The Pros and Cons of Salary Transparency
American culture generally avoids discussing three topics publicly: politics, religion, and money. While it can certainly be argued that politics and religion are much more openly discussed nowadays, talking about money, specifically how much money we bring home, remains somewhat taboo. The tide is starting to change with the “pay transparency” movement. We want to discuss the details of what pay transparency means, and what some of the pros and cons could be for employers.
What is salary transparency
Salary transparency, also called pay transparency, is a practice where organizations publish data on what salaries their employees make, in an effort to narrow gender, race, and orientation pay gaps.
Companies have gone in a variety of directions when it comes to how they are approaching salary transparency. Buffer publicly publishes the actual salary numbers of each team member by name, along with title and location, which is pretty rare. Most organizations take a less radical approach; the main information shared is the job title, relevant experience level/seniority, and a pay range covering all the salaries in that category, but no personally identifying information. The information may only be allowed to be shared internally, with consequences for sharing the information outside of the company.
Benefits of pay transparency
Participating in salary transparency can reduce pay gaps, increase employee trust and loyalty, and can be a great draw to new talent.
CO- , developed by the US Chamber of Commerce, says: “Pay transparency can contribute to an open and honest feeling in the workplace, which breeds trust in you as an employer.” According to Monster, 98% of employees are in favor of some form of salary transparency; responding to that demand, a handful of states have voted in favor of, or have already enacted, salary transparency into law.
When employees trust their employer and feel valued and respected, they are more productive, happier, and have fewer absences from work. It’s hard to overstate how effective that can be towards increasing your bottom line.
Potential disadvantages of salary transparency
As with any business decision, there can be consequences to pay transparency efforts.
If pay transparency is enacted before pay leveling is done across the board, employees could find discrepancies in the newly published data, which could pit them against each other and increase animosity. Per Daily Sundial: “While there are many benefits to pay transparency, a downside of it is that employees will be able to directly compare their pay with other employees, which could end up turning some of your employees against each other. In order to prevent this from happening, you’ll want to reassess any pay gaps amongst employees and be sure that your employees are being compensated appropriately.”
Similarly, if you simply release the details of organization-wide salaries without enacting a plan to measure bias gaps and ensure pay equity across the board, it defeats the purpose of publicizing the data in the first place.
If your salaries aren’t competitive against the industry, location, and your competitors, then publishing salary data outside of the context of culture and other benefits could scare potential candidates away, rather than drawing them in. You’ll need to make sure you offer competitive salary and benefits packages before you publish that information publicly, even if it’s only on job postings.
Additionally, not all employees want their salary to be public information. While opinion on this is definitely veering positive, our culture still values privacy when it comes to income details. You will almost certainly meet some resistance and you’ll need to be prepared to accept that some employees might prefer to leave your organization, rather than have their salary public for everyone to see.
Should you enact salary transparency
You should enact salary transparency only if you are prepared to ensure employees feel your organization prioritizes pay equity and offers competitive compensation.
This means taking actions beyond just publishing the data; you’ll need to compare salaries on the basis of gender, race, and other such identifiers, and then against similar roles, education levels, and locations. You’ll need to do a competitive analysis to make sure you offer wages consistent with the industry, location, etc. You’ll also need to respect that you may get substantial resistance from existing employees, depending on the culture your organization has nurtured.
It’s not a simple process, but the potential effects can definitely make it worthwhile. Remember that increasing employee satisfaction will also increase your organization’s productivity, and therefore your bottom line. If you aren’t sure you can go it alone, Skywalk Group has HR consultants that can assist you with salary compliance, handbook and policy creation or modification, or nearly any other issue your organization might face. We also have top-of-the-line professional recruiters ready to find the high-quality talent you need to fill your open positions and push your organization to the next level.
By Jessica Palmer