The Permanence of Pay Transparency: Navigating the New Normal

Whenever the topic pf pay transparency comes up, you can visibly see the hope that it’s a fad that will go away, or at least something we can delay as long as possible, forever if we can. Not a favorite topic among the Rewards community, mostly on the assumption that it creates more problems that it solves. As is often the case, these assumptions have no data from your own company to back them up. Let’s think about this a bit. For full disclosure, I have tried it and, at least in the case I applied it, it worked. But more on that later. First, let’s define what we mean by “Pay Transparency.” 

Based on Peter Bamberger's book "Exposing Pay: Pay Transparency and What It Means for Employees, Employers and Public Policy," the concept of pay transparency is evolving and gaining importance in modern workplace dynamics. The book provides insights into three distinct types of pay transparency, each with its own implications and considerations for employers and employees.

1. Pay Process Transparency: This involves providing employees with extensive information about how organizational decision-makers determine levels of base pay, benefits, pay raises, and incentive pay. It is generally seen as beneficial by both labor and management, with few negative consequences. This form of transparency enhances fairness perceptions and is associated with job satisfaction, trust, and organizational commitment.

In one case, a company provided access to the salary surveys the company uses to determine compensation to any staff that requested it, in an effort to answer the questions about pay competitiveness that often occur when employees hear of others that have left for higher pay.

2. Pay Communication Transparency: Refers to the extent to which employers allow employees to discuss pay-related matters freely. Legal protections in various jurisdictions support this type of transparency. It is important for employees to have the freedom to discuss their pay without facing repercussions, as it can lead to more informed and fair compensation practices.

In this line of thinking, disclosing salary structures and bonus targets allows for conversations based on data rather than hearsay. 

3. Pay Outcome Transparency: This is the most controversial form and involves the disclosure of actual pay levels. While it can facilitate social comparison and monitoring (beneficial for detecting pay discrepancies), it also raises privacy concerns and, if the pay system is not robust, lead to negative outcomes like envy and reduced collaboration.

There are examples of companies that share this level of information for sales teams and the like. If the system is robust, this can lead to increased performance of those that find themselves in the boundaries between one pay level and the next. 

If you want to test the notion of pay transparency in your organization, be sure to remain aware of the balance between being transparent about pay practices and respecting individual privacy.

Aggregate disclosures, such as average or median salaries for roles, can be a practical approach.

Also, remain aware of the legal framework surrounding pay transparency in your jurisdiction.

Different locations have varying regulations and cultural norms regarding pay discussions.

Following the principles of change management, emphasize clear, two-way communication about pay structures and policies with your staff. You should train line managers to discuss pay effectively with their teams. This communication should include clarity around how transparency fits the overall values and strategy of the organization.

Most importantly, have a goal to support the implementation of pay transparency, and monitor the impact. Did it help to improve employee satisfaction, retention, and/or company performance?

Why is it here to stay? There is of course the fact that legislations are adopting it and it may become mandated in your jurisdiction soon.

But that is not the only reason. The notion that employees don’t share this information, despite all our warnings about confidentiality, is misguided. Furthermore, data is readily available in job portals and glassdoor, plus on the many places where you can find data on the internet. Thus, when we hide the data, we give even more encouragement to these secondary and not-as-accurate sources to do so for us. 

Perhaps the best reason is that sharing data, at least to the second level in Bamberger’s definition, can yield positive results. As in all other things, the suggestion is that you test with your own data. 

The following story is here more as inspiration for you to do your own experiment. In a recent article published in Channel News Asia (https://www.channelnewsasia.com/commentary/should-singapore-workplace-embrace-pay-salary-transparency-jobs-guide-3541986), the point is made that in Singapore, the Social Services sector publishes its salary guidelines in the internet, so that all sector employees and prospective employees can see them. This was done to help all agencies recruit and retain staff. And the results were increased attraction and retention indeed. 

Pay transparency is a new trend that requires careful implementation and consideration of various stakeholders' interests. By embracing transparency, organizations can foster a more equitable, motivating, and trustful work environment. This approach aligns well with modern work dynamics and expectations, representing a significant aspect of the future of pay.