37% of Employees Work for Companies With Pay Transparency: Impacts on Retention and Equity

The gender pay gap remains a persistent issue, with women earning only 84 cents for every dollar men make. The disparity is even more pronounced for women of color. If progress continues at the current rate, experts predict the gap won’t close until 2088, leaving much of today’s workforce without the chance to experience pay equity.

Pay transparency—the practice of openly sharing salary information—has emerged as a potential solution to this inequity. However, it’s a strategy that can carry unexpected repercussions for employees and employers alike.

To delve deeper into this topic, researchers conducted a study of 1,000 full-time employees in for-profit organizations. The data reveals how salary transparency influences workplace satisfaction and retention.

Key Insights

• Over one-third of employees work at companies with some level of salary transparency: 24% report internal salary disclosures, while 13% indicate their companies publish pay data publicly.
• Non-white employees, Gen Z workers, and women show the highest levels of support for pay transparency, linking it to greater equity.
• 70% of respondents believe salary transparency helps reduce gender and racial pay disparities.
• More than half (58%) prefer to work for companies that make salary information publicly available.
• Employees in companies with full internal salary transparency report the highest job satisfaction and the lowest turnover intentions.

Salary Transparency Trends

As of 2018, ten U.S. states, including California, New York, and Washington, have enacted pay transparency laws. These laws vary in scope, with some requiring salary ranges in job postings or during interviews, while others mandate full disclosure for companies of certain sizes. Some municipalities, such as Toledo and Cincinnati, Ohio, also enforce transparency requirements.

Beyond legal mandates, many companies voluntarily adopt transparent pay policies. For instance, the human resources industry leads in this area, with salary details appearing in 74.7% of job postings, regardless of legal obligations.

Levels of Salary Transparency

Transparency exists on a spectrum, ranging from strict secrecy to full public disclosure:

• Mandated Secrecy: 6% of companies have formal policies forbidding employees from discussing salaries.
• Discouraged Sharing: 16% discourage discussions without outright banning them.
• Neutral Policies: 19% neither disclose salaries nor restrict discussions.
• Selective Transparency: 13% disclose salaries for certain roles.
• Full Internal Transparency: 24% provide salary details for all roles within the company.
• Public Transparency: 13% publish all salary information, accessible to everyone.

One standout example is Buffer, a software company that has maintained public salary transparency for most of its 13-year history. Their salary page includes detailed information about each employee’s role, location, and compensation, showcasing how geography influences pay.

Why Some Companies Resist Transparency

Not all organizations embrace transparency. Developing fair pay practices often requires costly measures such as benchmarking, job leveling, and regular pay audits. Transparency can also expose companies to legal risks, such as class-action lawsuits. For example, Nike faced an $11,000-per-year gender pay gap lawsuit filed by female employees. Additionally, businesses may hesitate to reveal pay data for fear of losing competitive advantage.

Employee Reactions to Pay Transparency

Employees’ responses to salary transparency vary widely. While some feel indifferent, others experience frustration upon discovering pay discrepancies among colleagues. Feelings of inequity often arise when workers compare their compensation to peers with similar roles or tenure.

However, transparency can also inspire professional growth. Learning about salary differences motivates some employees to seek clarity on performance expectations or negotiate higher pay. As one manager shared, “It shifted my perspective on workplace equity, nudging me toward seeking clarity on performance and reward criteria.”

Demographics Supporting Transparency

Support for salary transparency is notably higher among women, Gen Z workers, and non-white employees. These groups, often affected by pay disparities, view transparency as a step toward equity. Research backs this up: linking pay to objective performance metrics reduces gender gaps in academic institutions and beyond.

Transparency and Retention

Our findings reveal a strong connection between transparency and employee retention. Workers in companies with full internal transparency are least likely to consider leaving (8%) and report the highest job satisfaction (71%). In contrast, companies enforcing pay secrecy see higher turnover intentions and lower satisfaction rates.

Responding to Higher-Paying Opportunities

Compensation remains a top motivator for employees considering new roles. Many workers use publicized salary data to negotiate raises within their current jobs, while others view higher-paying opportunities as a reason to switch employers. Despite this, some employees prioritize workplace culture and stability over higher pay.

Study Methodology

This study surveyed 1,000 full-time employees across various industries in March 2024. Respondents ranged in age from 18 to 65, with a median age of 37. Demographic representation included 70% white, 11% Asian, 10% Black, and 8% mixed-race participants, along with diverse occupational roles from executives to administrative staff.

Author Bio: Md Sadique Akhter is the CEO and President of Financh & Quanqo LLC, with a distinguished career spanning key roles in the healthcare sector, including leadership positions at IQVIA, Pfizer, and as the Founder of Global Vox Populi. A recognized expert in global company data and corporate identifiers, he is known for his strategic vision and entrepreneurial success. Sadique is also passionate about photography, capturing creative moments through his lens.