Latest from HRi
Why Pay Transparency can be good for both employers and employees
Pay transparency has become one of the biggest topics in the workplace and for businesses.
These two words ‘pay transparency’ still cause a lot of nervousness for most employers. For a long time, it has been forbidden to discuss pay among colleagues. Two people could be doing the same jobs but will have no idea what they earn. This is because some employers traditionally request and expect employees to keep their salaries confidential. Some employees also find it difficult to broach the subject with their colleagues. A recent report based on 500 businesses in the UK and over 50 countries globally showed that only 24% of companies published their pay ranges.
Pay transparency has become one of the biggest topics in the workplace and for businesses. Transparency, accountability, communication and engagement are all values that employees today expect from their employers. Pay transparency is about being open when talking about employee pay in a company although strategies for discussion can vary. But salary transparency often includes the internal and external publication of pay ranges for roles. And creating a workplace culture where employees are encouraged to talk freely about pay.
Why salary transparency is important
Generally, transparency is key to building trust in the workplace. It is also fundamental to well-being, engagement and productivity. Pay transparency is also essential to overcoming pay gaps within organisations. This includes the gender pay gap, racial equity and disability pay gap. Salary transparency underpins the Equality Act. There can also be legal implications for failure to meet relevant transparency compliance standards.
Salary transparency also facilitates attracting and retaining talent. PayScale reported if the process is not transparent, employees particularly younger employees, may be more likely to leave a company within six months.
Benefits of pay transparency
Salary transparency can facilitate employers to improve employee engagement, productivity, and employee well-being. It can also help to attract and retain talent. Research into pay transparency conducted by Talent.com found that 78% of jobs seekers in England believe that salary transparency is a good thing. 74% argued that it creates a fairer environment for both the worker and their colleagues. Glassdoor also found in their research that three-quarters would be more likely to apply for a role that included a salary range.
It is also believed that salary transparency will help advance diversity in organisations. McKinsey’s Diversity Wins report shows there is a direct correlation between a diverse executive team and business financial performance.
Pay transparency for the employee would mean the individual will know how their compensation model works. This will enable them to evaluate how they can make more money and what their hard work translates to giving them control of their financial well-being.
Salary transparency as part of an open culture also allows employees to feel valued, fairly compensated and motivated resulting in job satisfaction.
Why pay transparency is challenging
Pay transparency is challenging from the onset of the employment cycle. From recruitment, onboarding, and retention to exiting people from businesses. Job adverts to attract talent are not always transparent about the pay for the roles. Some job adverts do not declare what they are paying for the roles. Others give a broad salary range where the variance between the low-end and high-end are huge. For example, a salary range of £75K to £110K. The variance is justified by the experience the person has. Some employers also at the recruitment stage make offers based on what the employee was earning in their previous roles. Once employees come on board and demonstrate their value to the employer, it does not always translate to deserving pay for the role.
The pay gap may widen due to several factors such as maternity leave, disability, care responsibilities, gender and race. Due to the lack of pay transparency, the gap can get bigger and worse. It can lead to animosity among colleagues. Pay transparency creates an open, fair and trusting environment. This is also supported by the research conducted by Talent.com mentioned earlier.
Many employers who declare themselves as equal opportunities employers still have a lot of work to do to achieve equal pay in the workplace. They still struggle to be fully transparent with their employees about pay.
Improving salary transparency
Total pay transparency will involve being transparent about the earnings of all employees. It will mean having a transparent pay and remuneration policy that is clear, consistent and commensurate with the role the employee performs and the value they bring to your organisation. Pay transparency means that when it comes to annual reviews and promotions, due consideration is given to the role, not the person in the role. For example, if the performance of the employee warrants a 10% salary increase, you award the 10% increase. You do not award 2% because of their gender, race, disability, etc. Or, you do not award a lower percentage just because you can get away with doing so.
Balancing pay inequalities can be hard for employers and can be costly. However, if managed properly, it can lead to a more productive, engaging, inclusive and happier workforce. Forbes reported that ComplyAdvantage, a London-based provider of anti-money laundering technology has seen an uplift in engagement. This is a result of its commitment to pay transparency.
Tips for improving pay transparency in your workplace
- Include salary in the job advert.
- Paying employees their worth.
- Encouraging employees to discuss pay.
- Creating an open environment where employees feel free and able to discuss their pay.
- Designing and implementing fair pay policies.
- Communicating your approach to pay and your policy to your employees.
- In addition to compulsory legal compliance to reporting such as gender pay reporting where required, take a proactive approach in reviewing and reporting on pay gaps.
- Take positive steps to bridge the gaps.
- Research roles to understand the salaries that those roles earn.
- Know their worth.
- Speak to their colleagues about their salaries.
- Speak to their employers if they believe they are underpaid or are not being paid fairly.
If you are considering implementing pay transparency in your workplace and are seeking assistance, we can help you source an HRi accredited HR consultant to work with your business.
Author: Mary Asante, Director