Both are related, but carry distinct concepts that address different aspects of fair compensation.
Pay Transparency
Pay transparency is the practice of openly sharing compensation details—like salary ranges and pay structures—to improve visibility and accountability within organizations. It’s about making pay data accessible and understandable to employees and job candidates. This includes requirements like posting salary ranges in job listings, providing pay scales to current employees upon request, and sometimes publishing company-wide compensation data.
The goal is to create openness around how pay decisions are made and what compensation levels exist within an organization. Transparency helps employees understand their market value, negotiate more effectively, and identify potential inequities.
Pay Equity
Pay equity focuses on fairness and equal treatment in actual compensation levels. It’s about ensuring that people are paid fairly for substantially similar work, regardless of protected characteristics like gender, race, age, or other factors. Pay equity examines whether compensation differences can be justified by legitimate business reasons such as experience, performance, education, or market factors.
The goal of pay equity is to eliminate biased pay practices by ensuring compensation reflects job-related factors—like experience or performance—not systemic inequities.
How They Work Together
Pay transparency serves as a tool to achieve pay equity. When compensation information is visible, it becomes easier to identify and address pay disparities. Transparency creates accountability and pressure for employers to ensure their pay practices are equitable.
However, transparency alone doesn’t guarantee equity. An organization could be completely transparent about unequal pay structures. Conversely, an organization could have equitable pay but lack transparency about their compensation philosophy.
Effective compensation management typically requires both transparency to build trust and accountability, and equity to ensure fairness and legal compliance. Together, they create a more just and sustainable approach to employee compensation.
There are cost effective compensation software tools that make it easy to deploy and manage pay transparency and pay equity practices in their organization. The right software will empower organizations with the tools they need to create sustainable processes to help attract and retain talent.
