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Is Pay Transparency Working?

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The Curtain Has Been Lifted
 

Employee compensation has traditionally been shrouded in secrecy. Salaries were rarely discussed in polite company, and employers did not disclose their compensation for job openings until making an offer.

But a series of rapidly expanding state and local laws requiring employers to post salary ranges and prohibiting questions about salary history are offering more pay transparency than ever before. This trend is creating foundational challenges but also opportunities for company leaders to reduce pay disparities, especially the gender pay gap.

"Since wages have been set under a realm of secrecy, when the curtain is lifted, you would expect wages to rise," says Zoe Cullen, an assistant professor of economics at Harvard Business School. "Why? Because everyone has been negotiating individually. When people who are paid less than their peers suddenly discover that, they will want to renegotiate their salary."

Three years after those first state laws passed, is the movement accomplishing what it set out to do?

 
 
 
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In 2024, HR and business leaders can expect to see three key trends in HR technology: the continued rise of AI, innovations in pay transparency tools and technology that supports the employee experience. Are you preparing your business?Advertisement
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A Case Study of Transparency
 

When Colorado's pay transparency law took effect in 2021, Children's Hospital Colorado was fully prepared to post, explain and defend its salaries, because its HR team had just finished a multiyear effort to define its compensation philosophy.
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Explore Further
 
SHRM provides resources to help business leaders make pay transparency work in their organizations.

Half of Job Ads Now Contain Salary Information
Global jobs board Indeed has reported that 50 percent of U.S.-based job listings on the site now include some employer-provided salary information, the highest share yet recorded.

Can Pay Transparency Reduce Employee Turnover?
Research indicates that employers with transparent pay practices can benefit by attracting potential employees. But what about current employees? New studies find that pay transparency can help retain them, too.

Want to Attract Job Seekers? Make Sure to Post a Salary
Recent data validates the pay transparency trend, along with a warning for employers: They may lose out on job candidates if they don't post a salary range.

One Benefit of Pay Transparency? More Productive Workers
There is a new, and perhaps surprising, benefit to pay transparency: Disclosing salaries may motivate employees to work harder.

SHRM Toolkit: Managing Pay Equity
This toolkit examines the need for organizations to review their policies regarding starting pay, allowable differences in pay, merit pay increases and promotional pay increases.

 
 

Every Saturday, All Things Work from HR Magazine provides thoughtful insights into the rapidly transforming nature of work and the workplace, and how HR, decision-makers and organizations worldwide are navigating and leading this change.

 

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