Transparency is something that many employees and candidates value in the workplace. About 96% of job seekers say it’s essential that companies embrace transparency.
But what about when it comes to being open about pay and salary information? A 2019 LinkedIn Global Talent Trends report found that one of the four trends transforming the workplace is pay transparency. In addition, according to a Glassdoor survey, employees want more salary transparency, with 70% of respondents believing openness is good for employee satisfaction.
Publicly revealing pay discrepancies can help start conversations regarding pay equity and showcase instances of wage inconsistencies. Therefore, when a company is transparent about its pay, it creates a sense of fairness and equity that can benefit its employer brand.
Employees want pay transparency from employers, and if organizations want to help attract and retain talent, having fair pay policies is crucial. If a business is transparent, it can help reduce misinformation that can negatively impact morale. When businesses list salaries, applicants may view the company as honest, transparent, and fair. This can help attract more talent to these organizations.
Several companies have successfully implemented pay transparency into their brand. An example is the social media software company Buffer, which has an extreme transparency policy in place, with information on salaries, raises, and company finances public for all employees to see. As a result, it has earned a reputation for its trusting culture and transparency.
Similarly, the tech firm Verve moved to pay openness in 2018 and allowed their employees to access the salaries of their bosses, coworkers, and CEO. As a result, it helped reduce bias and promote diversity in the company.
Verve CEO Callum Negus-Fancey told Forbes, “Pay transparency helps attract a more diverse workforce. People join organizations based on what they do, not what they say. They want to see tangible proof that your company encourages diversity.” Verve has an almost 50% female workforce.
Generally, job ads posted with pay information get more applicants. A study on "Wages, Job Queues, and Skills" found that jobs with posted salaries receive 7.8% more applications than those without the data.
For example, when Buffer publicized its employees’ wages, the number of applications skyrocketed, from 1,263 applications in one month to 2,886 within the 30 days after it revealed salaries. With an influx of applications, organizations may have a higher possibility of finding the right candidate. However, it’s worth noting that the same "Wages, Job Queues, and Skills" study found no correlation between pay transparency in job postings and applicant quality.
Businesses that are honest about pay can help foster trust and a better workplace environment. On the other hand, workers who feel uninformed may lose faith in their managers and coworkers. Transparency regarding wages can help with retention.
A report by Beqom found that employees simply believing there’s a pay gap, whether or not it’s true, can result in a 16% decrease in the desire to stay at the company. The same report found that 58% of respondents would consider switching jobs for pay transparency. Therefore, the need for transparency is even more critical to maintain talent.
Many employees value equitable pay policies, and they want to know the system is fair. Payment transparency establishes trust in pay practices and eliminates any noise around how compensation is determined. This level of honesty helps create a more open and trusting environment where employees can feel as though their efforts are recognized.
Pay transparency can help ensure fair pay across gender, race, and other demographics, creating a trusting relationship with all employees. When everyone’s salary is visible, there’s an onus on the organization to justify each employee’s salary, essentially decreasing or eliminating any bias or forcing organizations to adjust their compensations.
The idea of salary transparency to bridge the pay gap had resulted in a new employment labor law in Colorado. Called the Equal Pay for Equal Work Act, this legislature requires all companies to disclose salary ranges in job advertisements.
According to Monster, 72% of employers surveyed believe that revealing pay is good for business because it can increase trust, reduce misinformation, and help employees make informed decisions. In addition, an organization with transparent compensation as part of its culture and brand can help attract applicants that value that type of honesty.
As much as pay transparency can benefit a business’s brand and culture, there are some drawbacks. For example, posting salary ranges in jobs may cause qualified candidates who want higher compensation to not respond to the ad. Also, pay transparency may not be ideal for organizations willing to go higher than the posted salary range.
Organizations may also hesitate posting wages as it may cause some employees to be upset, particularly if they become unhappy seeing what others earn. Similarly, posting salaries in the workplace may cause competition and jealousy. Some staff may wonder why certain colleagues make more than them, which may provoke hostility and resentment.
Pay transparency appears to be the future of recruiting, especially with the popularity of salary information websites. Candidates want to make informed choices, which include seeing wage numbers before applying to jobs. Organizations should keep up with this “trend” to prevent losing out to competitors who are open to unmasked compensation and become companies that value transparency and fairness.
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