By HR Brew Staff
less than 3 min read
Definition:
Pay transparency refers to the practice of openly sharing compensation information with prospective and current employees in an effort to reveal, and ultimately address, pay inequities within organizations.
Why did companies adopt pay transparency practices?
Many US companies adopted pay transparency to comply with state laws mandating it. Starting in 2019, a number of state legislatures—including Colorado, California, New York, and Washington—passed laws requiring businesses to share an estimated salary range for jobs they posted. Prior to this wave of legislation, nearly two dozen states passed laws prohibiting employers from asking about or considering a job candidate’s salary history, as this practice is thought to put job-seekers at a disadvantage when they negotiate their compensation.
How widespread is pay transparency?
While pay transparency isn’t mandated across the US, by the end of 2025 at least 14 states and Washington, DC will have transparency laws on the books. It’s become the default practice for most employers; even if organizations aren’t located in a jurisdiction that requires transparency, they may be looking to recruit workers that are. Increasingly, job-seekers and employees also expect companies to share this information when they post open roles.
Multinational firms may also have to comply with new laws being passed in countries outside of the US, such as a pay transparency directive that will take effect in European Union countries in 2026.
What’s the point of pay transparency?
The overarching goal of these policies is to promote equitable pay practices. Policymakers argue that if workers know how employers pay for different roles, they’re in a better position to negotiate, making it harder for employers to perpetuate disparities, Helena Almeida, ADP’s vice president-counsel, previously told HR Brew.
As employers are sharing more information about pay, some are thinking about how to address inequities in their workforce when they are discovered. Over half (52%) of organizations surveyed by consulting firm Mercer in 2024 said they were “proactively conducting pay equity studies to identify outliers,” while 53% reported making pay adjustments in light of factors including pay equity considerations.
