Pay Transparency Is Coming, Whether You Are Ready or Not
In 2021, Colorado became the first US state to require employers to include salary ranges in job postings. Since then, New York, California, and Washington have passed similar laws. Illinois, Massachusetts, and several other states have active legislation moving through their legislatures as of early 2026.
The pattern is clear: salary range disclosure will be the norm in most US states within the next three to five years, and it is already the norm in several European jurisdictions. Companies that wait until they are legally required to disclose pay ranges will be at a disadvantage compared to companies that have already built the compensation infrastructure to support transparency.
But pay transparency is not just a compliance exercise. Done well, it improves candidate quality, reduces time-to-close offers, and strengthens internal pay equity. Done poorly, it creates internal resentment and external confusion. The difference lies in how you build your salary band structure.
82%
of job seekers say salary range information is very or extremely important when deciding whether to apply for a job (LinkedIn Talent Trends, 2024)
Pay Transparency Laws by State: What You Actually Need to Know
A critical nuance for remote roles: Colorado's law applies to any posting for a role that could be performed remotely by a Colorado resident. Many companies initially responded by adding "excluding Colorado" to remote job postings. This workaround has become increasingly untenable as candidates and the media noticed it, and as more states passed similar laws. The better solution is to build salary bands that you are comfortable disclosing everywhere.
How to Build Salary Bands from Scratch
Step 1: Define Your Job Architecture
Before you can build salary bands, you need a clear job architecture: a structured set of job levels and families that defines what differentiates a software engineer from a senior software engineer, and a staff software engineer. Most companies use a level numbering system (IC1 through IC6 for individual contributors, M1 through M4 for managers) with written level definitions that describe scope of impact, autonomy, and required skills.
If you do not have a job architecture, building one is the prerequisite to building bands. It does not need to be complicated at smaller sizes. A five-level IC ladder with written criteria for each level, applied consistently across all engineering roles, is sufficient for a company with 50-200 employees.
Step 2: Gather Market Data
Salary bands need to be anchored in market data, not to what you have historically paid. The best compensation data sources vary by company size and budget:
Radford (Aon): The gold standard for technology and life sciences compensation data. Expensive (typically $15,000-$30,000+ per year), but extremely granular. Used by most public technology companies for annual benchmarking.
Mercer: Strong for cross-industry benchmarking and broader role types. Often used alongside Radford by mid-size and large companies.
Levels.fyi: Free to use, crowdsourced total compensation data specifically for software engineers at technology companies. Not statistically rigorous but excellent for directional calibration and for roles that Radford might not have good data on.
Glassdoor and LinkedIn Salary: Useful for broad directional benchmarking and for roles where Radford data is thin. Use these for confirmation, not as primary sources.
Comp Analyst (CompensationForce): A middle-market option between Radford and free tools. More accessible for companies that cannot justify Radford pricing.
Step 3: Set Your Competitive Positioning
Your salary bands need to be positioned relative to market. Common positions are: 50th percentile (median, you pay what the average company pays); 65th percentile (you pay more than 65% of companies, used to attract and retain above-average talent); 75th percentile (aggressive market positioning, common in tech companies competing for scarce skill sets).
You do not have to use the same positioning for every role. Many companies pay at the 75th percentile for engineering and product roles while paying at the 50th percentile for administrative roles. This is rational if engineering talent is your primary competitive constraint.
Step 4: Set Band Width and Midpoint
A typical salary band has a minimum, midpoint, and maximum. The midpoint is your market anchor (the percentile you chose). The minimum is typically 80% of midpoint; the maximum is typically 120-125% of midpoint. This creates a band spread of roughly 40-50%.
Wider bands give more room for variation within a level but create more ambiguity about what drives position within the band. Narrower bands are simpler to explain but create "red circle" situations where existing employees are above the new band maximum more frequently.
63%
of employees who understand how their pay is determined report higher job satisfaction, compared to 31% of employees who do not understand it (PayScale Compensation Best Practices Report, 2024)
How to Communicate Salary Bands to Candidates
The most common mistake companies make when disclosing salary bands is posting ranges that are far too wide. A band listed as "$80,000 - $180,000" tells a candidate almost nothing. It signals that the company either does not know what they plan to pay or does not want to tell you. This erodes trust before the first conversation.
Best practice: in job postings, display the realistic range for the specific level you are hiring. If you are hiring a Senior Software Engineer at Level 5 in your job architecture, post the band for that level specifically, not the entire Senior Engineer category which might span two or three levels.
In recruiter screens, share where in the band you typically place candidates based on experience level. This is not a commitment; it is information that helps the candidate decide whether to continue. Candidates who drop out because the salary is too low save everyone time. Candidates who continue because the salary is in range are more likely to close.
The Internal Pay Equity Impact You Need to Prepare For
When you publish salary bands, current employees will compare their pay to the posted ranges. If you have existing employees below the minimum of the band for their role, you have two options: raise their pay to the band minimum before publishing, or be prepared for those conversations when they happen. The first option is better for morale and retention. The second is sometimes financially unavoidable in the short term but requires a credible remediation timeline to communicate.
Companies that run a pay equity audit before implementing transparency are in a much better position. They can remediate the most egregious gaps first, understand the total cost of bringing everyone to band minimum, and communicate a plan to the organization alongside the transparency initiative rather than having compensation conversations happen reactively.