When you don’t have a clear structure for your pay decisions, you run the risk of higher turnover, recruiting challenges, employee distrust, and noncompliance with legal requirements, depending on your location.
Currently, 16 states have laws related to pay transparency and 10 additional states have introduced bills regarding pay transparency. Some states, like Ohio, have local ordinances in specific cities instead.
Pay transparency is popular with employees, and 82% of U.S. workers are more likely to consider applying for a position if the pay range is listed in the job posting, according to SHRM.
Addressing Concerns
Even if you don’t currently live in a state where pay transparency is mandated, voluntarily implementing pay transparency can help with recruiting, reduce speculation, and minimize exposure if you’re looking to expand across states.
What is important to understand is that pay transparency does not mean publishing everyone’s exact salary, the same way open-book management doesn’t. Instead, it creates clearly defined pay ranges for roles and provides documented criteria employees must meet for movement within those ranges.
Pay transparency doesn’t remove your managers’ discretion or force uniform pay regardless of performance. Rather, it helps provide consistency within your company between job performance and compensation.
While culturally, discussing salaries has been frowned upon in the past, sharing pay ranges on job openings ensures candidates have a clear understanding from the start, and it can filter out misaligned applicants early on.
According to SHRM research, 70% of organizations that list pay ranges on their job postings say doing so has led to more applications; 66% say the quality of their applicants has increased.
Another major benefit of pay transparency is that it boosts your current employees’ trust in the organization. When salaries are shrouded by smoke and mirrors, it’s far more likely to breed resentment.
If you have a clear outline of how to reach a higher pay level, team members feel empowered to take the next step. Pay discussions with managers shift from being emotional to factual with actionable items.
Having pay transparency can also set you up for success as laws are passed or you look to scale your company into other regions. This level of operational consistency can also be attractive to those looking to acquire your business.
Closing Pay Gaps
Implementing pay transparency can also help protect your organization from inadvertent pay gaps.
When raises are based on negotiation skill rather than role value or given reactively when an employee threatens to leave, these informal pay decisions can lead to an imbalance in your organization.
Additionally, when positions experience scope creep without corresponding pay adjustments, employees in similar roles can end up being paid differently because the expectations of the job aren’t clearly defined.
According to Premier Law Group’s analysis of the latest U.S. earnings numbers, full-time, year-round women earned just 80.9¢ for every dollar men made in 2024. Women also earn 18% less per hour than men, even after adjusting for race, education, age, and location.
“It is a clear signal that many employers may be violating the Equal Pay Act of 1963 and related pay-equity laws by knowingly or negligently maintaining discriminatory pay practices,” Premier Law Group says. “In our experience litigating such cases, broad pay gaps of this magnitude can expose companies to liability for back pay, compensatory and liquidated damages, and attorneys’ fees, especially if those gaps trace to systemic failures in pay transparency, performance evaluation, or promotion policies.”
Creating Clarity Around Pay
To avoid creating blind spots when it comes to compensation, you first need to evaluate your roles and their responsibilities before defining the pay for them.
Once you have built out clear job descriptions, then you can determine the appropriate compensation for the various titles.
Within these roles, you can also establish pay bands that account for an individual’s skill level, certifications and responsibilities. These ranges need to be realistic for your market and pricing. One tool you can utilize to see if you are above or below average in your pay offerings is the 2024 Compensation and Benefits Report.
What matters the most is documenting the ‘why’ behind your pay rationale. Being able to defend your decisions matters just as much as being fair and equitable to your employees.
When it comes to pay increases, managers should have consistent evaluation criteria, so they don’t end up applying different standards across different branches or crews.
Decide within your business what sort of pay increases you want to practice. Some of the possible types of pay increases include tenure with the company, earned certifications, merit-based, promotions and cost-of-living adjustments.
If you choose to offer pay bumps to employees who increase their skills or knowledge, make this progression visible and clear so they know what actions will result in a raise.
Jonathan Lucci, general manager for Weed Man of Winchester and the Shenandoah Valley in Virginia, cautions against paying someone a set amount no matter how they perform.
“I would say as an overall philosophy, I don’t believe in paying any position of any kind that doesn’t have a variance according to performance,” Lucci says. “Whether it’s sales, whether it’s the technicians who are actually doing the work, whether it’s managers, I like there to be as much of a component as possible that is variable based on performance.”
Objective performance evaluations should be utilized so managers don’t end up basing their decisions on an employee’s general likeability or a vague sense that they’re a hard worker. Document specific instances of behavior to support the decision for pay increases.
Also, equip your managers with consistent language so they can communicate with employees who may not yet justify receiving a raise. When employees know what steps they can take, they are more likely to increase their effort, and their motivation rises as well when they know they are being compensated fairly.
