Salary transparency: Three reasons to disclose employee pay
Across many industries as well as social circles, salary remains a taboo subject, with some companies going to the extremes of banning employees from discussing pay, and others relying on the possibly outdated notion that discussing money is simply rude. The conversations that do take place are both secretive and vague, often including unrealistic or inflated figures, leading to distrust, and fuelling cynicism.
While average salaries have only marginally increased this year, the surge in opportunities when compared to 2020, means that the labour market has shifted in favour of candidates. As businesses recover from the effects of the pandemic, increasing wages to attract candidates may not be a possibility for all; however, being able to meet employees’ expectations of pay transparency is crucial to retain talent, promote fairness and continue to empower the workforce.
Here are the top three reasons why you should consider introducing salary transparency while advocating for workplace equality:
1. Boosting morale and efficiency
Many business leaders argue that pay transparency can boost morale and productivity, while discouraging nepotism and unjustifiable pay grades. Salary transparency pushes the employer to address any disparity. For many businesses, the simple act of going public is enough to re-evaluate their pay scale.
However, once everyone’s salary bands are common knowledge, it can potentially generate some animosity between colleagues. Another downside is that salary transparency can make it difficult for companies to keep costs down in pay negotiations.
2. Combating inequalities and pay gap
The lack of transparency continues to uphold systematic inequalities in wage gaps, especially among groups that are already at a disadvantage. The impact is particularly felt by women and members of minority groups who find they are paid less than white male counterparts. These groups generally face more challenges when negotiating pay, therefore feeding into the enduring wage gap.
In recent years, new studies have brought more clarity around best practice on salary transparency. Majority of the employees surveyed prefer a non-specific salary disclosure, where companies commit to revealing ranges or averages, as well as information about wage gaps rather than individual data. Furthermore, transparent environments promote wage equality. For example, in Denmark, the pay gap between men and women reduced significantly after the government mandate requiring mid-sized enterprises to share salary information.
3. Facilitating cultural shift towards transparency
The growing awareness of damaging effects of pay secrecy can contribute to a cultural shift. According to IWPR survey, Millennials and Gen Z employees are twice as likely as Baby Boomers to discuss money with their colleagues. While complete transparency may not be achievable, as workers’ pay is determined by many different factors, such as experience, qualifications or location, managers need to balance the benefits of closing the pay gap and boosting morale, against the effects on cost and solidarity.
As more people are proactively learning about their rights and challenging the culture of secrecy, growing public pressure on workplace equality ultimately gives employees more power and contributes to a more motivated and happier workforce.
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