Pay transparency has been a hot topic in recent years. While many employers believe that it could shift power away from those in charge, experts suggest that being more open about pay could facilitate more equal work environments and improve retention. In this article, we consider if salary should be kept a secret or whether it's time to embrace transparency.
What is pay transparency?
Pay transparency (also referred to as wage transparency or salary transparency) refers to a strategy in which employers communicate about pay practices and how salaries are determined within the organization. Many experts regard wage transparency as a critical step towards closing the gender pay gap and view it as a way to build trust among employees and create a culture of openness.
However, salary transparency can be interpreted in different ways. For some employers, it may mean offering full transparency around salaries for every role, while for others it can mean having proactive conversations to identify discrepancies. Ultimately, the objective of pay transparency is to provide employees with a better understanding of why they earn what they do, leading to a more trusting work environment.
Where some companies are making the decision to implement wage transparency of their own accord, in some states across the US it’s a legal requirement.
For instance, changes to Washington’s Equal Pay and Opportunities Act that came into effect at the beginning of 2023 require businesses with at least 15 employees to make the salary range a part of all job postings. California, Connecticut, Maryland, Nevada and Rhode Island also have laws in place requiring this. In Colorado, the Equal Pay for Equal Work Act prevents gender-based wage discrimination and demands that they include salary ranges and benefits in job listings.
How employees feel about pay transparency
Although it’s up to individual employees to determine how salary transparency should be implemented within their company, the statistics show that modern employees are in favor of the strategy.
According to a 2022 report from Beqom, 60% of US employees would consider switching companies to one that offered more wage transparency and 79% said they’d be more likely to apply for a role if the job description included a salary range. Furthermore, over a third (37%) of workers surveyed said their companies do not share gender pay gap data internally or externally.
Research has shown that there’s a clear generational gap when it comes to comfortability with discussing money in the workplace. In Visier’s Pay Transparency Pulse Report, 53% of baby boomers said they’d feel comfortable or somewhat comfortable doing so, compared with 89% of Gen Z respondents.
Advantages of pay transparency
Here’s an overview of some of the main advantages that wage transparency offers.
Promotes pay equity
It’s common knowledge that women are paid less than men on average, but that doesn’t mean it should be accepted. Wage transparency promotes pay equity by providing workers with the information they need to negotiate salary rates and the means to challenge discrimination.
Attracts more candidates
Applying for jobs takes a lot of time and effort. Candidates are much more likely to apply for a role if the salary is clearly defined in the job description so they know they aren’t wasting their time. In fact, 92% of workers support wage transparency laws and estimated compensation is prioritized as the most important piece of information when searching and applying for jobs.
The majority (91%) of employees who believe their organization is transparent about their salary decisions also say that they trust that their employers embrace wage equity. This is important considering that when employees perceive a pay gap it decreases intent to stay by 16%. Furthermore, wage transparency helps companies to build trust, as when employees know they make a fair salary they’re more likely to be satisfied with their job and more productive at work.
Best practices for embracing pay transparency
Transparency doesn’t have to mean simply publishing payroll information for everyone to see. Here are three best practices for implementing a wage transparency strategy within your organization.
1. Conduct a pay equity audit
One of the main reasons employers are hesitant to embrace wage transparency is that it may reveal gaps in wages among employees. But as pay equity laws strengthen and job seeker demand grows, it’s no longer avoidable.
The solution is to find these discrepancies and fix them by conducting a pay equity audit. To do this, follow these steps:
- Collect employee data: Gather information on employees’ job titles, hire dates, compensation details and demographic data such as age and gender to create a comprehensive dataset.
- Group employees with similar roles: Identify jobs that require similar skills, responsibilities and working conditions.
- Identify discrepancies: Find any outliers and pinpoint any legitimate control factors such as training, background and education. Make sure you can provide reasons why one worker’s salary may be different from another’s.
- Correct pay gaps: Make any adjustments in compensation by offering raises to those who are earning less without any reason.
2. Leverage data to define salary ranges
To promote pay equity, salaries within your organization should be defined using data. Outline salary bands for different levels and roles to create an objective framework based on values like experience, education and performance. This will help your wage transparency efforts as every candidate and employee will have access to a clear range of compensation for their role and routes of progression.
3. Ensure managers and employees are prepared to discuss salary transparency
Research shows that 61% of managers are not prepared to effectively communicate wage information with employees. It’s therefore important to have an effective pay transparency communication strategy in place. Create a guide for managers to follow that outlines how to talk about:
- How salaries are determined
- How incentives such as bonuses are calculated
- What an employee needs to do to achieve a pay rise
It’s also crucial to ensure employees know who they can talk to if they need to raise an equity complaint or if they need to ask any additional questions.
It’s time for forward-thinking organizations to embrace wage transparency
It’s clear that employees are demanding more salary transparency from the companies they engage with. In being more transparent, employers can cultivate trust, improve the employee experience and boost retention, all while championing workforce equity. From disclosing salaries in job listings to providing employees with more information about how wage decisions are made, there are many ways organizations can embrace pay transparency in the modern workplace.