It’s no secret that pay transparency is coming for the U.S. labor market. In fact, in many ways, it’s already here.
Ten U.S. states and counting have pay transparency laws on the table, with many more proposals in process or review at the state and local levels. The global market is experiencing a shift, too – 28 countries and counting have some degree of pay transparency laws on the books.
Seeing this strong surge in legislation, many HR leaders are starting internal conversations to prepare for the inevitable. They’re asking questions like, “Are we ready for salary transparency? What would we need to do to prepare?”
If your HR department is just diving into the complexity of salary transparency, here are some opportunities and challenges to consider:
Opportunity: Salary transparency can increase equity and fairness at your organization.
The main goal of salary transparency laws is increasing equity for employees and candidates. When candidates know the salary range for a job position ahead of time, they are in a much better position to negotiate fair pay. This is especially helpful for candidates who traditionally experience pay gaps in the workplace. When you include a salary range on your job posting, you are indicating that fairness and equity is important at your organization and building trust from the get-go.
Challenge: Salary transparency can start difficult internal conversations.
Often, the most immediate fallout from salary transparency is not with candidates – it’s with current employees. In a 2023 ZipRecruiter survey of hiring managers, 44% said they believe pay transparency causes tension among existing employees. When current employees become aware of what new hires are being paid, they may start to ask questions about their own salary.
For this reason, it’s a good idea for HR teams to outline a compensation rationale ahead of time. A compensation rationale is a set of clear guidelines for what determines salary – years of experience, qualifications, return for the company – that employers can reference when talking to employees about compensation. However, these guidelines take time and considerable strategy to create.
Opportunity: Your recruiting process can be more strategic and efficient.
In the same ZipRecruiter survey, 61% of hiring managers said salary transparency made recruitment more efficient, and 75% said including a salary range helped them attract top candidates. For several reasons, job postings with clear salary information are more attractive to candidates. They are clearer and often encourage talented candidates to take the time to apply. It can also lead to “better fit” applications, as candidates who are less experienced can quickly discern whether they have the qualifications to be truly competitive.
Challenge: Lower salary baselines can lead to unfilled positions.
If candidates are seeing your organization’s salary range, they are likely seeing salary ranges for other roles, too. If your company has a smaller budget for new hires as compared to competitors, it can affect your ability to attract top talent and stay competitive. Some employers are working around this by offering more benefits and perks outside of salary. If your team can still make a pitch on a strong package, even with a slightly lower salary, talented candidates may be inclined to accept.
Opportunity: More motivated and engaged workforce overall.
While the transition to salary transparency can be bumpy for organizations, the long-term payoff is often worth it. If your company invests time and strategy into a clear compensation rationale, it can often lead to a more motivated workforce. When employees can clearly visualize their financial trajectory, and trust that the company’s pay structure makes sense, they will be more likely to engage in their role and work toward future promotions.
Salary transparency is a delicate dance for many HR departments.
The transition to salary transparency provides both opportunities and challenges for organizations. If HR leaders can navigate these tricky questions with strategy, forethought and tact, current and future employees may thrive in this new, equitable environment. Is your organization ready for the changes ahead?
For more insights around healthcare leadership, subscribe to Lauren’s LinkedIn newsletter, Leading in Healthcare. Lauren Bencekovich is the founder and Managing Director of Lauren Recruiting Group, a boutique healthcare recruiting firm that matches healthcare executive candidates with hospitals and health organizations. Looking for an outstanding C-Suite candidate? Visit our contact page to schedule a 30-minute intro call with one of our team members. We look forward to connecting and matching you with a top-tier candidate!