Pay Transparency: From Trend to Workplace Standard

Pay Transparency

The Pay Transparency trend is no longer a trend; it’s a reality. Across the United States, many state-level laws and local ordinances are being enacted to increase transparency in salary negotiations and in the overall hiring process. Just this year, five states have added new text and regulations relating to pay transparency requirements. On a local level, many large cities and industrial centers have additional requirements (New York City, Jersey City, Cleveland, to name a few). The management and execution of these changes, especially in areas where both state and local requirements are in effect, can be challenging. Arguably more complex are remote/hybrid roles and territory-based positions where an employee will be based outside of the organization’s “home state.”

What is pay transparency?

In general, pay transparency is the practice of openly sharing compensation and benefits information with candidates in the hiring process- the goal is to promote wage equity and trust. Each state’s pay transparency legislation varies in scope and requirements, particularly regarding salary and benefits disclosures in job postings. There is also an inconsistency in how remote and territory-based roles are treated. While pay transparency supports the broader goal of pay equity, the two are different. Pay equity focuses on ensuring employees are paid fairly and consistently for equal work, regardless of gender, race, or other protected characteristics. Transparency aims to help achieve equity by reducing the reliance on prior salary history in compensation negotiations, instead focusing on role-based compensation. 

How does this legislation impact my organization, its employees, its operations, and hiring practices?

These state laws and local ordinances set the standard for what and how much information you must include in your external and internal job postings. Each state and locality is unique in both what information is required and the timeline of the dissemination of that information to candidates and employees. For example, Washington, DC requires all employers, including those with remote roles, to disclose all relevant compensation and benefits information to the candidate before an interview takes place, regardless of the company's size. On the other hand, Vermont requires compensation and benefits information only upon a conditional offer, and it does not apply to remote roles. And some states require this information on job postings. This demonstrates that pay transparency is a complex issue that will continue to evolve as we move forward. 

The Pay History Ban

With all the minutiae of each state’s requirements, one commonality remains-the Pay History Ban. As best practice, you should never ask an employee about their previous pay history, regardless of location and applicable legislation. It comes down to how the question is framed-any explicit question related to a candidate’s or employee’s previous compensation is not acceptable and can both diminish trust and, in severe cases, lead to legal exposure, as it may reinforce existing pay disparities and violate laws aimed at promoting pay transparency. 

Pay Transparency in Remote/Territory-Based Roles

Managing pay transparency requirements becomes increasingly complex when companies employ remote workers or territory-based employees. Legislation varies widely, particularly in how it addresses these remote roles and positions based outside of a company’s home state. Take, for example, a company headquartered in New York, with traveling sales representatives based in Illinois. The company must comply with both states’ pay transparency laws. New York legislation applies to remote roles, meaning that any job that can be performed in the state is subject to these requirements. Additionally, if the role is or can be performed in Illinois, regardless of the company's home state, Illinois regulations also apply.

The primary challenge in complying with these multi-state requirements lies in the legislative gray areas. Many state-level laws lack explicit coverage of remote roles, territory-based employees, and the definition of a true “job posting.” While the basis for some pay transparency legislation is the Pay History Ban and the requirement for salary ranges to be included in job postings, others leave much to interpretation. As mentioned, questions have emerged about what qualifies as a job posting, whether internal promotions are subject to the same requirements, and how salary and benefits information must be communicated.

The technicalities of these laws can be challenging to interpret and apply consistently, particularly for organizations operating across multiple states or jurisdictions. As the push for increased pay transparency continues, legislation will likely become more standardized and explicit, helping employers navigate the requirements with consistency and confidence. 

Common Misconceptions of Pay Transparency

With the rise of pay transparency legislation comes confusion that can ultimately lead to an improper approach to the topic. Here are a few of the most common misconceptions about pay transparency and what they mean for you in practice.

1. Pay Transparency means full disclosure. 

Pay transparency is not the same as full disclosure. One of the most common misconceptions is that pay transparency requires a disclosure of each employee’s exact salary. In practice, this level of detail is not required, as most states with active legislation require only a salary range, benefits information, and an application deadline on job postings. 

2. It makes salary negotiations harder for the employer.

There are concerns that transparency surrounding salary and compensation decisions may limit negotiations or tie your hands in the hiring process. In reality, pay transparency can help to frame negotiations rather than restrict them. Candidates and employees can enter discussions with a clearer understanding of expectations. As an employer, you can still negotiate within the listed range, accounting for factors like location, job responsibilities, experience, and internal equity. If you find during the hiring process that you need to offer a higher salary to attract qualified candidates, then you can adjust your pay range accordingly.  

3. It will lead to conflict and discontent amongst employees. 

It’s understandable to think that increased transparency around compensation and related decisions may cause internal tension among employees. But hiding compensation information doesn’t limit dissatisfaction; it creates room for assumptions and suspicion. Plus, current law already allows employees to discuss their wages without reprisal. A transparent compensation framework can help employees understand the “why” behind compensation decisions, enabling them to better understand individual differences. 

4. It’s just a compliance issue. 

Pay transparency is not just a legal checkbox. While pay transparency begins with compliance, the legislation intends to foster greater fairness and accountability for all parties involved. Transparent compensation and hiring practices can build organizational credibility and reputation, helping to create a competitive advantage in the hiring and retention areas. 

How to Navigate Pay Transparency with Confidence

Avoid prior pay history questions. Regardless of local or state laws, it is best practice to avoid questions related to a candidate’s compensation history to ensure future compensation is based on what the role is worth to the company. 
Document salary and benefits. Prepare standardized compensation materials for external job postings and internal use. 
Audit current compensation practices. Ensure all roles have defined salary ranges that align with both internal pay equity and market benchmarks. 
Train your hiring teams. Educate recruiters and managers on how to communicate salary expectations and legal boundaries, including what not to ask. 

If you’re considering your approach to pay transparency, The Workplace Advisors is here to help. This includes assessing current job postings for compliance, developing new job postings, and reviewing overall compensation practices.