Pay transparency

Last updated: January 13, 2026

This guide explains the evolution of pay transparency and how embracing it can help businesses support compliance and attract and retain talent. Employers will also learn pay transparency best practices.

Pay transparency key takeaways:

• Pay transparency is designed to address gender and racial pay gaps and improve pay equity across the board.
• Employers may need to disclose pay ranges for open positions to comply with pay transparency laws.
• Being transparent about pay can help earn employees’ trust and attract and retain talent.
• Best practices include knowing the applicable laws, conducting pay audits and being forthright with employees about how pay ranges are determined.

What is pay transparency?

Pay transparency is an initiative to make it easier to identify systemic pay inequities and empower job seekers and employees to demand equal pay. It’s enforced by laws in a growing number of states and cities. To comply, employers must internally or externally disclose pay or pay ranges for open positions within their organizations.

Why is pay transparency important?

"How much does this job pay?" Every candidate ultimately wants to know the answer. Some are finding out sooner rather than later thanks to a growing number of states and cities with pay transparency laws.

Depending on the jurisdiction, employers may be prohibited from asking candidates for their salary history, or they may be required to disclose a wage range for current and/or open positions.

Yet, complying with these laws is just one part of the larger pay transparency picture. Being forthright about compensation helps improve pay equity – a hot topic with many employees today. Consequently, pay transparency can directly impact an employer's brand reputation and ability to attract and retain talent.

The evolution of pay transparency

The concept of pay transparency – and how it impacts employers and employees – has changed significantly over the years.

Pay secrecy policies

For many years and in most circumstances, federal and state laws have prohibited employers from adopting policies that restrict an employee's ability to discuss wages with other employees.

Salary history bans

Many state and local governments have also passed laws prohibiting employers from considering a candidate's salary history when making hiring or compensation decisions.

Pay range disclosure laws

In the latest effort to address unequal pay, several states and local jurisdictions have enacted pay transparency laws that require employers to disclose a wage or wage range to prospective candidates and/or current employees. Depending on the law, disclosure occurs upon request, at a certain point in the hiring process or publicly in a job posting.

Pay data reporting

The Equal Employment Opportunity Commission (EEOC) formerly required employers to report pay data on their EEO-1 filings, also known as Component 2. Although this requirement no longer applies, the federal government is exploring ways to improve its pay data collection process and future mandates are possible. In the interim, California and Illinois have enacted their own pay data reporting requirements.

Potential benefits of pay transparency

Embracing pay transparency can help businesses comply with the aforementioned laws. In the process, employers may also be able to improve the following:

• Trust
  When employers disclose how they make pay decisions, their employees may trust that their compensation is fair.
• Pay equity
  Focusing on transparency creates an opportunity for employers to uncover and address potential pay inequality.
• Talent acquisition
  The decision to include a pay range in a job posting naturally means ensuring that the pay range is competitive enough to entice qualified candidates to apply. Businesses that pay below market value may need to promote advantages unrelated to compensation (e.g., flexible hours, remote work, advancement opportunities, etc.) to compete for talent.
• Retention
  Employees who know their pay reflects their performance and experience may be more likely to stay with their employer rather than seek opportunities elsewhere.
• Productivity
  Pay transparency sometimes renews employees' commitment to their jobs, which could mean they try harder to deliver results.

Despite these advantages, pay transparency poses challenges and employers must prepare accordingly.

Pay transparency best practices

1. Recognize that pay transparency is appropriate

Pay transparency is not a fad – it's the new normal. While managers once may have reserved discussions about wages for performance reviews, that approach does not meet the moment. Such conversations can occur at any time and, if initiated by an employee, should not be viewed solely as a request for more compensation, but as a reasonable inquiry regarding company pay practices.

2. Expect the conversation to happen and own it

Managers should be prepared for employees to ask questions about pay ranges and company compensation practices. Owning these conversations and providing the appropriate information builds trust and confidence. A culture of transparency can also make it less likely that employees will want to leave the organization.

3. Know the organization's policies and pay philosophy

To better prepare for discussions with employees about pay transparency, managers should thoroughly familiarize themselves with their organization's pay policies and know the answers to these questions:

• How are pay ranges established?
• Are there geographic and market considerations?
• Is the pay range competitive with the open market?
• What data is used to determine market competitiveness?
• How does the company handle pay ranges for positions than can be performed remotely?
• Has the company evaluated the existing compensation structure to ensure that there are no unjustified pay differentials among current employees?

Managers may want to consult with their human resources professional and legal counsel to determine appropriate responses.

4. Conduct a pay audit

Regularly auditing pay scales can help identify instances of pay inequality. Before analyzing the data, however, employers should determine their pay audit goals and frequency and consult with counsel.

5. Know the law – pay transparency laws by state or city

As states continue to pass new legislation, pay transparency will become more critical.

Use ADP’s pay transparency map for an overview of state and local laws, covered employers and when employers must disclose and by what method. Get started

Note: State and local requirements vary and are changing frequently, so check with your compliance expert or attorney for the latest information on these requirements. The monetary risks associated with non-compliance are hefty and penalties can be thousands of dollars per violation. This is in addition to attorney's fees, costs and reputational harm.