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Should You Experiment With Transparent Compensation?

Should You Experiment With Transparent Compensation?

By Mark Swartz

 

Salary secrecy is under siege. For years employees have been able to visit compensation databases online, such as Monster.ca’s Salary Wizard. These tools offer free glimpses into what people get paid based on their job, locale and experience.

The latest innovation in salary sites is input from actual staff about their employer. These details can be quite specific and revealing.

This trend has put pressure on companies to adopt transparent compensation. But does it help to inform all your workers about what everyone else there makes?

 

Secrecy Is Still the Norm

The majority of employers have stuck with traditionally opaque pay disclosure. They may publish pay bands for each position within their organization. But what a particular person makes remains confidential to others – unless that person shares their info.

Internally published salaries have become commonplace in Canada’s public sector. Such disclosure laws apply to numerous jurisdictions. Also many publicly traded companies must have pay transparency for senior executives. Start-ups and employers that mainly hire millennials are more prone to offer published pay.

 

A Majority of Employers Believe In It

More than 7 in 10 (72%) of employers surveyed in select countries globally view revealed pay as good for business. It can increase trust, reduce misinformation and help employees make appropriate job decisions. 

Conversations about comparative compensation help everyone understand the variety of skills and talents needed to make the company successful.

 

It Can Weed Out Undesirables

Existing staff will know where they stand in comparison to their peers. Lower paid individuals within a specific band can see they are under-earning. If those employees are reluctant or unable to improve their performance and move up the scale, they may elect to seek work elsewhere.

 

Recruitment Is Simplified

Job applicants who know upfront what pay to expect can govern themselves accordingly. Recruiters waste less time interviewing candidates who end up rejecting the offer because it’s too low, and there’s no getting bogged down in round after round of counter-offers.

From a culture-fit standpoint, transparent compensation attracts talent that appreciates this type of openness, and that is keen to work toward bettering their level of compensation.

 

Imparts a Sense Of Fairness And Openness

Open pay is part of a trustworthy company culture. Unfair pay practices tend to diminish quickly; a goal that sometimes eludes even employers that make serious efforts to treat equally all workers’ requests for raises.

A window is opened as well to meaningful conversations about pay and gender equity. Currently this country’s private-sector wage gap is around 20%: women earn 1/5th less than men do for a similar job.

 

Negatives for Employers

Transparent pay has its downsides too. In some ways it ties the hands of managers and recruiters. No exceptions can be made to internally published pay bands. That raises a risk of top talent refusing job offers, and of the best employees leaving for higher compensation.

Moreover when your staff knows what their peers earn, the level of infighting between colleagues or complaints about placement within pay bands can rise. Plus managers can’t hide that they’re penalizing a lower performer in terms of salary.

 

Does It Make Sense For Your Company?

Unmasked compensation is an opportunity to communicate the company culture and employer brand. However the benefits can only be realized if applied at all levels.

That can increase the burden on managers in other ways. There must be a clear and consistent system for ranking people within bands. Performance measures have to be outlined and monitored carefully. If not there will be calls of inequity.

Where employees tend to share compensation info between themselves anyway, being forthright with them from the start may provide a fairly unique recruiting advantage.