For decades, employee compensation has remained top-secret. Outside of a human relations office, salaries were rarely discussed, and job seekers often entered negotiations with little to no insight into what a company was willing to pay. But that era of secrecy is rapidly coming to an end.

Pay transparency is now becoming the norm, driven by a push for pay equity and new legislation across multiple states. 

But, hey! Wait. Slow down… What exactly is pay transparency? And what does it mean to me and my business? Great questions! 

In this article, we’ll explain pay transparency, why it’s gaining momentum, and how businesses can implement policies that comply with new laws while maintaining trust with employees. 

What Is Pay Transparency 

Pay transparency is the practice of openly sharing information about employee compensation, including salaries, bonuses, commission structures, and wage ranges for specific roles. While the level of transparency varies from company to company, the goal remains the same: to provide employees with a clear understanding of how pay decisions are made and to promote fairness in the workplace.

For years, discussing salaries was often considered taboo. However, with changing workforce expectations and new laws requiring greater transparency, that mindset is shifting. In fact, it has been illegal for employers to prohibit workers from discussing their wages since the passage of the National Labor Relations Act in 1935. Today, pay transparency is becoming more common, especially among younger generations. A survey found that 89% of Gen Z workers are comfortable discussing salary, compared to just 53% of Baby Boomers.

Companies approach transparency in different ways. Some take an open-book approach by publishing employee salaries online for the world to see. Others choose to disclose salary ranges within the company or in job postings to provide candidates with more insight before applying.

The push for pay transparency is largely driven by efforts to eliminate pay inequities. Studies show that organizations embracing transparency have seen a 20% reduction in pay disparities. By shedding light on compensation structures, businesses can build trust with employees, reduce bias in pay decisions, and create a more equitable workplace where every worker understands their earning potential and path for growth.

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Pay Equity and Fairness: More Than Just Transparency

For many employees, transparency alone isn’t enough. True fairness comes from pay equity — ensuring employees are compensated fairly for similar work based on objective criteria, not just visibility into salary ranges.

The recent wave of salary disclosure laws aims to level the playing field for job seekers, but the rollout hasn’t been without its challenges. Some companies have taken a creative — if not misleading — approach, posting salary ranges so wide they render transparency meaningless. A job listing with a $90,000 to $900,000 salary range? That’s not pay transparency — that’s pure deception.

Beyond frustrating job seekers, unclear pay practices can erode trust within existing teams. Employees who discover that a new hire is set to earn tens of thousands more than they are may start questioning their value within the company. And when trust erodes, so does morale and retention.

Transparency Without Equity? A Recipe for Discontent

While transparency brings visibility, equity ensures fairness. A company can openly share salary data, but if pay disparities persist due to historical inequities or bias, the damage is already done. Employees don’t just want to see numbers — they want to know those numbers are fair.

That’s why companies should start by addressing pay equity before pulling back the curtain on salaries. An internal audit can help identify gaps and correct inconsistencies before transparency leads to backlash. After all, if a company suddenly raises wages for certain employees to fix past inequities, those changes won’t go unnoticed. People talk. And when some employees receive significant adjustments while others don’t, trust can further erode.

The Cost of Avoiding Fair Pay

Some businesses are resisting transparency laws, hoping enforcement will be lax. But the risks — fines, bad press, and damage to employer reputation — are high. Colorado, for example, has issued hundreds of thousands of dollars in fines for noncompliance, while New York City has fielded hundreds of public complaints against companies skirting the rules.

Beyond legal penalties, failing to embrace pay equity and transparency can cost businesses their most valuable asset: talent. Job seekers are increasingly prioritizing fair pay, and employees who feel undervalued won’t hesitate to take their skills elsewhere.

Perhaps the best approach is to treat pay equity and transparency as two sides of the same coin. Start with an internal review, correct disparities, and then communicate openly with employees. A company that actively ensures fairness — and isn’t afraid to talk about it — will attract top talent, build stronger teams, and foster a workplace culture built on trust and respect.

Pay Transparency Laws: State By State

On March 14, 2023, the Salary Transparency Act amended the Fair Labor Standards Act (FLSA) to require all employers to disclose the wage range for a job to all employees and applicants. Via this law, employers are prohibited from refusing to interview, hire, promote, or employ an employee or applicant for employment, or in any other manner retaliate against an employee or applicant, for exercising their rights described in the legislation.

The Pay Equity for All Act of 2023 prohibits employers from underpaying employees because their previous employer’s pay rate was lower than the hiring company's, unless the candidate volunteers the information to negotiate a salary offer.

State-by-state variation makes compliance tricky, especially for businesses operating in multiple locations. Let’s examine the latest state-level pay transparency laws and what they mean for employers.

Illinois 

Effective Jan. 1, 2025, Illinois requires employers with 15 or more employees to include a salary range and a general description of benefits in job postings. The law applies to positions that are performed, at least in part, in Illinois or where the employee reports to an Illinois-based supervisor or office. Additionally, employers must inform all current employees about promotional opportunities within 14 days of an external job posting. Businesses must also retain job posting records for at least five years to ensure compliance.

Minnesota

Starting Jan. 1, 2025, Minnesota will require employers with 30 or more employees to disclose salary ranges and a general description of benefits in job listings. However, the law does not explicitly state whether it applies to positions performed outside Minnesota. The aim is to provide job seekers with a clear understanding of compensation expectations upfront, reducing pay disparities and enhancing equity in hiring practices.

New Jersey

On June 1, 2025, New Jersey will implement its pay transparency law, affecting employers with 10 or more employees operating within the state. These employers must include the wage or salary range and a general description of benefits in all job postings. Additionally, companies must make a reasonable effort to inform current employees about promotional opportunities before making promotion decisions. While the law covers in-state hiring practices, it remains unclear whether it extends to remote roles performed outside of New Jersey.

Vermont

Vermont’s pay transparency law, effective July 1, 2025, applies to employers with five or more employees. It requires salary ranges to be included in job advertisements, covering both in-office and remote roles primarily serving Vermont-based locations. For commission-based positions, employers can simply state that compensation is commission-based rather than disclosing a specific pay range. This legislation aims to promote fair pay practices while maintaining flexibility for performance-driven roles.

Massachusetts

On Oct. 29, 2025, the Massachusetts Frances Perkins Workplace Equity Act will mandate employers with 25 or more employees disclose pay ranges in job postings. It also requires employers to provide salary information when offering promotions, transfers, or new roles to existing employees. Furthermore, businesses with 100 or more employees must submit annual wage data reports to the state, ensuring ongoing compliance with pay equity standards.

These states are joining the ranks of Colorado, California, New York, Washington, Hawaii, Maryland, and Nevada, all of which have already implemented pay transparency laws. Additionally, federal legislation — such as the proposed Salary Transparency Act and Pay Equity for All Act — could further shape the national landscape. While each law has its own nuances, the broader trend is clear: Pay transparency is becoming the new norm, pushing businesses toward more equitable and open compensation practices. 

Pay Transparency’s Role in Employee Retention 

Pay transparency isn’t just about compliance or attracting new talent — it plays a crucial role in keeping your best employees, too. Research shows that organizations with clear, open compensation policies experience lower turnover and higher employee satisfaction. In fact, pay transparency alone can reduce an employee’s intent to quit by 30%, according to Payscale.

Why? Because transparency builds trust. When employees understand how their pay is determined and see that their compensation is fair compared to colleagues and market rates, they’re more likely to stay engaged and committed. On the flip side, when pay structures are unclear — or worse, when employees discover disparities on their own — it can lead to frustration, disengagement, and, ultimately, turnover.

However, transparency alone isn’t enough. Simply posting salary bands without context can backfire, especially among younger employees who are more likely to job-hop for a pay bump. If pay differences aren’t explained, workers may assume they’re being undervalued and start searching for better opportunities. That’s why communication is just as important as transparency itself. Employees need to know not just what they’re paid, but why — how their compensation is structured, how pay decisions are made, and what steps they can take to grow their earnings.

Organizations that embrace pay transparency with strong communication strategies don’t just retain talent — they also build a reputation as fair, ethical employers. In today’s job market, that’s a competitive advantage worth investing in.

Of course, pay transparency is just one piece of the puzzle. Scheduling and PTO transparency are also key to building trust and fairness in the workplace. With OnTheClock, you can simplify employee scheduling, track PTO with clarity, and ensure your team always knows where they stand. Start your free, 30-day trial today and create a more transparent workplace!