State and local pay transparency mandates swept across the U.S. like a legislative wave in 2022, creating dramatic shifts in the way job candidates, workers and employers talk about compensation.

A total of eight U.S. jurisdictions require at least some employers to include pay or pay ranges in certain job postings, with half of them affecting New York alone. In some cases, these requirements have spurred employers to more intentionally address pay equity. Advocates of transparency laws, meanwhile, point to statistical evidence that the laws are chipping away at persistent gender pay gaps.

But employers face a variety of challenges due to the transparency trend, according to panelists at a virtual event hosted by Salary.com. That list not only includes the cultural effects of knowing what co-workers make, but also the need for additional communication about pay practices, training, monitoring of pay equity and negotiation of individual compensation packages.

“You can’t just be good at talking about it,” said IBEJesus Prince, senior consultant at Salary.com. “You’ve got to put your money where your mouth is.”

To do that work, HR departments will need managers’ help, panelists said. Managers, in turn, need the right data to have pay conversations.

“That information needs to be shared more broadly,” said Garry Straker, VP of compensation consulting at Salary.com. “Gone are the days when HR were the compensation police. Managers, and whoever is hiring people, need to be more comfortable dealing with pay.”

Panelists pointed to performance evaluation as a key component in pay policies. Evaluations depend on managers to know not only how a given employee is performing — and which metrics are to be considered when assessing performance to begin with — but also how different employees want to receive feedback, said Diane Mulhall, director of client experience and talent solutions at ADP.

For example, there may be generational differences in terms of feedback preference. Younger workers may prefer more frequent, instantaneous feedback than their older co-workers, according to Mulhall.

“You have to have those conversations,” she added. “From a manager’s perspective, you don’t want to be making [pay] decisions without showing them this information. They should know what they’re doing wrong and what they’re doing right. Analytics is the key.”

HR, meanwhile, needs to ensure that performance is telling an accurate story, Prince said. Otherwise, the organization’s justification for certain pay discrepancies could become discredited.

“Pay transparency has as its core pay equity,” Straker said “It’s the degree to which pay differences will be permitted. We need to explain those differences and support them.”

While 42% of global knowledge workers feel their company does a good job of taking care of them, about a quarter say they either have no resources in place or don’t know anyone in their company who’s responsible for keeping them feeling happy and well in their workplace, according to a report on employee disillusionment by global employment platform Oyster.

The more than 2,500 workers who responded said they consider regular pay raises (86%), psychological safety (84%) and flexible work (83%) the most valued aspects of their workplace. However, specific responses differed along race and gender lines: Black and female workers consider a safe, inclusive culture more important than their White male colleagues do. Black employees are also more in favor of regular pay raises (63%) than their White colleagues (48%); and manager check-ins are more important to Black and female employees than they are to White male workers, according to the survey.

About three-quarters of employees say paid time off is the benefit that most affects their well-being at work. Top aspirational benefits also include a four-day work week and remote work.

Perhaps unsurprisingly, the findings about employee well-being are the most concerning, Oyster said. It found that stress over external events — in particular, the rising cost of living and personal worries — is affecting how workers do their job: More than half say it’s getting in the way of their ability to focus. 

“Imagine at your place of work that at any given time, over half the organization is struggling to get their work done,” the report observed. “When you think of it like that, we’re looking at a crisis of employee engagement.”

Indeed, employee engagement has been trending downward since 2021, which marked the first annual decline in a decade, a recent Gallup survey revealed. The number of employees who reported feeling “actively disengaged” went down two percentage points in 2022, according to Gallup. Actively disengaged employees differ from employees who are simply not engaged in that they are “actively likely to leave,” a chief researcher said.

In the Gallup survey, employees reported feeling less engaged mainly because they were confused about what their employer expected of them. Managers can combat the problem by having at least one meaningful conversation a week with their direct reports about these expectations, the researcher noted.

The results of the Oyster survey bolster this approach. “It was heartwarming to see how impactful managers are when it comes to employee well-being,” the report said. Managers “truly make the difference between a good job and an intolerable one.”

Employee engagement is also tied to workers’ satisfaction with how inclusive their organization is, and managers play a critical role here as well, a QuestionPro report published in January noted. Managers can provide employees with a great opportunity to impact how inclusive their teams are and, in turn, how inclusive the organization is as a whole, the report said.

Ultimately, it comes down to HR departments to ensure these issues are being addressed and employees have access to the resources they need to help get them resolved: Close to 56% of the knowledge workers who responded to the Oyster survey point to HR teams as the people responsible for taking care of them in the organization.

How do HR professionals maintain their own equilibrium and promote a healthy work environment? They can develop positive strategies to overcome negative thinking and troublesome ideation that could result from the stress of their work, the founder and executive director of a leadership development firm told HR pros attending a 2022 Society for Human Resource Management conference.

The executive director explained that positive psychology invites new questions, like “What is working?” It may seem simple, but it requires a significant change in perspective. He outlined three strategies for doing so: using hard evidence to disprove inaccuracies; checking for silver linings or positive or alternative viewpoints; and putting together a plan just in case an outcome is undesirable.

Due to wage pressures the last two years, tenured employees in high-paying job groups may make less money than new employees, according to a Syndio report — and this wage compression may threaten retention and employee engagement.

In 83% of these high-paying job groups, defined by Syndio as jobs with average salaries of $125,000 or more, tenured employees make the same as newly hired employees; tenured employees actually make less than new workers at least 30% of the time, according to the report.

Such compression varied by role in lower-paying job groups (defined as having salaries of $75,000 or less). Positions in retail, manufacturing and other front-line jobs tend to pay more to tenured workers, while pay in corporate support roles, such as HR, marketing, IT and analytics, generally didn’t vary by tenure.

The news comes as employers tighten budgets and freeze hiring amid recession concerns and inflation. At the same time, workers are expecting more transparency when it comes to salary in job advertisements, creating a “perfect storm” for employers, Syndio said in its report.

“An organization may want homegrown talent, they may value the fresh perspective that external hires bring, and they may want a mix. All of these approaches are valid. But the reality is that we’re in the pay transparency era and salary ranges are out in the open. Companies have to be prepared to publicly explain why there may be pay gaps between tenured and new employees,” said Chris Martin, research economist at Syndio, in a statement. 

Poor communication around pay can tank engagement, other studies have shown; while many employers have a compensation plan, a February Salary.com report said, they tend not to share them with workers, and only a third said they train managers on having compensation conversations.

A pay structure that is well-communicated to workers can help with the dichotomy between tenured and new employee pay, a McLean and Co. report said.

“Remember, with pay, perception is reality: how employees feel about their compensation impacts their satisfaction with their employer and their desire to stay,” Martin said.

Corporate pay strategies have shifted due to remote work and inflation in recent years, leading to pay inequities and compensation inconsistencies at many companies, according to a report from The Josh Bersin Co.

Standard pay bands and performance-based pay models have fallen behind. Instead, corporate compensation should consider fairness, transparency, inflation and a systemic approach, the analysis recommended.

“The last three years have seen an increase in companies worrying about burnout, mental health and work-life balance for their employees. Today, with rising inflation and a slowing economy, a new issue has emerged: Pay is now the number one concern for workers around the world,” Kathi Enderes, global industry analyst and senior vice president of research for The Josh Bersin Co., said in a statement.

Pay and rewards are now the top drivers of employee experience, according to the report, with about 44% of employees believing they are underpaid. In-work benefits, which make up 32% of payroll, are no longer sufficient to meet employee demands for inflation-adjusted pay.

In addition, only 9% of companies effectively address pay equity issues, the report found. These companies have redesigned their pay-for-performance models to incorporate remote and hybrid work.

To better move forward, HR departments should use a new model of “systemic rewards” rather than “total rewards,” the report suggested. This approach better reflects evolving workforce requirements and balances pay equity and pay-for-performance with personalization options, it said. The “systemic rewards” model works due to focusing more benefits dollars on flexibility, career and recognition, the report found.

“A more systemic approach to pay and benefits is the best way to make your company ‘irresistible’ to current and prospective employees,” CEO Josh Bersin said in the statement.

“But, to be effective, requires collaboration with other HR domains (talent acquisition, learning and development, talent management, people analytics, employee experience, diversity, equity and inclusion) and with business leaders to solve business problems with the right rewards approaches, not just deploy rewards programs,” he added.

As part of this new approach, pay equity is becoming increasingly important to meet employee needs, the firm reported earlier. Companies are still struggling to meet the goal, even though clear communication about pay equity is key for employee retention. Employers have felt pressure for equity from several fronts, including shareholders, customers and employees; recent months have seen a substantial number of labor strikes, many of which included pay equity demands.

Pay transparency is also rising to the forefront of hiring conversations, as more companies highlight fair pay and pay transparency changes as part of the employee experience. Most of all, organizations should have a focused compensation strategy based on solid data and the latest best practices.

The pay transparency laws popping up around the U.S. are creating a sense of momentum. At the first of the year, new laws took effect in California, Rhode Island and Washington, requiring employers to include salary ranges in job posts. These states joined a growing list of other locales with similar, and in most cases recent, requirements.

The energy surrounding pay transparency makes the topic feel fresh, but advocates have been pushing fair pay practices for a long while. These advocates include Noreen Farrell, who currently serves as the executive director for Equal Rights Advocates, the organization that co-sponsored the California Fair Pay Act of 2015. 

In a recent conversation with HR Dive, Farrell reflected on the modern movement for fair pay and discussed how employers might best prepare for the laws spreading across the country.

This interview has been edited for length and clarity.

HR DIVE: Pay equity is having a moment. We're seeing the passage of more laws pushing pay transparency and promoting pay fairness, and we're seeing more workers, leaders, and companies devote attention and effort to the subject, too. Why now?

NOREEN FARRELL: Pay equity momentum is building across the country for a lot of exciting reasons. We’ve seen a powerful cultural shift driven by a younger generation of workers sharing salary information at work and online and expecting employer transparency when it comes to pay scales.  

According to a new survey of recent and upcoming US postsecondary and recent graduates, 85% reported they are “less likely to apply for a job if the company does not disclose the salary range in the job posting.” The law is out in front of this cultural shift with dozens of new state and city laws on the books requiring employer posting of salary scales in states and municipalities across the country — including a bill co-sponsored by Equal Rights Advocates. 

These cultural and legal shifts combined with the #MeToo movement’s demands for improved conditions for women, greater employer attention to racial justice, and pandemic workplace strain to center the importance of pay equity. 

Another important factor has been the growing power of employees in the workplace as employers scramble to attract and retain top talent. All of these forces have contributed to the attention and energy around pay equity we’re seeing now.

From your perspective, what has been the response to this moment? How has the business community, in particular, reacted to the attention devoted toward pay equity? 

Some smart employers have positioned themselves ahead of these trends, voluntarily posting salary ranges and abandoning reliance on prior salary. These fared better in the bid to attract and retain top talent during the “great resignation” period of mass employee job changes. Others are now being compelled to do so through new laws transforming pay equity requirements. 

The demand for corporate leaders to listen and do better has created an opportunity to push for more progressive workplace policies, norms, and culture. Progressive leaders and advocates must keep pushing, and get more leaders on board, so this moment can lead to real, lasting change for a stronger and more inclusive economy. 

Business leaders and HR professionals may think of pay equity from a compliance perspective first and foremost. Is there another perspective to consider? In other words, outside of compliance, why should leaders devote their attention to this issue?

Compliance is an important perspective, and we need HR professionals to be dedicated to compliance to put these policies to work. However, pay equity provides many more benefits not only to employers but to our economy overall.

First of all, committing to fair and equal pay can help employers attract and retain more competitive and diverse talent. Companies with diverse teams perform better financially. Being a leader in equal pay efforts can also boost employer brand affinity. 

On a broader scale, equal pay increases the spending power of women and people of color. The average woman loses over $400,000 over a 40-year career due to the wage gap. For Latinas, the gap loses them over a million dollars, and Black women lose about $964,000. Closing this gap would boost the economic security of women, families and communities of color. 

What factors create pay gaps within organizations? 

There are many factors that contribute to the pay gap, and many of these can be addressed directly by employers at their organizations. One major factor is simply ignoring or not measuring the problem. Organizations that are not analyzing salary discrepancies across all employees, and not dedicating the proper resources to address the discrepancies, are bound to have pay gaps. 

Another major factor is a lack of pay transparency. Pay secrecy keeps workers in the dark about pay disparities and prevents them from asking for the wages they deserve. Having access to this information is important because it not only makes workers aware of the data but also gives them a tool to negotiate for better pay. It’s also important that employees feel comfortable discussing their wages with each other. Rules or norms that prohibit discussion of compensation often create pay gaps.

Further, employers basing compensation on an employee’s earning history can perpetuate discriminatory compensation practices. Salary history may reflect discrimination by past employers, and there are other factors that can and should be used instead to determine compensation. 

Another factor that impacts women especially is pregnancy and caregiving responsibility discrimination. In fact, mothers across race and ethnicity experience a wage gap of approximately 58 cents compared to fathers. This is largely due to inadequate family and medical leave policies and a refusal to accommodate workers with caregiver responsibilities, which can result in mothers needing to quit their jobs or even being let go. 

Finally, pay gaps can come about because of occupational segregation. Women and people of color are overrepresented in lower-paying roles and industries because their work is not valued as highly. These kinds of roles are often subject to wage theft, which exacerbates the problem.

How can employers leverage the energy around pay equity to make progress?

Employers have a central role to play in closing the pay gap. They can and should visibly promote pay equity, regularly measure and analyze pay data by race, sex, and ethnicity, and prioritize closing gaps. They should evaluate their managers on pay equity practices. They should aim to lead in their industries by implementing progressive pay policies and sharing their lessons learned and best practices. 

Employers should make pay equity part of a broader commitment to employer policies demonstrating that diversity, equity, and inclusion are a priority. These include policies ensuring the hiring and promotion of underrepresented groups in the highest-paid jobs, job-protected paid leave, ending bias against mothers and caregivers and robust protection of reproductive healthcare access.

Communicating clearly about pay equity is nearly 13 times as important for employee retention and engagement as talking about “high levels of pay and benefits,” according to a report from The Josh Bersin Co., a human capital advisory firm.

Although equal pay for equal work may appear straightforward, most companies still struggle to meet the goal. About 71% of executives say pay equity is a critical component of their business and people strategy, yet 95% of companies are failing to achieve pay equity maturity, and only 14% have allocated budget and staff to address the challenge, according to the report.

“While most companies know they must increase pay during times of inflation, they do not understand the problems they create when people feel the system is unfair,” Josh Bersin, global industry analyst and CEO of The Josh Bersin Co., said in a statement.

“Most employees know that they are paid for performance, but when they perceive unfair practices (due to bias, racism, sexism, or simple politics), they lose confidence in the company and their sense of trust is damaged,” he said. “The result is more politics, turnover, and low levels of engagement.”

Bersin and colleagues examined 448 companies internationally to better understand pay equity and its effects. They found that pay equity touches all areas of the employee life cycle — including hiring, development, performance management, promotion, succession management, and leadership development. It also requires active communication and change management. 

Among the 5% of companies with effective pay equity policies, several outcomes were noticeable. They were 1.6 times more likely to meet or exceed financial targets, 2.1 times more likely to attract the talent they need, and 1.7 times more likely to innovate effectively.

However, the other 95% have recurring issues with pay equity and employee experience. These companies tend to overlook the issue until a legal, compliance or reputational risk arises, or they approach pay equity in a piecemeal way with sporadic projects, according to the report.

Importantly, the report found, only 21% of companies appear to listen to employee feedback around pay equity. In addition, only 15% are willing to communicate the required information to address the pay equity issue.

Beyond that, new technologies that can help identify pay inequities aren’t utilized well. About 15% of companies said they were actively using data and equity platforms to find problems.

“The problem goes beyond bias,” Bersin said. “Companies have to discuss what ‘equity’ really means and what criteria will be used for bonuses, rewards and raises.”

The U.S. has aimed for pay equity since the passage of the 1963 Equal Pay Act, which banned overt policies and practices that paid women and men different amounts for equal work. Since then, additional federal legislation has expanded the focus to encompass race, national origin and other protected groups. All 50 states have passed or enhanced their own policies as well, the report noted.

In recent years, more executives have focused on the issue of pay equity due to increasing legal pressures and major lawsuits, such as Google’s $118 million settlement, The Josh Bersin Co. noted. Companies such as Patagonia, Microsoft, and Adidas have shifted from a focus on performance-related pay and emphasized equity across organizational decision-making.

Other recent research has found that more organizations are addressing pay equity issues, including the racial pay gap between White and non-White workers.

A key component of that requires pay transparency, as well as making pay equity a core responsibility of compensation.

User experience writer and poet Kimberly Nguyen didn’t set out to become the “poet laureate of pay transparency,” as she recently tweeted. But her tweetstorm that recounted stumbling across a job post from her own employer on LinkedIn struck a nerve. The post featured her title, required qualifications and set of responsibilities — for up to $90,000 more than she was making.

“So I applied,” she said.

Beyond new applicants

Nguyen works in a contract-to-permanent UX writer position for Photon, a tech consulting and services firm based in New York City. She’s currently contracted out to Citibank, she told HR Dive.

My company just listed on LinkedIn a job posting for what I’m currently doing (so we’re hiring another UX writer) and now thanks to salary transparency laws, I see that they intend to pay this person $32k-$90k more than they currently pay me, so I applied.

— Kimberly Nguyen (@knguyenpoetry) March 7, 2023

Nguyen’s Twitter thread quickly went viral, with the first tweet amassing more than 220,000 likes so far, and, according to Twitter’s analysis, more than 12 million views.

She described “arguing for months about pay inequity,” a reality that became clearer to her after New York City’s pay transparency law laid bare the difference between her own salary and what other UX writers internally and elsewhere were likely making. “I was appalled,” she told HR Dive. 

Nguyen’s managers at Citi directed her back to Photon, which determined her salary. Photon told her she’d need a performance review, which she is still waiting on. Photon did not respond to an HR Dive request for comment.

The job posting through which Nguyen applied closed, “but LinkedIn recommended a second posting to me, same position,” she said. “But the link was broken. I’m not really sure what was happening.”

Nguyen’s story illustrates how recently passed pay transparency laws will affect more than applicant demands: Employees can now see what their soon-to-be co-workers have the potential to make — and they can compare their own salaries in real time.

The ‘shroud of mystery’ is gone

“The law is working exactly how it’s intended,” Kate Bischoff, an employment law attorney and consultant, told HR Dive. “It’s intended to show what the ranges are and cause people to ask questions about what they’re making.” 

Employers benefited from the “shroud of mystery” that surrounded salary information before, Bischoff said — a situation that allowed for a less careful approach to pay and a broader set of salary ranges because employees lacked the information to negotiate. 

It’s not uncommon for employers to respond to changes in the labor market by broadening pay bands, especially when available talent is scarce. And many expect raises when they change employers; a Conference Board survey from last year found that nearly a third of workers who changed jobs during the pandemic saw a 30% pay increase. 

But applicants aren’t the only ones looking, as Nguyen’s story highlights. “This is not an uncommon situation, and it’s one that every employer is struggling with,” Bischoff said. “Because when you try to do good [compensation], the rising tide raises all wages. And it’s hard to budget for that. It’s hard to find talent at what people are already making. And then it’s hard not to make your people upset when they see the pay ranges that don’t match what they make.”

In other words, employers are attempting a balancing act in keeping employees satisfied while maintaining attractiveness in a broader marketplace — and trying to reliably budget while accounting for the salary increases these goals will demand.

What can employers do?

The goal of pay transparency is largely to accelerate pay parity, as Bischoff noted. Experts have suggested companies set up policies that demonstrate how raises are earned, set salary ranges and provide checks and balances. Employees should understand how their pay is set and how they can earn more money. As the market changes, the compensation process may require continuous analysis and work, research has suggested. 

If skeptical employers aren’t swayed by rising applicant expectations or social media embarrassment, they may want to consider potential legal threats. Assume, for example, a White male applicant applied for and was offered the same job as a current worker of a different background — at $50,000 more. Poorly planned transparency “is going to open the door to more potential discrimination claims,” Bischoff said.

Pay transparency may come with legal risks and its own set of challenges, but Bischoff has little patience with the argument that the shift will spell doom and gloom for employers. She pointed to the Davis-Bacon Act, which set prevailing wages for construction and other workers on federal contracts. Those industries have not broken down in the wake of this requirement, Bischoff said.

As for Nguyen, she awaits a performance review and potential salary increase — but she’s also looking for other UX writing roles. Offers and referrals have been streaming in, according to her Twitter feed. And thanks to the new salary transparency law, it’s likely she’ll be choosier about the job she ends up taking.

Once again, I’m so grateful to all of you who have reached out to me offering referrals, job leads, etc. Please continue to do so. I'm incredibly excited for what my future holds because this experience has really shown me what I'm made of, what I'm capable of.

— Kimberly Nguyen (@knguyenpoetry) March 17, 2023