Use Pay Transparency to Build Trust
Do your employees trust you? Perhaps even more importantly, do job hunters trust you? Common sense suggests a company with a reputation for honesty, transparency, and ethical behavior is likelier to attract and keep high quality talent than one known for being secretive, paranoid, and amoral.
Research bears this truth out.
A 2023 survey by online career platform iHire shows most new job seekers are looking for companies known for honesty, transparency, and flexibility. Similarly, a recent survey by the talent management company Software Advice found the most important qualities that potential applicants seek in a new employer are “honesty and transparency.” Sure, everyone is looking for a good salary. But money only means so much when you don’t trust the very company you work for!
One of the easiest ways to build trust with your workforce is through pay transparency. But what is “pay transparency”? You’ll find a variety of definitions online, but the electronic payroll service Paychex describes it quite well: “Pay transparency is the practice of openly and proactively sharing information on organizational compensation practices, including pay rates for specific positions, pay increases, bonuses or commission structures, benefits, retirement plans, or any other specifics about pay. This information may be shared voluntarily on a company's website, in job listings, or upon request, although pay transparency may be required under certain circumstances in specific jurisdictions.”
At present, practicing pay transparency is the law in fifteen states. This select group includes California, Colorado, Delaware, Hawaii, Illinois, Massachusetts, Minnesota, Nevada, New Jersey, New York, and Washington state. In these states, employers must post salary ranges when posting job openings. (These are base salaries, not including bonuses and other compensation.) In Connecticut, Maryland, and Rhode Island ranges must be disclosed upon request.
In addition, it is now unlawful in all states for companies to prohibit or otherwise punish employees for discussing their salaries, according to the National Labor Relations Board (NLRB). This is in sharp contrast to how pay was handled in the past, when discussing salaries and pay rates with coworkers was often a fire-able offense.
Even if your company is not located or headquartered in a state with pay transparency laws, sharing salary range information as part of job postings, providing pay range data when employees ask, and educating employees on how their pay is determined are practices worth embracing. If your company has many branches or employs remote workers, determining who can and cannot legally discuss compensation based upon local laws and regulations becomes a major headache.
Perhaps most importantly, when employees can better understand why they are paid at the level they are—even if their salary is lower than an immediate co- worker’s—they are more willing to accept their status and not demand more. And finally, as discussed above, a company that practices pay transparency is more likely to be viewed by job hunters as an in-demand place they want to work—compared to one that does not.
Zooming out, as discussed at length in a January 2024 article published by SHRM, pay transparency has the added benefit of helping to close the gender gap suffered by so many working women. It points to a study published in 2022 in which researchers examined the effect of university pay transparency rules on 100,000 U.S. academics and found “evidence that pay transparency causes significant increases in both the equity and equality of pay [between the sexes].”
Certainly, implementing pay transparency practices is not inherently difficult, but it does require effort. Steps you can take include:
Ensure you are treating employees and external job candidates the same with respect to sharing salary range information.
Train your managers so they are comfortable explaining your organization's pay practices to employees. This includes describing how pay decisions are made and why individual incumbents, when they ask, make what they do.
Use pay transparency to build trust amongst staff. Implementing pay transparency should be a “win” for both employers and employees alike. Leadership messaging that makes it clear to employees that you have nothing to hide with respect to pay practices, and backing up that messaging with action, can help garner greater trust in leadership at your company.
For more help on implementing the best pay transparency practices at your organization, and to make pay transparency a “win” for your culture, please contact laura@conoverconsulting.coming.com. As a corporate culture and compensation specialist, I can support your organization in getting the best talent by embracing the best business practices.
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