Compensation transparency
{{Short description|Type of economic principle}}
Wage transparency, salary compensation, and compensation transparency generally, involves disclosure of employee compensation amounts, either among other employees in an organization, to owners, to government regulators, or to the public.
Some jurisdictions have pay transparency laws intended to prevent discrimination based on demographics like gender or race. These laws require job listings to give a salary range for the position. To eliminate unintentional discrimination and treat employees more ethically, some organizations have adopted radical transparency, disclosing all employees' compensation internally and either equalizing pay for similar positions or justifying differences.
Some jurisdictions mandate disclosure of executive compensation to shareholders, in an attempt to reduce excessive compensation.
According to a 2024 review of existing evidence, pay transparency within a firm tends to narrow coworker wage gaps, but also incentivizes employers to bargain more aggressively to keep average wages down. Within-firm pay transparency also reveals to workers pay differences across different levels of seniority, which "can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity." Cross-firm pay transparency overall strengthens the power of workers against employers, as workers are more likely to seek higher-paying jobs, and negotiate higher pay at their current job.{{Cite journal |last=Cullen |first=Zoë |date=2024 |title=Is Pay Transparency Good? |journal=Journal of Economic Perspectives |language=en |volume=38 |issue=1 |pages=153–180 |doi=10.1257/jep.38.1.153 |issn=0895-3309|doi-access=free }}
A 2024 experiment conducted on employees at an Asian bank showed that revealing salaries of their managers, especially to those who predicted it lower than actual, led the employees to become more productive.{{Cite news |last1=Cullen |first1=Zoë B. |last2=Perez-Truglia |first2=Ricardo |date=2018-10-25 |title=The Motivating (and Demotivating) Effects of Learning Others' Salaries |url=https://hbr.org/2018/10/the-motivating-and-demotivating-effects-of-learning-others-salaries |url-status= |access-date=2024-11-21 |work=Harvard Business Review |issn=0017-8012}}{{Secondary source needed|date=November 2024}}
Compensation transparency by country
=Canada=
Under Ontario's Employment Standards Act it is illegal for an employer to "intimidate, dismiss or otherwise penalize an employee or threaten to do so" because the worker has disclosed their own wages or because the worker has inquired about the wages of another worker for the purposes of determining the employer's compliance with the law's Equal Pay for Equal Work provisions.{{cite web|url=https://www.ontario.ca/laws/statute/00e41 |title=Employment Standards Act, 2000, S.O. 2000, c. 41 |publisher=Government of Ontario |accessdate=2023-10-08}}
=United Kingdom=
In the United Kingdom, the Equality Act 2010 protects the rights of workers to discuss pay and forbids employers from prohibiting a worker's "relevant pay disclosure".{{cite web|url=https://www.legislation.gov.uk/ukpga/2010/15/section/77 |title=Equality Act 2010 |publisher=legislation.gov.uk |accessdate=2023-10-08}}
=United States=
==Federal law==
In the United States, the National Labor Relations Act protects the right of employees to discuss compensation without retaliation from their employer.[https://www.nlrb.gov/about-nlrb/rights-we-protect/your-rights/your-rights-to-discuss-wages Your Right to Discuss Wages]
==By state or territory==
California, Connecticut, Hawaii, Illinois, Maryland, New York, Nevada, Rhode Island, and Washington have passed compensation transparency laws as of 2023. Some US cities also have compensation transparency laws, including New York City.
New York enacted a pay transparency law in 2023. The law requires employers to publicly disclose job salary ranges.{{cite web|url=https://www.msn.com/en-us/money/markets/new-york-pay-transparency-law-drives-change-across-the-us/ar-AA1h3j8S |title=New York pay transparency law drives change across the U.S. |publisher=MSN |accessdate=2023-10-08}} Massachusetts enacted a pay transparency law in July, 2024, which applies to businesses with more than 24 employees, with data reporting for businesses with 100 or more employees.{{cite news |url=https://www.wbur.org/news/2024/07/31/gov-healey-massachusetts-wage-transparency-bill |title=Gov. Healey signs wage transparency bill |date=July 31, 2024 |author=Sam Drysdale |agency=State House News Service}}
Maryland's Equal Pay for Equal Work law states that "an employer may not prohibit an employee from inquiring about, discussing, or disclosing the wages of an employee or another employee".{{cite web|url=https://dllr.state.md.us/labor/wages/equalpay.shtml |title=Equal Pay for Equal Work - Employment Standards Service (ESS) |publisher=Maryland Department of Labor |accessdate=2023-10-08}}
See also
- {{section link|Equal pay for equal work|Transparency laws}}