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Surveys say: Pay Transparency is Hot Compensation Topic

CPAs & Advisors


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The data is coming fast and furious. When it comes to compensation in today’s workplace, many people are talking about pay transparency.

Simply defined, pay transparency is the concept of an employer openly sharing its compensation policies and practices with job candidates, employees and even the public. This includes disclosing pay ranges/rates for specific positions, as well as clearly explaining how raises, bonuses and commissions are determined. Here are some reasons why pay transparency has become so important … as well as that data we mentioned.

Expectations are rising

In February, compensation software and data company Payscale published its 2023 Compensation Best Practices Report. The findings are based on the responses of 5,000 professionals surveyed in the fourth quarter of 2022. According to the report, 45% of organizations now include pay ranges in their job postings — a rising trend from previous surveys. What’s more, 48% of employers said that transparency-related legislation is driving them to change their compensation policies. This could indicate that pay transparency might soon become a matter of compliance rather than self-motivated policy.

A different survey from the job-posting site Indeed delivered a similar message. Company data released in March 2023 showed that, over three years, the prevalence of employer-provided salary information had risen from 18.4% of organizations disclosing pay ranges to 43.7%. That’s right, it more than doubled. Indeed researchers noted that growth of pay transparency was the highest in fields focused on science, technology, engineering and mathematics — commonly referred to as “STEM.” This includes industries such as software development, banking and finance.

It may help reduce turnover

Payscale released a different study in June 2023. Its Retention Report, which contains data from an online salary survey, found that compensation transparency “decreases intent to quit by 30% when analyzed in isolation.”

The report also states that, when employees believe their pay is unfair, they’re much more likely to quit. This indicates that simply divulging pay ranges isn’t enough. Employers need to provide sound rationalizations for each position’s compensation. Organizations also need to clearly explain how pay is determined, why their compensation is competitive within their respective industries or markets, and how employees can elevate their pay levels.

Younger workers care about it

You’ve probably heard the phrase “Gen Z.” It’s used to broadly represent people born between roughly the late 1990s and the early part of the 2000s. Although generalizing the attitudes and behaviors of any generation is fraught with risks, one thing is clear: Gen Z represents the next large demographic to enter the workforce — or continue to enter, as the case may be, because many members of Gen Z are already working.

Data indicates that pay transparency is important to them. The enterprise technology and information-management solution provider Symplicity released a report in May entitled 2023 State of Early Talent Recruiting: Gen Z and the Job Search Process. The report culled data from a survey of 3,700 U.S. college students. Of those respondents, 87% said that pay transparency (and equity) was “important” or “very important.” More specifically, 53% said they’d be discouraged from applying for a position without a stated salary range.

Find your comfort level

History has shown that hiring, compensation and retention practices evolve over time. What was widely accepted years ago may not go over so well now or in the years ahead. That said, every employer needs to find its own comfort level regarding pay transparency based on factors such as its industry, labor pool and culture. We can help you analyze the financial data that goes into setting reasonable pay ranges and handling other aspects of compensation.

© 2023

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