The Role Pay Transparency Plays in the Global Workforce

Governments around the world are taking action to close the gender pay gap through pay transparency laws.

Many employees in the United States still follow the informal or official rule of keeping their pay a secret. However, there is a growing demand for companies to be more transparent about their salary policies. Governments at the local, regional, and national levels worldwide are passing laws to increase the disclosure of pay practices. 

Laws requiring job listings to include pay ranges have been put into effect recently in New York City, California, and other locations. Here is a list of pay transparency laws by state or city:  

• California – All employers 

• Colorado – All employers 
• Connecticut – All employers 
• Maryland – All employers 
• Nevada – All employers 
• Jersey City, NJ - Employers with five or more employees 

• New York City, NY 
• Ithaca, NY 
• Westchester County, NY 
• Cincinnati, OH and Toledo, OH - Employers with 15 or more employees 
• Rhode Island – All employers 

• Washington - Employers with 15 or more employees 

 

According to experts, employers in the United States are becoming more open about their pay policies to keep up with companies in states that have laws requiring them to disclose salary ranges and to address the compliance challenges given the evolving landscape of state and local requirements. This is also due to a competitive job market and more people working remotely. 

The requirements vary by state and city but the law mostly requires employers to provide the pay scale for the position advertised and a general description of all employment benefits. 

A new report from job search website Indeed has revealed that the proportion of U.S. job postings containing salary information has more than doubled from 18.4% in February 2020 to 43.7% in February 2023. 

Big companies such as Microsoft and Google have made a public promise to reveal the salary ranges for all their job postings across the United States, not just in the states where it’s mandated by law. 

Pay transparency has become an expectation among job-seekers. Employers compete for job candidates across state lines; therefore, it’s beneficial for them to share their salary ranges to enable job-seekers to make fair comparisons. 

The push for greater pay transparency is not limited to the United States, as workplaces worldwide, including Europe, are also making strides toward more openness regarding their pay transparency policies. 

Pay Transparency in the European Union 

The European Parliament has recently approved a legislative proposal regarding pay transparency put forth by the European Commission on 30 March. The proposal is aimed at reinforcing the principle of equal pay for equal work or work of similar value between men and women. The proposal, called the Pay Transparency Directive, focuses on implementing pay transparency measures and enforcement mechanisms. 

The objective of the Pay Transparency Directive is to guarantee that the European Union’s right to equal pay is maintained by creating pay transparency standards that enable employees to assert their entitlement to equal pay. 

The Pay Transparency Directive places various significant responsibilities on employers to improve pay transparency within their organizations and reinforce enforcement measures for employees. In addition to the introduction of definitions that explicitly relate to equal pay, such as “pay” and “work of equal value,” the directive imposes other crucial obligations, including transparency of pay before employment, transparency concerning pay level and career advancement, and the right to access information. 

What Employers Need to Know About Pay Transparency 

To comply with the upcoming implementation of the Pay Transparency Directive in the EU and similar state laws in the U.S., employers can take several proactive measures beforehand: 

To ensure pay equality, employers should carefully review their payment system and identify any differences in pay between genders. By doing so, they can determine the reasons behind these differences and take steps to address them, as well as gain a better understanding of their current pay practices. 

Make sure to examine and revise pay rules, job assessment processes, and job categories to ensure they are unbiased toward any gender and grounded on unbiased measures. To ensure a fair and clear assessment process, it is essential to involve worker representatives on time and abide by any relevant rules regarding the involvement of worker representatives. 

Pay transparency laws pose unique challenges for large and small employers alike, particularly those who routinely recruit across state lines. The burden on employers is further complicated by the trend toward remote work, which can create obligations and liabilities for companies in states the company has no physical presence. 

Laws mandating pay transparency can create challenges for both big and small employers, especially for those that often hire employees from around the world. This responsibility becomes even more complex for employers due to the growing practice of remote work, which can result in legal obligations and financial risks for companies in states where they do not have any physical operations. 

Fortunately, there are many valuable advantages to implementing pay transparency, particularly concerning diversity, equity, and inclusion. 

How Workers Benefit From Pay Transparency 

Advocates say that pay transparency is a trend that is helping to reduce pay inequalities across various dimensions, such as gender, ethnicity, and sexual orientation. This is especially beneficial for women and people of color who typically do not fare as well during hiring negotiations. 

Instead of expecting job-seekers or employees to figure out if they are being paid fairly compared to their colleagues, pay transparency laws require employers to disclose salary information. This levels the playing field and gives employees more power. Similarly, laws that prevent employers from asking about salary history help achieve the same goal. 

According to government data from 2021, full-time women workers earned about 83% of what men earned. This means women earn less than men in almost all jobs. Additionally, a report by the National Partnership for Women and Families found that Black women make 64 cents, Latina women make 54 cents, and Native American women make 51 cents for every dollar paid to white, non-Hispanic men. 

Job-seekers can benefit from knowing the salary range of a position before applying for it. This can save them time and effort in applying for jobs that do not pay enough. It can also be especially important for those in lower-paying jobs, who may be living paycheck to paycheck. 

Human resources executives are facing a new challenge, as more employers are considering how much information they should share with their current employees due to new laws. Some executives are concerned about the potential impact that such information could have on their workers’ productivity and morale. One concern is that revealing salary information could lead to tension and conflict among employees, which could ultimately undermine performance. 

An increasing number of studies by experts at top universities such as Indiana University, Harvard Business School, and the University of California indicate that when employees become aware of how their pay compares to that of their colleagues, it can motivate them to put in more effort.  

All indications suggest that pay transparency can benefit both employees and an organization’s DEI initiatives. If your organization has a DEI strategy in place—and according to Worldwide ERC’s DEI survey, 98% of respondents do—it may be worth considering implementing a pay transparency policy. 

Worldwide ERC’s DEI Research 

According to research by Worldwide ERC on workforce diversity, equity, and inclusion (DEI), senior HR leaders remain committed to supporting and promoting DEI initiatives as a way to make their companies more appealing to potential employees. Pay transparency plays an important role in this. 

As organizations develop a global workforce, it is essential to create a pay package that meets the diverse needs of its employees, considering various factors such as local markets, demographics, cultural differences, and diversity. Compensation programs should be carefully reviewed to ensure that pay is fair, equitable, and nondiscriminatory by analyzing local market data. 

The respondents to Worldwide ERC’s survey suggested the following actions to ensure that their policies and practices promote a diverse, equitable, and inclusive workforce: 

• Adjust pay scales to ensure equal pay for all, regardless of age, gender, and other factors. 
• Conduct regular reviews of equal pay policies. 
• Provide higher compensation for under-represented groups. 

• Despite the difficulties in discussing pay, greater transparency can motivate employees. 

 

You can explore Worldwide ERC’s complete report on diversity, equity, and inclusion to understand how human resources leaders, corporate HR mobility experts, and global mobility service providers are putting into action particular objectives and programs.