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The gender pay gap is currently at 16 percent, meaning full-time female employees earn 84 cents for every dollar their male counterparts receive. The gap is even wider among women of color. At the current rate of change, the gap won’t close until 2088, long after most of the current workforce has retired.
Pay transparency, the act of openly sharing workers’ compensation details, is one strategy that could help narrow the gender pay gap. However, it can have unintended consequences on colleagues and their employers.
To understand more about attitudes toward pay, Business.com researchers conducted a study of 1,000 full-time employees in for-profit organizations. Our timely data unravels what happens when companies publish salary data internally and externally and how it could impact worker retention.
Since 2018, 10 U.S. states have enacted pay transparency laws: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, New York, Nevada, Rhode Island, and Washington. Each state differs in its approach. Some require employers to post salary ranges on job descriptions or reveal the data during interviews. Other states mandate full salary disclosure in companies with certain headcounts. Individual towns and municipalities, including Toledo and Cincinnati, Ohio, must also adhere to salary range laws.
Even in places without laws, companies can choose to create their own pay transparency policies. One study highlights that the human resources industry is leading the way by publishing salary information in 74.7 percent of job listings, regardless of applicable state laws.
Business.com’s research uncovered three levels on the spectrum of pay transparency, ranging from mandated secrecy to public pay transparency. Six percent of employees reported that their employer had formal policies preventing them from disclosing their pay. Sixteen percent work in companies with informal secrecy, where they’re discouraged from disclosing pay information to each other.
How does your employer handle the disclosure of salary information? | Percentage of companies as reported by employees |
---|---|
My company doesn’t disclose salaries and has policies against workers disclosing their salaries | 6% |
My company doesn’t disclose salaries and discourages workers from disclosing to each other | 16% |
My company doesn’t disclose salaries, but also does not discourage workers from sharing | 19% |
My company discloses salary info for certain roles | 13% |
My company has full internal transparency of salary ranges for all roles | 24% |
My company discloses salary information for all roles, both internally and publicly | 13% |
I’m not sure | 10% |
On the other end of the spectrum, 37 percent of the employees we surveyed currently work for companies that publish salaries, either because of local laws or the companies’ preferences. Twenty-four percent offer full internal transparency, enabling employees to view salary ranges for all company roles. Thirteen percent go a step further and make their salary data public, meaning job candidates, competitors, and anyone else can review and distribute the figures.
What does full transparency look like in practice? Take software company Buffer. They’ve publicized their team’s salaries for 10 of its 13 years in business. The company’s salary page publishes each employee’s salary details, including their first name, location, team, and role as reference points. The table also shares how team members working similar roles earn different salaries based on their home location.
Unless mandated by local law, not all companies are committed to openly proclaiming how much they pay their workers. Why? Creating fair compensation practices is a costly business practice that requires regular market benchmarking, job leveling (creating a hierarchy of job roles with associated salary ranges), and pay audits to ensure everyone is paid fairly.
Transparency can also invite class-action suits if employees hold their employer accountable for historic pay decisions, such as the case of a group of female plaintiffs fighting a $11,000 per year gender pay gap suit against Nike. Additionally, companies may not relish the risk of competitors knowing how much compensation they offer their talent.
For these reasons, pay secrecy is still a staple of many organizations. The Institute for Women’s Policy Research finds that women are more likely than men to work under a pay secrecy policy; interestingly, women are also more likely to break cover and violate these policies.
Not all workers adhere to their companies’ pay secrecy policies. Our data reveals that 62 percent of workers in non-transparent company environments have shared their salary details, discovered their co-workers’ salaries, or both. Some respondents were unconcerned about their findings, believing everyone earns what they deserve. Workplace relationships remained unscathed for those employees, even after learning how much their colleagues receive.
However, many other employees were emotionally impacted by discovering their peers’ pay. Our study revealed that frustration and unfairness are natural byproducts of uncovering pay discrepancies. These feelings are heightened when employees compare pay across people with similar roles, lengths of tenure, or perceived contribution levels. Understandably, feeling undervalued is a common sentiment that can impact employee morale and job satisfaction. “It made me realize that I am a ‘bottom of the barrel’ employee and am getting paid much less than I feel I should,” said one Gen Z administrative professional.
On the other hand, some people use the data as a catalyst for professional growth by exploring what they need to do to earn more. “Discovering a colleague’s higher compensation was initially jarring, prompting introspection about my value and contributions. It shifted my perspective on workplace equity, nudging me towards seeking clarity on performance and reward criteria,” noted an upper manager from St. Louis.
Gen Zers, women, and people of color are most supportive of salary transparency policies.
Compared to other groups, non-white workers, Generation Z (ages 18-27) and Millennial (ages 28-41) workers, and women are more supportive of salary transparency policies. Since these workers are most likely to be impacted by gender and racial pay gaps, it makes sense they would be most interested in policies that could advance equal pay.
But is pay transparency a viable remedy for pay inequalities related to gender and ethnicity? Seventy percent of our survey respondents believe so. A study published in Nature Human Behavior confirms that gender pay gaps are reduced when public U.S. academic institutions consistently link pay to tangible productivity measures rather than factors that could invite bias. Other settings report similar pay gap narrowings in response to transparency.
Accordingly, 54 percent of workers feel that companies should be legally required to share salaries. According to 58 percent of our survey respondents, organizations unwilling to support pay transparency rouse suspicion that they’re hiding unfair compensation practices.
It’s challenging for employees to anticipate how they might react when faced with their co-workers’ compensation data. About half claimed this information doesn’t impact their motivation or satisfaction at work, while 43 percent disagreed that it would make them more competitive with their co-workers.
Nevertheless, for some groups of employees, total pay transparency does have the disadvantage of lowering individual employees’ bargaining power. When companies commit to achieving pay equilibrium, this can lead to lower wages across the board. Simply put, when one employee strives to negotiate a higher salary for themselves, their employer is likely to deny it to avoid raising compensation for similar employees. Unfortunately, a study on “Debunking the “Women Don’t Negotiate” Pay-Gap Myth” also suggests that women motivated to negotiate their salaries are still paid less than men.
Employers may also be concerned about how their pay policies could impact talent retention decisions in the aftermath of the Great Resignation and the rising QuitTok movement, where employees resign from their positions on social media.
How does your employer handle the disclosure of salary/compensation information? | Percentage of workers planning to leave company in the next year | Net job satisfaction among workers |
---|---|---|
My company doesn’t disclose salaries and has policies against workers disclosing their salaries | 20% | 41% |
My company doesn’t disclose salaries and discourages workers disclosing to each other | 25% | 25% |
My company doesn’t disclose salaries, but also does not discourage workers from sharing | 20% | 46% |
My company discloses salary info for certain roles | 14% | 55% |
My company has full internal transparency of salary ranges for all roles | 8% | 71% |
My company discloses salary information for all roles, both internally and publicly | 22% | 58% |
Our research confirms a clear transparency-retention link: Only eight percent of employees working in companies with full internal transparency expect to quit the organization, compared with a respective 20 percent and 25 percent of employees who would leave a company with formal or informal secrecy. At the same time, employers with full internal transparency also boast exceptional job satisfaction with 71 percent of employees feeling satisfied compared to 25 percent working for employers with informal secrecy.
It’s interesting to explore how employees would react if they came across job postings for similar roles that offer higher compensation than their current rate. Our research found that compensation is a top motivator for workers planning to leave their current company, with more than 50 percent seeking higher pay.
Many respondents claim they would use the advertised role as a point of reference to negotiate a higher salary, especially if they feel confident that they’re valued in their current position. “I would approach my manager about the posting and see about getting a raise myself,” a skilled worker from Boston told us.
A larger group of employees would consider leaving the organization when presented with a higher-paying opportunity. Some employees would feel betrayed by their current companies, prompting them to seek alternative roles offering better compensation. Others would be prompted to apply for the advertised position, viewing it as a means of financial and professional advancement. A female middle manager in our study confirmed they would have no qualms about moving on to a role with higher compensation: “I would consider taking this job if it fits my interests. I would apply and schedule an interview.”
However, a small group of respondents seemed indifferent to the prospect of more money, especially if they were satisfied in their current role or loved other aspects of their job, such as the company culture. “I know every other place that [pays] more money than my company has more strict rules and regulations and a different community of people. I can live off the money I make now at my current job,” explained one technical staff worker from Pennsylvania.
In March 2024, Business.com researchers conducted an online poll of 1,000 Americans employed full-time at for-profit enterprises. 499 were female, 498 were male, and three elected not to say. In terms of ethnicity, 70 percent of respondents were white, 11 percent Asian, 10 percent Black, eight percent mixed race, and one percent chose not to say. The median age of respondents was 37. We also gained the perspectives of employees across a spectrum of ranks and responsibilities; one percent of respondents were executive leaders, eight percent were upper management, 36 were percent middle management, 25 percent were technical staff, 17 percent were administrative or support staff, 10 percent were skilled laborers, and two percent worked in other roles.