Pay Transparency

Any company that seeks to take care of its bottom line (i.e. every company) knows how important it is to make decisions based on the numbers. Employees are expected to provide data to prove the efficacy of their time and effort, and management expects faithful reporting in order to keep their business growing. But if you reverse the flow of information, that call for data and clarity in numbers disappears. When it’s the employees asking for pay transparency to prove how they and their colleagues are being compensated, communication from leadership suddenly becomes opaque.

In an age of leaked information, Glassdoor reviews and tell-all stories from ex-employees, companies are being forced to be more transparent with both their employees and their consumers in order to head-off bad press. But the vast majority of businesses hold tight to a culture of obscured salaries. It’s so common that, when companies opt for salary transparency, candidates see them as more progressive. And while it’s true that implementing pay transparency has its pros and cons, the positives are quickly outweighing the negatives, especially where candidate perception is concerned.

Transparency for Employee Engagement

A recent survey by Glassdoor shows that a considerable majority of employees want their employers to provide pay transparency, but more importantly, they want a better understanding of what factors are considered when their salaries are calculated. The question of “how much” is important, but the true key to using pay transparency as an employee engagement tool is the question of “why this much.” When employees trust that there is a process in place and agree that it’s fair, it drives confidence in their company. Creating a clear policy around pay scale also makes a company’s values clear. A direct connection between performance, experience and compensation also leads to employee empowerment, because when all the cards are on the table and the path is made clear, employees have an easier time focusing on the skills needed to reach career goals.

Pay Transparency as a Recruitment Tool

Not only is clear performance-driven compensation and salary disclosure a means to boost confidence in an existing workforce, it also has a unique impact on recruitment practices. As previously mentioned, a company that steps out of the shadows of an aging business practice is seen as more progressive to a Millennial candidate pool that thrives on innovation. But pay transparency can also make the logistics of the recruiting process can go more smoothly. Including a base salary in a job listing quickly weeds out applicants who would go through the entire interview process only to turn down an offer that was considerably lower than their expectations. After all, a candidate only has to do a quick search on sites like PayScale.com to know their market value. Without mystery surrounding the process, recruiters can communicate to interviewees more effectively, and the stress that candidates face when negotiating salary is alleviated.

One Less Obstacle in Diversity Recruitment 

One of the biggest issues in gender, race and orientation discrimination is that of the pay gap. An obvious first step to safeguarding against unfair pay discrimination is to make employee salaries common company knowledge. Diverse candidates are more likely to join a workforce if they are confident that their employers are treating them equally. Knowing that they can compare their salaries with that of their coworkers can be a much needed relief from discriminatory practices that diverse candidates have faced throughout their careers. Considering the fact that federal contractors are required to report salary data by race and gender, and the likelihood of policy to continue closing the pay gap, creating a salary transparency plan may be considered strategic positioning for a company’s future.

Picking the Right Approach to Transparency

For a company that’s just getting off the ground, it’s easier to begin with a policy of transparency than it is for an existing company to suddenly throw open its doors. Salary is an emotional topic that some people attach to their self-worth, and having it announced to the world can be jarring. For that reason alone, salary transparency should be approached with consideration and care. There are variations on a transparency strategy, such as providing a pay scale policy and a salary calculator based on that policy. For example, Buffer has an online salary calculator that shows candidates what they would be making if they worked there. It may also help to express the values of non-salary benefits such as flexible work programs, paid time off or tuition reimbursement in order to convey a more holistic picture. Having an online employee database where salaries can be accessed is one way to offer this information without pushing it upon employees.

In any scenario where a company wishes to benefit from a transparent salary policy, there will likely be perceptions of unfairness, and companies must be prepared to address discrepancies. While some may be justified based on factors like market health, skill level and competition, others may be genuinely unfair and deserve attention, but will make a company stronger for addressing.

Olivia Landau lends expert knowledge and technical fluency on digital best practices, quality assurance, social media, knowledge sharing, email marketing, and popular internet culture.