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Why Pay Transparency Pays Off in Recruiting

Pay transparency has grown into a global issue in recent years, as pay equity remains a hurdle and workers increasingly demand wage clarity with job postings.

Achieving pay transparency in the current labor climate is not easy, partly because there is no standardized legal definition of pay transparency and what constitutes an acceptable range for wage disclosure. In many countries, pay transparency is currently governed at local levels, leaving employers with a patchwork of regulations.

Still, enacting a pay transparency plan can ultimately benefit job seekers, existing workers and employers alike. Following are just a few ways pay transparency is already demonstrating value in the recruiting and hiring processes.

 

Workers are prepared for Pay Transparency

 

The workforce is ready to embrace wage transparency, whether mandated by law or implemented by individual employers. Consider North American workers alone.

In Canada, where most workers’ pay transparency rights are regulated by provincial legislation, approximately 84% of workers support wage transparency laws requiring employers to disclose good-faith salary ranges. In the United States, where some municipalities and states have established salary transparency laws, about 98% of workers believe employers should divulge pay rates with job postings and nearly 80% support laws requiring employers to do so.

 

Boosts candidate participation

 

Job seekers are more likely to respond to job advertisements that include salary details.

A recent Forbes article about the effects of U.S. pay transparency laws on recruiting reported that 1 in 6 companies that disclose pay data with job postings attract more candidates. Colorado, one of the first U.S. states to pass a pay transparency law that requires wage disclosure for all state-based positions, saw a nearly 2% increase in labor force participation during the law’s first year.

 

Improves applicant Diversity and access

 

Among pay transparency’s goals are to eliminate gender- and race-based wage gaps and enhance employment opportunities for under-represented groups. While pay transparency is relatively young as both a concept and a regulatory practice, early indicators suggest it’s progressively achieving its key objectives.

A recent Wired article about pending pay transparency legislation in the European Union referenced several studies illustrating that voluntary pay transparency and wage disclosure can rapidly shrink internal wage gaps between female and minority workers and their white male counterparts. In the United States, research shows that pay transparency is especially effective at bringing women’s and men’s salaries into alignment.

Pay disclosure also drives applications from under-represented populations. The aforementioned Forbes article cites data that suggests employers draw a higher percentage of minority candidates — particularly African American applicants — when wage information is included in job postings.

 

Streamlines recruiting processes

 

 An overall increase in responses to job postings may seem like more work for hiring managers, but pay transparency can actually accelerate recruiting, interviewing, and hiring. When job postings contain clear salary ranges, talent can determine whether a given position is financially viable for them before submitting an application.

Without pay transparency, employers often waste significant hours and financial resources on recruiting talent who appear to be good fits but drop out of consideration at the interview stage when the salary is disclosed. A survey of full-time workers reported in a recent Inc. article discovered that 50% of respondents have abandoned potential jobs during the application or interview stages because the wage offered did not meet their expectations.

For organizations that work with managed service providers such as external recruiters or workforce management agencies, pay transparency helps vendors narrow the talent pool. When recruiters have a realistic pay range, they can more easily identify and target qualified candidates with the necessary skills and corresponding salary expectations.

 

Facilitates trust and satisfaction

 

Research into pay transparency’s long-term effects is ongoing. Still, a recent Harvard Business Review article reported that short-term impacts include improved worker perceptions of organizational trust, workplace equity, and job satisfaction.

Pay transparency also has a positive impression on job-seeking talent. A recent CFO article about pay transparency’s repercussions in human resource departments reports that job seekers have a favorable view of organizations that disclose wages and that candidates find organizations with pay transparency policies more trustworthy than those without.

 

Reduces recruiting hard costs

 

A recent study reported by the Society for Human Resource Management (SHRM) found that including wage ranges in job postings can reduce recruiting costs.

The Voice of Talent Report: State of the Workforce 

In October of 2022, Procom surveyed 1, 740+ contingent and permanent workers across the United States and Canada to uncover what’s most important to them amidst heightened expectations, competition and uncertainty. 

We have distilled the data into actionable insights you can leverage to strengthen your position as an employer of choice and access the skills you need. You can get your copy below:

 

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