Why does revealing a salary spark so much conversation, emotion, and—sometimes—controversy? Salary transparency has become one of the most hotly debated workplace topics in recent years. But beyond legal policies or HR best practices, the push for pay visibility taps into something deeper: our psychology. From fairness and trust to self-worth and status, this article explores why we care so much about salary transparency—and what it means for both employees and employers in 2025.
The Rise of Salary Transparency: More Than a Trend
Salary transparency is no longer a fringe idea—it’s entering the mainstream. In 2024, nearly 40% of U.S. job postings included salary ranges, a significant increase from just 12% in 2019 [1]. This shift is largely driven by new state-level laws (like those in California, Colorado, and New York) requiring employers to disclose pay ranges in job listings.
But even in states without mandates, companies are adopting salary transparency policies to meet growing employee expectations, boost employer branding, and compete for talent. The movement is as cultural as it is legislative.
Why Salary Matters So Much: A Psychological Breakdown
Fairness and Equity Are Fundamental Human Needs
According to behavioral economist Dan Ariely, people would rather earn less in absolute dollars if it means they’re not being underpaid relative to peers [2]. This highlights the power of relative fairness—we compare our compensation to that of coworkers, industry averages, or even national norms.
When salary information is hidden, the absence of clarity creates fertile ground for rumors, resentment, and disengagement—even when pay may be objectively fair.
Pay is Tied to Identity and Self-Worth
In a society where jobs are often tied to identity, salary becomes more than compensation. It reflects achievement, value, and validation. Researchers at Harvard Business School found that salary transparency reduces internal anxiety, fosters more productive conversations about advancement, and encourages merit-based career growth [3].
This connection to identity explains why compensation secrecy can feel personal, triggering emotions like self-doubt or imposter syndrome when left unaddressed.
Transparency Builds Organizational Trust
A study in the Journal of Business Ethics found that transparent pay policies correlate with higher trust in leadership, greater collaboration, and improved performance—even in companies where salaries were not significantly higher than the market average [4].
The takeaway? Employees care more about clarity and consistency than top-dollar salaries. Transparency fosters trust—even when the numbers aren’t perfect.
Why Companies Are Embracing Transparency in 2025
Legal Compliance and Risk Management
Salary transparency laws are expanding quickly. Companies operating in California, New York, Washington, and other states are already required to publish pay ranges in job listings. Failure to comply may result in fines, lawsuits, or reputational damage. Staying ahead of legislation is not just good ethics—it’s good business.
Competitive Talent Acquisition
According to LinkedIn’s 2024 Workplace Report, 61% of job seekers say they are more likely to apply to roles that list salary ranges [5]. Transparent pay practices immediately boost the attractiveness and legitimacy of job postings, particularly among Gen Z and millennial candidates who prioritize openness.
Support for Diversity and Pay Equity
Salary transparency helps close the gender and racial wage gaps by bringing systemic disparities into the light. A 2023 Payscale study found that organizations with transparent pay policies had 5% smaller gender pay gaps than those without [6].
By making compensation structures visible and accountable, companies empower HR teams to proactively address inequities and build trust with historically marginalized groups.
Brand Reputation and Trust
In an era of Glassdoor reviews and TikTok career exposés, employees and candidates talk. Organizations seen as open, fair, and equitable earn stronger employer branding—and a reputation that attracts top-tier talent without expensive marketing.
The Emotional Impact: Why Hidden Pay Hurts
Secrecy around compensation breeds misunderstanding, mistrust, and emotional disconnection. In the absence of information, employees often default to negative assumptions—believing their contributions are undervalued or that others are being paid more unfairly.
This perception can lead to:
- Lower morale: Employees who suspect pay inequality often disengage emotionally from their work.
- Quiet quitting: Some may reduce discretionary effort if they feel unrewarded.
- Toxic work environments: Mistrust among coworkers fosters resentment, gossip, and reduced collaboration.
Conversely, salary transparency builds psychological safety, allowing people to focus on performance rather than politics. A 2022 SHRM study found that companies with pay transparency saw a 17% boost in employee morale and 23% lower turnover [7].
Pay visibility provides clarity—and clarity is calming.
Behavioral Economics at Play: Anchoring and Perception
Salary transparency doesn’t just inform—it frames perception. When employers include a range like “$85,000–$100,000” in a listing, it sets an anchor, shaping expectations around value, seniority, and negotiation.
This anchoring effect influences:
- Application behavior: Candidates are more likely to apply if they see their salary expectations reflected in the listing.
- Negotiation tone: Transparency removes the uncertainty and power imbalance in salary talks.
- Internal expectations: Employees better understand career progression when pay bands are tied to roles and performance.
Furthermore, when pay structures are openly communicated, employees gain a sense of control over their future. They can see what success looks like and how to get there, which drives motivation and goal setting.
What It Means for Employers
Salary transparency may feel risky—but the risks of avoiding it are greater. Inconsistent or secretive compensation practices can drive your best people away, damage your employer brand, and leave you scrambling to explain disparities under pressure.
Here’s how employers can lead with transparency:
- Establish structured pay bands: Define compensation ranges tied to roles, experience, and responsibilities—not gut feeling.
- Train managers on compensation conversations: Ensure consistency in how pay is discussed and justified.
- Audit for equity regularly: Use tools and external benchmarks to identify and address disparities.
- Communicate early and often: Transparency isn’t a one-time reveal—it’s a continuous conversation about performance, goals, and compensation philosophy.
At DAVRON, we encourage our clients in engineering, construction, and manufacturing industries to embrace salary transparency as a strategic advantage—not just to meet regulations, but to earn trust and attract the industry’s top talent.
Final Takeaway: Transparency Is a Competitive Advantage
Salary transparency is about more than compliance—it’s about culture. When pay becomes part of an open conversation, it fosters trust, boosts performance, and strengthens employee engagement.
As workforce expectations evolve and Gen Z demands greater openness, companies that lead with clarity will be the ones who attract, retain, and grow top talent in 2025 and beyond.
Sources
[1] https://hbr.org/2023/06/salary-transparency-is-here-to-stay
[2] Ariely, Dan. Predictably Irrational. HarperCollins, 2008.
[3] https://www.hbs.edu/faculty/Publication%20Files/22-025_b478d8b5-5a6f-445e-bf8f-9a528b1082f1.pdf
[4] https://link.springer.com/article/10.1007/s10551-021-04963-3
[5] https://www.cnbc.com/2023/04/26/more-job-postings-are-adding-salary-information.html
[6] https://www.payscale.com/research-and-insights/gender-pay-gap-report/
[7] https://www.shrm.org/hr-today/news/hr-news/pages/how-pay-transparency-can-boost-morale-and-engagement.aspx