Pay transparency is the practice of openly communicating company salaries. It comes in many shapes and sizes, from small things such as posting salary ranges in job ads to full-blown payroll transparency where individual salary information is freely accessible to all employees.
Transparent salaries allow employees to be in the know about how exactly their work is valued and help eliminate discrimination, making the workplace more equitable and welcoming.
It’s particularly valuable for the wave of current job seekers, who have grown tired of the vague offers of a “competitive salary” on job ads. People want to know what they’re in for before having to spend time and effort on motivation letters and interviews.
But it’s not just employees who benefit from transparent salaries. Employers do, too.
1. Become trusted by employees
One common reason for hiding salaries is that it enables employers to negotiate lower salaries for employees, with the purpose of lowering company expenses. In that sense, being transparent about pay signals that an employer doesn’t have anything to hide in that department and is willing to be upfront and fair about compensation.
Employees don’t have to worry that they’re being exploited or taken for fools when applying and the decision to join is completely on their shoulders. Accordingly, there’s less friction between employers and employees, and trust in the company is an important productivity booster.
2. Employees are empowered to self-evaluate
Knowing how salaries are structured and who makes what for which responsibilities, enables employees to better manage their own career paths within a company (and outside of it, too). If you see that you are doing more than your colleagues, while getting paid the same, you can make demands to improve your position in the company. Conversely, if you’re underperforming, you can easily benchmark work goals by comparing with your peers.
Self-evaluation is an intrinsic motivator that will help boost productivity company-wide, as people have a reason to work harder, which is our next point.
3. People work harder
People work harder when they know the rules of the game. Pay transparency helps give employees concrete goals to aim for. Instead of hoping to get promoted and get an additional abstract sum added to their wage, people can see that their manager or senior peers make X, and if they’d like to reach that level of remuneration, then they can achieve it by developing professionally.
Pay transparency can create healthy competition, dispel hierarchies, and orient the entire team towards a shared goal. That said, for this to work, pay transparency alone isn’t enough. It should also be accompanied by fair pay.
4. Combat the wage gap
The gender pay gap is real, the curbing of which is a fight that’s been ongoing for decades. While transparent salaries alone won’t be the thing that solves it, it will nonetheless be an important step in the right direction, by ensuring that people are paid for what they do not who they are. Publicly available salaries will make it easier to question the decisions behind them and any unfair inequalities will be quicker to identify.
In this day and age, being an equal opportunity employer is an important element that the workforce expects from their company, especially the younger generations. People increasingly want to work for honest and ethical companies and through pay transparency, you can position YOUR company to be in line with today’s values, attracting and retaining key workers.
5. Recruit more suitable candidates
Everyone has grown tired of having “competitive salary” in job ads. For employees, this means initiating an application that might be a complete waste of time. And since most job applications require considerable effort, the growing popular frustration with such practices is perfectly understandable.
For companies, posting the salaries in job ads can help recruit people that actually want to be there and are OK with the pay. This will allow you to avoid the expenses of processing candidates who disappear after realizing the pay doesn’t match their expectations.
The cons pay of transparency
Despite the many benefits, there are still a lot of nay-sayers to pay transparency. Employers are rightly worried that this will increase expenses as workers demand better pay. Wage transparency can also make it easier for competitors to poach your employees, as well as impose additional administratorial expenses, among other things.
Still, in the long term, the pay transparency pros outweigh the cons. A culture of transparency and productivity is one of the strongest things a company can have if it wants all of its employees to be dedicated and working towards a common goal. Sure, as mentioned earlier, pay transparency alone isn’t enough. It needs to go hand in hand with fair pay practices – you can’t have one without the other.