Five Steps to Pay Transparency Compliance
As states and localities across the country enact pay transparency laws, small and medium-size businesses (SMBs) find themselves wrestling with difficult questions.
Among them:
- What exactly are the new or existing requirements asking us to do?
- Are we paying all our people equitably and how can we address these pay challenges?
- If everyone knows what everyone else is earning, how will that affect our people, our company culture and our business?
This eGuide will not only help you understand how to navigate these and other essential questions about pay transparency compliance, but also help you understand how to create a pay transparency culture that can transform your business for the better.
What exactly is pay transparency?
We define pay transparency as an employer’s obligation to disclose aspects of compensation. The goal is to achieve pay equity; that is, avoid unfair payment practices for protected classes, which can affect anyone, but tend to disproportionately affect certain sex and underrepresented groups.
The concept of pay equity has been around for some time at the federal level. The Equal Pay Act (EPA) was enacted in 1963 with the aim of preventing wage discrimination based on sex. Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (ADEA) and the Americans with Disabilities Act (passed in 1990) combine to prohibit discriminating based on sex, race, color, religion, sex, national origin, age, or disability in pay and benefits.
State and local pay transparency statutes build on those federal laws to expand pay equity protections. The newer requirements, which vary depending on the location, might require salary range disclosures upon request or require a salary range to appear on a job posting, along with other compensation information. Either way, these requirements have the potential to help employers identify and address disparities.
As of this writing, California, Colorado, Connecticut, DC, Hawaii, Illinois (1/1/25), Maryland, Massachusetts (10/30/25), Minnesota (1/1/25), Nevada, New York, Rhode Island, Vermont (7/1/25), and Washington are among the states.
Best practices ease compliance efforts
While pay transparency requirements are location specific, there are some best practices that can provide a starting point for compliance. Here are the five key steps:
1. Review and update your recruiting processes and materials.
You must comply with existing laws in any region you recruit or have employees actively working. But to create a truly pay transparent organization, you need to go beyond mere compliance. Begin by reviewing, and if necessary, amending job postings, employment applications, interview guides and related hiring documents and procedures. State, county and city specific websites can provide some guidance, but as noted above, this is an area that is changing rapidly and websites may not always be up to date. Also keep in mind that certain pay transparency laws require compensation information to be provided on internal job opportunities as well as external ones.
2. Conduct a pay equity audit.
A pay equity audit maps out current compensation information and identifies any employee whose compensation may fall outside of the expected level based on objective factors like the employee’s tenure, job performance and responsibility level.
a. Involving legal counsel when conducting an audit can help you evaluate risks and help ensure, that this is a legal review— not a business one—and, as such, may be privileged information.1
3. Act quickly on any pay inequities.
Depending on the scope of the inequities your audit uncovers, you may want to consider adjusting the salaries of underpaid employees all at once or more gradually. Either way, it is important not to delay too long. Taking reasonably prompt steps to correct any disparities discovered during a pay equity audit can help mitigate the risk and liability
the business may face from a pay discrimination lawsuit.
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4. Create a salary structure for your organization.
If you do not already have one, consider developing a salary structure that captures pay ranges for all roles in your organization.
a. Fair compensation will differ for every SMB and every industry, so speak with your finance department to understand your business’ budget—and with your employees to understand what motivates them to stay with your company. At that point, benchmark your salary structure against comparable jobs.
b. Consider listing the pay ranges and other compensation information on job postings. Consider the applicable state or local pay transparency laws and defining what factors, such as experience or credentials, will impact where a given applicant falls within the range. Similarly, implement a process for providing wage ranges and other compensation information to applicants and active employees throughout the employment life cycle.
5. Train managers and other decision-makers
Many companies have never worked in an environment where others knew what they were earning and so are unfamiliar with how it might affect the workplace. That makes it especially important that managers, human
relations personnel and any employees who participate in the pre-employment, internal transfers or promotions or salary negotiation process understand your company’s pay equity efforts and each person’s role in carrying out those efforts.
a. Stress that salary decisions should be justifiable based on objective, nondiscriminatory criteria and made according to your established salary structure for each position.
b. Make sure that those personnel making decisions about salary understand that pay equity does not necessarily mean everyone in the same role must receive the same salary. That is a common misperception. If you’ve clearly laid out bona fide criteria for pay differences, whether it’s workplace location, seniority or any other bona fide factor, then your managers are in a strong position to offer the right salary for each applicant and employee.
Beyond compliance: Use pay transparency to create a more productive workplace
While pay transparency laws may impose new requirements on your SMB, they can actually be an opportunity for employers to create stronger employee engagement and a more positive employee experience. And there is no need to wait to seize this opportunity if you operate in an area where pay transparency laws do not yet exist. The result can be a workplace that attracts and retains the best people and helps make them as productive as they can possibly be.
First, it’s important to understand that pay transparency has its origins in a grassroots push to ensure equal pay for groups that have been historically underpaid compared to others when performing the same or similar jobs. As such, organizations that are committed to pay transparency can reasonably expect to increase their opportunities to attract and retain talented people who have historically been underpaid and underrepresented. Studies have shown that a more diverse workforce can create higher levels of profitability.2
Outside of the potential for building a more diverse, more innovative and more profitable company, pay transparency and pay equity can help you offer competitive salaries and benefits that will attract and retain the best possible people. While wage inflation is an understandable concern for any employer, it’s worth remembering something Salary.com Vice President of Consulting, David Turetsky told us on a TriNet webinar when advising that companies pay people what they’re worth. “There are no bargains,” he said.
The thinking is simple: when people know they are being paid fairly—when there is no lingering questioning, no looking over one’s shoulder—they will more likely be engaged with their work and more likely be productive.
