The brilliance of pay transparency

16th May 2024

Samantha Gee

Pay transparency is a priority for many organisations right now, but is this for the right reasons?

With the impending EU Directive mandating pay transparency from 2026, and the ever-increasing transparency legislation in the US, many organisations are having to get their pay into a good place fairly swiftly.

But looking at pay transparency as merely a compliance exercise is missing a very big point.

Every now and again in the reward world something comes along that is seriously brilliant. Like a few years back when progressive organisations realised the massive impact recognition could have on employee engagement. For very little cost. Brilliant!

Well, today’s progressive organisations are reaping the benefits of pay transparency. I’m not talking about publishing everyone’s pay. More about having clear pay foundations, making consistent decisions that employees trust, and communicating pay in a way that employees understand.

So, what is so brilliant about pay transparency?

It improves employee engagement. The Glassdoor Global Salary Transparency survey showed 70% of businesses see pay transparency as good for employee satisfaction. When an individual understands how their pay is set, they are more likely to trust it is fair, and trust matters when it comes to engagement.
It combats discrimination. Justifying pay to employees will create accountability and makes it easier to notice disparities. This will inevitably lead to more objective and evidence-based decisions. No surprise the Government’s series on how to improve gender equality includes a guide on transparent progression and reward.
It enhances reputation. Demonstrating pay transparency shows a clear commitment to equality. In fact, 48% of 18-35 year olds have a negative perception of a company that doesn’t post the salary in their job ads(Reed).
It attracts talent. A recent Gartner study showed that 64% of candidates are more likely to apply to a job that lists compensation in the description, and nearly half of candidates in a 12 month period decided not to apply to a job because it did not include salary information.
It delivers a better candidate experience. Salary is a key factor when deciding if a job is right and more applicants will apply for a job with salary ranges (Reed). Nearly 90% of candidates who exit the hiring process do so due to at least one mismatch in the employee value proposition, including compensation (Gartner).
It improves retention. When something is kept ‘secret’, it’s human nature to expect the worst. A Payscale study found that how people perceive their pay often matters more than what they’re actually paid, the more information they have the less likely they are to quit”. With more than half of employed adults believing they must switch companies to obtain a meaningful change in pay, it’s worth being absolutely clear on how pay can be progressed internally.
It’s what employees want. Being treated well is an essential part of today’s employee deal. This means having open and honest ‘adult to adult’ conversations about emotive issues such as pay. Glassdoor found that 69% of employees wish they had had a better understanding of what fair pay is for their role and skills and only a third feel that their pay is fair”.
It puts you in control of your narrative. Whether you publish pay ranges or not, pay details are being shared in the public domain including through popular sites such as Glassdoor and Payscale. By communicating what drives pay in your organisation, and the systems you have in place to ensure decisions are consistent and equitable, you can take control of the messages and explain the context behind pay decisions.
It’s progressive. Strong pay governance and transparency aligns UK organisations with good practice from a global perspective, creating a platform to compete.

There’s certainly some groundwork to do to ensure you have a clear pay strategy and the appropriate frameworks in place, and to address any inequities. But the sooner this is done, the sooner you can address any unfairness and reap the benefits of more transparent pay.

What are you waiting for?

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If you’d like help with your pay and reward strategy, or preparing for pay transparency, please do get in touch for an initial conversation.

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