities and opinions on pay transparency within an organization. Keeping an open line of communication with employees and management about the changes and allowing them to feel like they are a part of decisions being made will help create the most successful outcome.


Salary Transparency is The Future of Work

Salary transparency is good for both the employer and employee, challenging both to create environments where they can succeed and grow. Now with over half of America enacting and thinking about pay transparency laws, the movement continues to grow. 

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