Pay transparency: laws, benefits and how employers can get it right

A strong candidate opens your job ad, finds no salary range and moves on to the next one. Pay transparency, the practice of openly sharing what a job pays and how pay is decided, is now also the law in 18 US states and Washington, D.C.

The EU is adding its own rules for employers hiring in Europe. This guide explains which laws apply in 2026, what the benefits and risks are, and how to roll out pay transparency in seven steps.

TL;DR:

• Pay transparency means openly sharing what a job pays and how pay decisions are made. It usually starts with a salary range in every job posting.
• As of 2026, 18 states and Washington, D.C. require salary ranges in job ads, per SHRM. US federal law does not.
• SHRM found 82% of US workers are more likely to consider a job that lists a pay range, and about 70% of employers listing ranges saw more applicants.
• The EU Pay Transparency Directive bans salary history questions and requires pay ranges before the interview. Large employers report pay gaps from June 2027.
• Run a pay audit and fix unexplained gaps before posting ranges, or you end up explaining old problems in public.
• Post the range you would actually offer, not the full band, and say where most offers land.
• Base each offer on job-related evidence, such as skills tests and structured interviews, and record why it sits where it does in the range.

What is pay transparency?

Pay transparency is an employer's openness about compensation: what a role pays, how the pay range was set, and how people move within it. A transparent employer tells candidates the range before or during the first interview, lets employees discuss their pay without fear, and explains the factors behind every offer, raise and promotion.

The term is used in three related ways:

• Pay range disclosure: sharing the salary range for an open role in the job posting or on request.
• Pay process transparency: explaining how pay bands, levels and raises are decided.
• Pay data reporting: publishing or filing statistics such as the gender pay gap with a regulator.

Salary transparency is often used as a synonym, though it usually refers only to sharing salary ranges, not the full pay process. The closely linked goal is pay equity: paying people fairly for work of equal value.

What are the levels of pay transparency?

Pay transparency comes in five levels, from complete pay secrecy to a fully published pay structure. Each level adds openness on top of the one before it.

Most employers in the US and Europe now operate at level three or four, often because the law moved them there.

1. Pay secrecy: Pay is never discussed and policies forbid employees from sharing their salaries. For most private-sector employers in the US, rules like this are unlawful.
2. Open pay talk: Employees can share their own pay with colleagues without being punished. This is the legal floor in the US, the UK and Australia.
3. Ranges on request: The employer gives the pay range to an applicant or employee who asks, or at a set point in the hiring process.
4. Ranges in every posting: Every job ad includes a good faith pay range, often with a summary of benefits and bonus. This is the standard in 18 states and Washington, D.C.
5. Open pay structure: Pay bands, job levels and the rules for raises are published to all staff, and a few companies publish individual salaries.

The right level depends on your locations, your culture and how well your pay structure holds up to scrutiny. Moving up a level before your pay data is clean is the most common mistake.

Why does pay transparency matter in 2026?

Pay transparency matters because candidates now expect it, the law increasingly requires it, and hidden pay gaps are harder to defend. A job ad without a range loses applicants to the ads beside it, and an unexplained gap between two people in the same role is now easier for employees, regulators and courts to spot.

The gender gap is still large. Women who worked full time earned 82.7% of what men earned at the median in 2024, according to the BLS report on women's earnings in 2024. Pay secrecy makes gaps like this harder to see and harder to fix.

Employers feel the pressure too. In Korn Ferry's Global Total Rewards Pulse Survey, 65% of organizations said they expect pay transparency to be their biggest rewards challenge in 2026 and 2027.

For a deeper look at the causes of unequal pay, read our guide on the gender pay gap: causes, implications and solutions.

What are the benefits and risks of pay transparency?

Pay transparency brings more applicants, fewer wasted interviews, greater trust and earlier detection of pay gaps. The risks are real but manageable: employees comparing pay, pressure on existing salaries, and competitors using your ranges to poach. Most of the risk comes from publishing ranges before fixing the pay structure behind them.

The candidate side is clear. In SHRM research on pay transparency, 82% of US workers said they are more likely to consider a job that lists a pay range. Another 73% said they trust employers that post ranges more.

Employers see the same effect. Among those that list ranges, about 70% saw more applicants and 66% saw better applicant quality. The table below sets the benefits against the risks in five areas and shows how to manage each risk.

Pro tip: Treat the first year of posting ranges as a test of your pay structure. Count how many current employees fall below the new posted minimum for their role. That number, and the cost to fix it, is your real pay transparency budget.

Which US states have pay transparency laws?

US pay transparency laws are set by states and cities, not by federal law. As of 2026, 18 states and Washington, D.C. require employers to include salary ranges in job advertisements, according to SHRM.

A few more states and cities require employers to share the range only when an applicant asks or at a set stage of hiring.

At the federal level, the National Labor Relations Act protects the right of most private-sector employees to discuss pay. The NLRB explains that employers may not ban, monitor or punish employees' conversations about wages.

The separate pay transparency rule for federal contractors fell away when Executive Order 11246 was revoked in January 2025. The Department of Labor's final rule removing its regulations takes effect on October 26, 2026, according to a Crowell and Moring client alert.

The table shows the main states that require a range in job postings, with the employer size that triggers the rule.

Nevada and Rhode Island require employers to give the range on request or at set hiring stages, and several other places have their own versions. New York City, Jersey City, Ithaca and Westchester County have local posting rules.

Maine and Delaware passed newer laws, with Delaware's due to take effect in 2027. Most of these laws also reach remote jobs that could be filled by someone living in the state.

States without a posting law, such as Texas, Florida, Ohio and Virginia, still fall under the federal right to discuss pay, and many multi-state employers now post ranges everywhere to keep one process. For US and Canadian trends, see our post on compensation transparency as a hiring trend.

What does the EU pay transparency directive require?

The EU Pay Transparency Directive requires employers to share pay ranges with candidates, stop asking about salary history, answer employees' pay questions and report gender pay gaps. Member States had to turn it into national law by 7 June 2026, and the first pay gap reports for large employers are due by 7 June 2027.

The main obligations in Directive (EU) 2023/970 are:

• Pay before the interview: Candidates get the starting pay or its range in the job ad or before the interview.
• No salary history questions: Employers may not ask candidates what they earn now or earned before.
• Right to information: Employees can ask for their own pay level and the average pay, by sex, of people doing the same work or work of equal value. Employers must answer within two months.
• No pay secrecy clauses: Contracts cannot stop workers from disclosing their pay.
• Gender pay gap reporting: Employers with 250 or more workers report every year from June 2027. Those with 150 to 249 report every three years from June 2027, and those with 100 to 149 every three years from June 2031.
• Joint pay assessment: A gap of 5% or more in any category of workers that the employer cannot justify triggers a joint review with worker representatives.
• Shifted burden of proof: In a pay discrimination claim, the employer must prove there was no discrimination.

Progress is uneven. WageIndicator reported in June 2026 that only four of the 27 Member States (Slovakia, Italy, Lithuania and Malta) had transposed the directive by the deadline, and others are still passing their laws.

Employers hiring in Europe should plan for the directive's rules now rather than wait for each national law.

What pay transparency rules apply in the UK, Canada, Australia and India?

Pay transparency rules outside the US and EU focus on gender pay gap reporting and the right to discuss pay, with Canada now adding salary ranges in job postings. None of these countries has a single rule identical to the EU directive, so global employers usually set one standard that meets the strictest market.

• United Kingdom: Employers with 250 or more employees must publish their gender pay gap figures each year. There is no UK law requiring salary ranges in job ads, but the Equality Act 2010 makes pay secrecy clauses unenforceable when employees discuss pay to find out whether they are paid fairly.
• Canada: British Columbia requires pay ranges in public job postings and bans salary history questions. Ontario added a posting rule on January 1, 2026 for employers with 25 or more employees, with a cap of CA$50,000 on the width of a posted range for most jobs, according to DLA Piper's summary of the regulation.
• Australia: Since December 2022, employees have had a legal right to share or keep private their pay, and pay secrecy terms in employment contracts no longer have effect. The Workplace Gender Equality Agency now publishes the gender pay gaps of employers with 100 or more employees.
• India: India has no law that requires salary ranges in job postings. Equal pay rules sit in the Code on Wages, and the move toward ranges is driven by the market rather than by regulation.

To keep up with laws that touch pay and benefits, see our guide on how to stay compliant with compensation and benefits laws.

How do you implement pay transparency step by step?

Pay transparency is best introduced in seven steps: map the laws, set a pay philosophy, audit pay, build ranges, train managers, tell employees, and review every year. The order matters.

Employers that publish ranges before fixing gaps end up explaining old problems in public.

Step 1: Map the laws for every hiring location

List each state, city and country you hire in, including remote roles. Note what the posting must include and when a range must be shared. Your strictest location often becomes your standard.

Step 2: Set your pay philosophy and level of openness

Decide where you want to pay against the market, for example at the median, or above it for hard-to-fill roles. Then choose which of the five levels you are aiming for this year.

Step 3: Run a pay audit

Compare pay for people doing similar work by gender, race, location and tenure. Find gaps you cannot explain with job-related factors. Then set a budget and timeline to close them.

Step 4: Build pay ranges by job level

Group roles into levels, price each level against current market data, and set a minimum, midpoint and maximum. Our guide on building a leveling system before setting salary ranges walks through this step.

Step 5: Train managers

Managers get the first questions. Give them the ranges for their teams, the rules for placement within a range, and practice answers to questions like "Why does the new hire earn more than me?"

Step 6: Tell employees before candidates see it

Explain the pay philosophy, the ranges and how people move through them. Do this ideally before the first job ad with a range goes live. Our post on how to communicate compensation and benefits to employees can help in this regard.

Step 7: Track and review

Review ranges at least once a year and watch the questions employees ask. Re-run the pay audit to check that gaps are closing.

Before step one, leadership should agree on the answers to a few questions: who can see what pay data, how much the business is willing to spend on fixing gaps, and how it will respond if a team finds out about a gap before HR does.

How do you set salary ranges candidates trust?

Salary ranges earn trust when they are narrow enough to be useful, honest about where most offers land, and backed by a clear rule for placement. A range of $60,000 to $140,000 meets the letter of some laws but tells candidates nothing, and it can push away the people you want.

Research covered by SHRM in July 2026 found that women preferred jobs with narrower salary ranges more strongly than men. Adding context about the typical starting salary and how final offers are decided largely removed that gap in both applications and negotiation.

• Keep the range tight: Post the range you would actually offer for this hire, not the full band for the level. Ontario caps posted ranges at CA$50,000 for most roles, a useful benchmark anywhere.
• Say where offers usually land: A line such as "most new hires start between $72,000 and $80,000" sets honest expectations.
• Explain placement: Name the factors that move an offer up the range, such as relevant experience or skills shown in the assessment.
• Include the full package: Many laws ask for benefits and bonus details too, and candidates compare total pay.
• Use the same range internally: If a posted range is higher than what current staff in that role earn, fix that first.

Our glossary entry on the salary range covers how ranges are built in more detail.

How does pay transparency connect to fair hiring?

Pay transparency and fair hiring depend on each other: a published range is only defensible if the decision about who gets hired, and at what point in the range, rests on job-related evidence. When offers vary because one interviewer liked a candidate more, transparency exposes the gap instead of preventing it.

Hiring teams can close that loop in three ways:

• Assess the same skills for every candidate: Role-based skills tests give each candidate the same job-related tasks, so placement in the range can point to measured skills rather than resume signals.
• Use structured interviews: A structured interview asks every candidate the same questions and scores answers against the same criteria, which keeps offers consistent.
• Record the reason for each offer: Note which factors set the offer within the range, so the decision holds up to an internal review, an employee question or a regulator.

Testlify supports this part of the process. Hiring teams can choose from 3,500+ validated tests or build an assessment from a job description, run structured AI interviews, and see every candidate scored on the same criteria.

You can browse the Testlify test library to find tests for the roles you are hiring for.

Ready to hire on job-related evidence? See how Testlify scores every candidate on the same criteria. Book a demo to talk it through with our team.

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