This year, three of America’s most influential states—New York, Washington, and California—passed statewide salary transparency bills, putting the issue under the spotlight. Conversations around quashing the pay gap and mandating salary transparency on job ads have become popular in the US, but we haven’t arrived. The US is among the worst in the global ranking of salary transparency, with less than 3% of job postings, including salary information.
The lack of salary transparency exacerbates the widening pay gaps and perpetuates bias. When an employee’s salary is no longer hidden, every little difference in salaries among employees needs to be accounted for. Employers must also be more mindful when hiring in the public eye.
Many employers fail to recognize the hidden costs incurred by the lack of salary transparency. Our recent research has found that the absence of salary clarity directly hinders talent attraction and damages employer attractiveness.
According to our survey of 2,000 job seekers in the US, 1 in 3 would turn down an interview opportunity if they do not know the salary range. Even worse for an employer, over half would decline an offer after finding out the salaries. The cost of a vacant role compounds over time.
Jobseekers are skeptical of employers who do not disclose salaries in job ads. A third assume the company is hiding something, while 30% believe it shows the company will underpay them. Others think it makes the company look untrustworthy (28%) or indicates that the company will be biased in how they pay their employees (31%).
We’ve launched a petition calling for the government to make it a legal requirement for every job posting to include a salary. But companies don’t have to wait for a mandate; the tips below can help companies create salary transparency now.
1. Review the current salary philosophy
Companies must consider their salary philosophy, particularly how bias can unintentionally creep in to create salary differences. Consider looking into the salary history of a position, comparing the salaries and career journey of employees on the same team, and assessing whether each decision is warranted.
Unconscious bias is inevitable and is part of the human experience. To help mitigate it, companies and leaders can reflect on past actions, identify unconscious bias among decisions, and put policies or systems in place to tackle each of them.
2. Set salary ranges and publicize them
Start by using market data to set initial salary ranges. Consider implementing payroll audits to identify discrepancies. Then, be open and honest by listing salary ranges for each role on job ads or in the early stage of the hiring process.
Show employees how salaries are calculated and what they need to do to reach the next step in the range. In addition to achievements and career milestones, include the behaviors and attributes that senior leadership and the human resources (HR) department want to incentivize in the criteria for determining earned raises.
A common misconception around salary transparency is that discussing salaries at work is demoralizing, and therefore conversations around salaries should be avoided in the workplace at all costs. It’s normal for employees to make assumptions and incomplete conclusions as they learn where their salaries stand in the company from their colleagues. However, our research has found that most employees are happy to learn what their colleagues earn. Less than 1 in 10 respondents is unhappy about it.
3. Train leaders to lead by example
There are certain limitations to what an HR department or top management can do. Leaders who work closely with their team members and are usually responsible for finalizing hiring and promotion decisions play a crucial role in compensation conversations. Empower leaders to address the unconscious biases they typically gravitate towards and train them on how to handle salary conversations with potential and current employees in a fair and sensitive yet subjective manner.
4. Factor salary transparency in the company blueprint
Smart companies make salary transparency part of their future work plans. Salary transparency can help companies develop a culture where leaders can have a proactive salary conversation with their team members, standardize hiring processes that avoid unconscious bias, and attract employees with diverse backgrounds and experiences.