For all the issues of modern corporate culture, salary transparency has proven perhaps the most resilient over the last few years. In spite of all the changes to the workplace, the demand for employers to come clean about compensation remains on a low simmer. And yet, a majority of businesses still fail to see the value.
On the face of it, salary transparency looks like an own goal to leaders who would force themselves into the position of increasing rates for underpaid staff and promising new hires more than they might otherwise be willing to accept. Do not read too much into the cynicism of this argument: if wages cost 40-65% of a company’s expenditure, it seems the most natural thing to cut in order to ensure long term sustainability.
Only it doesn’t. Opaqueness around pay contributes to a much deeper hole of inefficiency in hiring and staff retention that will go overlooked so long as employers are willing to brush the issue under the carpet.
When companies do embrace salary transparency, it forces a complete rethink of internal structuring and culture. In order to sustain such a system, employers are pushed to demarcate roles and pay bands more clearly, starting with a decisive assessment of the value each employee adds to the company.
This process is painful but worthwhile. When the open secret of pay is finally brought to the fore, employers must own the conversation, grouping staff by merit and spelling out clear paths for progression internally. The consequence of a company-wide value assessment is that staff are paid according to output alone and not how strong they are at negotiating or other factors irrelevant to value. This creates a fairer and more meritocratic environment in which an employee without a university degree who does twice the work as an employee with one is compensated proportionally to what they add to the team – and nothing else.
Reaching this stage requires a cultural shift towards understanding the hard metrics driving your company forward. This creates the incentive for all teams to coordinate and work towards shared objectives, communicating values of meritocracy and purpose through all strata of the workforce. It also means that typically undervalued jobs are rewarded appropriately so long as their output is deserving, and the prejudices favouring certain roles or skill-sets defer to merit. We know, for instance, that women are less likely to push for a raise, contributing to the gender pay gap; pay transparency negates this: nobody should need to ask if they are worth more when the metrics are on full show.
Of course, this is a challenge. Some roles have a harder time articulating ROI than others. Some individuals offer more to the team than the progress they make on their KPIs. What salary transparency invites is due reflection on the value of those additions, perhaps factoring in success metrics previously ignored in reporting. With varied data pooled on what makes a company tick, recruiters will be well positioned to hire based on more than a cursory look over a resume. As machine learning and predictive analytics become an increasingly commonplace feature of human resources, teams will be in a better position to scan for the variables that matter, attracting talent to the right role and pay grade and, as a result, offering the appropriate compensation needed in order to retain personnel.
The case for pay transparency goes far beyond hushing internal conflicts between staff. Towards making the workplace a fairer and more efficient environment, transparency forces employers to reflect thoroughly on the value of certain roles and to undergo an internal assessment of what fundamentally matters to their business.
It is only through these processes and by ratifying them in policy that leaders can make a total shift towards efficiency and fair pay. While the conservative perspective might be that more money is saved by concealing pay differences, the companies that promote transparency will be those who know they are paying staff proportionally to what they are worth – not more and not less – and that they can reward staff with linear progression if and when their value shoots up – not before and not after -, ultimately attracting and retaining top talent.
This is more crucial than ever. Last year, DARE Worldwide surveyed 1,000 respondents in mid-sized to large companies and found a number of harrowing trends. Two in three employees today feel their employers do not effectively implement their organisation’s purpose – a concern that will contribute to the Great Resignation as staff resign in droves in favour of more meaningful work.
To rejoin this and to hold onto talent, employers must find a way to articulate value across the organisation and to show each employee their role in contributing to a greater end. Publicly communicating value, rewarding merit and carving out a clear progression path for staff – especially having recently witnessed careers stall through the pandemic – will help valuable employees feel their worth and understand what is needed for better remuneration. These quirks of culture will differentiate those who can retain staff from those who cannot.
Salary transparency is not a gimmick afforded only to small teams with flat hierarchies and limited hiring capacity. Truly, it represents a total cultural shift towards efficiency, defining and rewarding merit and making decisive cuts where appropriate to teams not operating as well as they could. Transparency is the most immediate change businesses can enact to make their work more fair, more fulfilling and more efficient, and leaders must expect it to feature prominently in the sustainable workplace of tomorrow.