Guide to pay transparency

Pay transparency is a popular topic in today’s labor market. While it was taboo in the past, many employers now use pay transparency to achieve pay equity, build trust with employees, and attract talented candidates. With more states creating pay transparency laws, employers must know their obligations or risk potential legal recourse.

This guide will cover everything you need to know about pay transparency, including state-by-state requirements, and how to use personalized employee benefits to supplement your compensation package.

In this blog post, you’ll learn:

• What pay transparency is, why it's gaining popularity, and how it can help build a happier workforce.
• The pros and cons of implementing salary transparency and how it can affect recruitment and retention efforts.
• Pay transparency laws by state and how offering employee benefits can help small businesses stay competitive.

What is pay transparency?

Pay transparency is the practice of employers being open about salary and pay information at their organization.

A company that encourages pay transparency can:

• Give job seekers more detailed compensation and benefit information for open positions.
• Showcase their organization’s mission and values surrounding pay.
• Enable leaders to play an active role in determining pay ranges for positions.
• Better understand how to discuss compensation plans with applicants and current employees.

Wage discrimination still exists in the U.S. According to AAUW’s 2025 report, Women, on average, earn around 83 cents for every dollar a man earns for the same job, which has been the case for the past 20 years¹. But gender pay gaps are only one reason wage transparency has risen in popularity. A SHRM survey found that 82% of workers are more likely to apply to a job if the posting lists the salary².

Besides promoting equality, pay transparency helps your employees understand their current wages and what they can do to achieve higher pay. Being open about annual salary information can also build a culture of trust between you and your staff, attract talented candidates, and reduce turnover.

Pros of pay transparency

First, let’s go over a few reasons why pay transparency is a good practice to implement at your company.

1. Close pay gaps

One way employers are working to close pay gaps and promote salary equality is through pay transparency. Policies that promote complete transparency allow employees to know how much their colleagues make, so they can determine if their wages are fair — especially if they have the same job title.

Transparency efforts also play a critical role in:

• Ending racial wage gaps and gender biases
• Boosting employee morale
• Improving role accountability
• Stimulating productivity
• Promoting pay equity

It’s harder to ignore a wage gap if employees can access salary benchmarking data. This openness also helps prevent wage disparities, reinforcing a company’s commitment to equitable compensation.

2. Improve recruitment efforts

Attracting good employees can be challenging. In some industries, there are more open job positions than external candidates applying. That’s where pay transparency can give you a competitive advantage.

Pay and benefit transparency in job postings helps attract talented workers by building trust and setting clear expectations. Job seekers value honesty, and when employers are upfront about salary ranges, candidates are more likely to feel respected and make an informed decision about applying. It also allows you to recruit from a wider pool of candidates.

For many businesses, pay and benefits disclosure is also a legal requirement. States like California, Washington, and New York have enacted employment laws mandating salary and benefits information in job postings. Meeting these requirements helps employers avoid costly penalties while appealing to interested candidates.

3. Improve overall employee retention

Pay transparency and highlighting benefits don’t just help with recruiting efforts — they’re great for retention, too. When you list health insurance, paid time off (PTO), and other perks in your job descriptions, you not only stand out among your competitors but also appeal to job seekers prioritizing work-life balance.

SHRM research found that pay transparency can positively impact employee engagement and increase retention³. Transparency positions your organization as one that values honesty and possibly even as an employer of choice.

Being upfront about pay and how your employees can earn promotions, raises, and bonuses creates more satisfied team members and reduces the likelihood of employees seeking other job opportunities. If you compensate them fairly, employees will feel more valued and enjoy coming to work.

4. Promote an open culture

Salary transparency promotes a positive company culture by holding employers accountable for their employees’ salaries throughout the organization. Open communication builds trust between company leaders and employees instead of hiding pay practices, which can breed resentment among your team.

For example, employees at larger companies may feel like senior management is disproportionately paid compared to them. But with pay transparency, all employee wages are more likely to be equitable and solely based on performance. This is even more impactful if you have open discussions that outline how you determine pay for each role at your company.

Finally, transparent compensation and benefits practices support diversity, equity, and inclusion initiatives and strengthen your company’s brand. Employees often view businesses that highlight transparency as modern, ethical, and people-focused, qualities that resonate with today’s workforce.

Cons of pay transparency

While there’s no denying that pay transparency has several advantages, you should consider the potential downsides before rolling it out at your organization.

1. Comparing pay and employee resentment

One possible drawback of salary transparency is that your staff can compare their pay directly to their coworkers. If an employee believes that their job performance is greater than that of a coworker earning more than they are, it can create resentment and conflict among the team. Even worse, it can hurt morale, productivity, and business operations.

A great way to lessen pay comparisons and disgruntled workers is by having honest conversations with employees about how your company determines salaries. When employees make assumptions without fully understanding the policy, speculation and conflict are possible.

You should train managers on the best ways to discuss pay with their team, how to set salaries, and how to answer questions that may arise. However, this may require more resources than you have, especially if you’re a small business owner.

2. Companies may hire fewer people

If you’re paying lower wages, you may hesitate to make your salary compensation transparent because it can make hiring difficult. This may be even more of a concern if you own a small business and have a tight salary budget.

Salary is a key factor in attracting and retaining employees. So, if your state requires you to disclose pay, you may end up hiring fewer people, or your current employees may leave your company altogether.

Transparency practices can also make it easier for candidates to compare pay between competitors. If another company in your industry offers larger employee salaries than yours, you may have fewer candidates to choose from.

However, you can combat this by offering several free or low-cost perks that suit your budget while attracting candidates.

3. Pay differences may be misunderstood

Many employers determine pay based on various reasons that employees don’t know. With pay transparency, employees might insist that employers pay them the same amount as another person doing a similar job, even if they don’t have the same skill set or performance level. This can lead to potentially overpaying employees, which can blow your budget.

A mistake many employers make is not communicating why certain employees receive more or less than others. Specifying in your compensation strategy how you determine pay — such as by skill set, specialized job category, or previous experience — can lessen the chance for misunderstandings.

Pay transparency laws by state

Over the past few years, many states have drafted legislation requiring employers to implement transparent compensation policies in the workplace.

The chart below shows a comprehensive list of states that have enacted pay transparency laws.

Other state pay transparency laws

No other states currently have pay transparency laws. But, a few states and cities prohibit employers from hiring, interviewing, or promoting a job seeker based on the applicant’s decision not to provide their pay history. In some places, hiring managers also can’t ask for a candidate’s past salary information on job applications.

States and cities with these types of legal requirements include the following:

Only Michigan and Wisconsin have prohibited local governments from enacting salary history bans.

How offering employee benefits can offset lower salary ranges in small businesses

If you’re a small business owner, you may not have the budget to offer the same size salary to job candidates and employees as larger companies. But you can be competitive in other ways.

Offering a compensation package with various employee benefits and perks is crucial for attracting and retaining talent. Even if you provide a competitive salary, 81% of employees believe an employer's benefits package is a crucial factor when debating whether or not they accept a job offer.

Employee benefits are indirect compensation provided to workers in addition to their base wages. Certain benefits are state or federal requirements, but they can also be a voluntary offering.

A robust employee benefits package may include:

• Health benefits, such as health reimbursement arrangements (HRAs) and health savings accounts (HSAs)
• Life insurance
• Paid time off (PTO)
• Flexible work schedules
• Taxable stipends
• Retirement plans
• Lifestyle spending accounts (LSAs)

As your business grows, you’ll need more than competitive company wages to keep your employees engaged. Offering benefits shows your employees you care, highlights your company culture, and improves your overall brand.

Simply put, a pay transparency policy should accompany a front-and-center compensation package filled with benefits and perks your employees will love.

Conclusion

Even if your state doesn’t have pay transparency legislation, implementing the practice at your company will boost employee engagement, improve morale, and increase job satisfaction. While this method can potentially lead to difficult conversations at first, it’s an essential element to closing pay gaps and removing potential bias from your compensation decisions.

If you’re a small business with a limited budget, you can offset your salary by highlighting employee benefits in your compensation package. At PeopleKeep by Remodel Health, we’re here to help you offer a personalized HRA that your staff will value. If you’re ready to refresh your benefit package, contact us, and we’ll get you started!

This article was originally published on January 4, 2023. It was last updated on June 30, 2025.

1. AAUW - The simple truth about the gender pay gap

2. Equal Pay Day infographic

3. Study: Pay Transparency Reduces Recruiting Costs

4. The New Jersey pay and benefits transparency law