Using Pay Transparency Legislation as a Strategic Advantage

With at least 10 jurisdictions having enacted pay transparency legislation at the state or local level—5 states with the law taking effect in 2025, 3 states with proposed legislation, and a proposed federal law—it looks as though it is not a matter of if pay transparency legislation will impact your business, but when.

Pay transparency laws can present challenges for employers who may be worried that publishing pay ranges will cause discontent among their current employees. However, employers have a unique opportunity to leverage pay transparency legislation to create clearer and more equitable career advancement pathways ultimately strengthening their employer brand, boosting retention, and fostering employee trust and engagement. Here’s how employers can transform compliance with pay transparency laws into a strategic advantage.

Understand Pay Transparency Legislation

Generally speaking, pay transparency laws mandate organizations to disclose salary ranges for external job postings and promotion/internal opportunities. While the specifics of these laws vary by jurisdiction, the core objective is to combat pay inequities and promote fairness.

For employers, these regulations are more than a compliance checklist. They present a framework to reassess internal compensation structures, clarify roles and expectations, and boost overall performance while addressing historical disparities that might hinder employee morale and progress.

Align Career Advancement with Pay Transparency

1. Conduct a Comprehensive Pay Audit: Before implementing transparent systems, organizations should audit their current compensation structures. This step identifies discrepancies and ensures the organization’s pay scales align with market standards and internal equity.

2. Establish and Communicate Pay Philosophies: Commit to ensuring internal and external equity and reviewing the market on a regular basis, in addition to establishing how individual performance influences compensation. Communicate the organization’s pay philosophy effectively.

3. Establish Clear Competency-Based Career Ladders: Define career pathways with specific, measurable competencies required for advancement. Each step in the ladder should correlate with a transparent pay range. For instance, an employee aspiring to move from a junior to a senior role should clearly understand the skills, experience, and outcomes needed to justify the transition.

4. Make Performance Reviews Development Focused: Regular performance discussions should include transparent and objective conversations about salary ranges, individual progress, and the steps needed to achieve career growth. Managers should be trained to have these conversations effectively and empathetically.

5. Leverage Technology for Transparency: Use HR software to provide employees with access to career development resources. Interactive tools can help employees visualize career paths and understand the financial implications of each step.

6. Communicate Openly and Consistently: Transparency initiatives require clear communication. Use internal communications channels to explain the purpose and benefits of pay transparency and how it connects to career development.

7. Foster a Culture of Continuous Feedback: Encourage open dialogues between managers and employees about career aspirations and development opportunities. A culture of feedback ensures employees feel supported and informed about their advancement options.

Benefits of Aligning Career Advancement with Pay Transparency

• Builds Employee Trust: Transparency around pay scales builds trust, signaling that the organization values fairness and equity. Transparent systems minimize opportunities for conscious and unconscious bias, leading to fairer promotions and rewards and protecting the organization from legal risks. Employees who understand how their pay is determined are more likely to believe they are being paid fairly.
• Enhances Employee Engagement: Employees who understand how to progress in their careers—and what that progression entails financially—are more motivated to achieve their goals. Employees who understand how their individual contributions impact the organization’s success are more willing to put forth extra effort.
• Attracts and Retains Talent: Clear, transparent pathways demonstrate that the organization is invested in its employees' growth, making it an attractive place to work.

Overcoming Challenges

Implementing pay transparency and aligning it with career progression is not without challenges. Here are some common hurdles and how to address them:

• Resistance to Change: Some leaders may be hesitant, fearing pay transparency will lead to employee dissatisfaction. Overcome this by emphasizing the long-term benefits of transparency and equipping leaders with data to make informed decisions.
• Uncovering Historical Inequities: Pay audits may reveal discrepancies. Address these proactively by implementing corrective actions and communicating openly about the steps taken to ensure fairness.
• Balancing Transparency with Flexibility: While transparency is crucial, some degree of flexibility in compensation may be necessary to address unique situations. Define clear policies for exceptions to ensure consistency and fairness.

The Path Forward

As pay transparency legislation continues to evolve, forward-thinking employers can lead the way by integrating these regulations into their talent development strategies. Transparent pay structures and clear career pathways empower employees to take charge of their growth while fostering trust and equity within the workplace.

By proactively aligning pay transparency with career advancement, employers create a workplace culture that values fairness, clarity, and opportunity. This not only meets the demands of modern workforce expectations but also ensures long-term organizational success.