Humans have a tendency to share all the personal information from articles that they just read to their dinner photos. However, we become particular about sharing salary details even to a member of our family.
Sharing salary in the workplace can only turn natural if the employees are made to comprehend how workplace salary policy works and provides practical reasons why one is being paid less than others.
Small organizations may find salary transparency easy and beneficial; however, it can get tricky with the large organisations with plenty of employees and their merits.
Let us get some insight into the importance of salary transparency in the workplace.
1. Salary secrecy:
Salary secrecy has many downsides even though the company claims security and confidentiality with concealment of salary.
Inequality increases and employees turn more insecure when they do not understand the pay process and feel undervalued. It is beneficial for the companies as they can keep the employee salaries as low as possible.
However the company will not receive higher productivity from their employees.
2. The importance of salary transparency:
There has been an increased interest from both companies and employees regarding salary transparency.
Since advent of business’s practicing full transparency and laws supporting employee sharing their salaries plus the number of online articles debating the advent transparency has become important and heated discussion topic amongst company management.
3. Types of transparency:
There exist two types of transparency, one is processed transparency and second is full-salary transparency. In this employee salary transparency process, the public will be able to see the source, potential range of salary and how one can move up to that range.
In full salary transparency, each employee’s salary is made public.
4. Difficulties for employers:
At times it becomes tough for employers to make the employees understand why and how some employees are being paid more than others, with factors like performance and experience being difficult to quantify.
5. Formulas make people feel undervalued:
The skill set that a person holds will definitely be diverse from another person’s skill set, regardless of being in the same department.
Hence it is complicated when one formula is being utilized to check what each person’s value is. This formula can be utilized by small organizations, but it will be complex for the corporate world to use the same standard formula.
6. May discourage to go ‘above and beyond’:
If there are two employees in the same position, holding similar experience and qualifications and earning the same remuneration, when one will be given extra duties, he may feel discouraged to complete those extra duties.
The employee may feel no requirement for performing such requests with the same pay as his coworker and would ultimately feel resentful.
7. Transparency is permanent:
In today’s era, where people are sharing everything on social networking profiles and personal accounts, the company has to keep up with people disclosing information that used to be behind closed doors.
There are certain websites like glassdoor, payscale, etc that job seekers can access for information on a company’s culture, pay details, etc. Thus the organizations are now pressurized with transparency in all factors.
There have been conducted many research on the topic of salary transparency. Research on Psychology of employees and effects on company administration with pay transparency has been done. The results establish many reports and go as far as supporting the practice of salary transparency in organizations.
9. Buffer salary transparency example:
Transparency lies at the core of Buffer’s company culture. They shared revenues, user numbers, business performance and progress reports on its customer support. They even publish investor’s updates on their blog. Each employee of Buffer can calculate their salary through Buffer’s simple salary formula.
Buffer has effectively influenced the potential of employee wage transparency to overcome obstacles and barriers within and among teams.
10. Pay fairness:
Salary transparency helps to encourage pay fairness. The company becomes responsible for their actions, and it helps them to remain unbiased towards gender, race and orientation. When salaries are fair the workers tend to hold more trust in the company.
This would lead to higher employee engagement and overall successful outcome of the company.
11. Benefits potential employee:
It just not only eases the mind of current employees but also affects the mind of a prospective employee.
At the time of recruiting the person knows precisely what job and salary he is applying for, thus, reducing any pay negotiations that can arise. It even helps in maintaining fairness while recruiting.
12. Understanding salary differences:
The employers must make their employees understand the differences in salaries of each employee.
There must not be left any scope of confusion or unfairness on salary transparency, as it can have adverse effects. The employer must explain how the numbers are derived and where each employee stands.
By providing clear perspective of how the salaries are resulting followed by gaining employee trust, the salary transparency can prove to be effective.
13. Regular feedback:
When employees are consistently handed feedbacks on their work, they find their salary reasonable. If there is lack of communication, even the person who gets raise will feel insecure and undervalued.
Research has proved that the employees who find out that employee compensation of others is more than them, will tend to betray their company. Thus it is crucial to provide reasonable feedbacks.
14. Understand your company’s culture:
If your company is hiring millennial then salary transparency can be considered fine since the millennial are in the habit of sharing their personal information. However if your workforce consists of baby boomers, employee pay transparency can be perceived as invasion of their privacy.
15. Identify company’s purple squirrels:
An employee who has the right skills and experience, as well as education for a job position, is considered as a purple squirrel. These positions are unique and very difficult to be filled. From a salary transparency perspective these employees are highly compensated and so difficult to be disclosed.
However salary compensation can eliminate the possibility of not recognizing the value and contribution of a purple squirrel.
16. Higher productivity:
Research has established that employees under salary transparency were more efficient than employees having no access to salary details. Transparency seems to breed fairness and promotes trust among the employee and employer.
17. Reevaluation of pay scale:
There are organisations that may get worried about salary transparency. In such cases reevaluation is necessary to be fair and avoid loopholes. When company is worried that their employees will be unhappy then it calls for immediate pay scale reevaluation.
18. Increases female applicants:
Workplace salary transparency will help in increased number of female applicants. Research has established that salary transparency can close the negotiation gap in salaries between men and women, which causes women to negotiate over salary similar to their male counterparts.
19. Decreases unemployment spells:
When employee’s knowledge is increased over salaries, it prevents drop-outs of a workforce and discouraged employees, more than the programs for retaining employees. This is very beneficial to the company.
20. Discourages raised executive salaries:
When executive’s salaries are known by the public, the employees start feeling relaxed and know they are not being kept in dark regarding how the company’s revenues are being shared up.
There is no doubt that the executive’s pay is going to be more than the people working under him, however the point is that the executive’s willingness to share his earning will display employees that he has got nothing to hide.
21. Encourages higher productivity:
When an entry-level employee will know how much his supervisor earns, he will become motivated to work hard and reach that level. When employees know that they will earn a particular amount after earning a position, it will cultivate ambitious and hard working employees.
22. Locating a middle ground:
If a company is not quite for complete salary transparency, however, wants to enjoy the benefits that it brings, they can give aggregated salary information.
Instead of disclosing each person’s exact digits, the company could reveal a salary range or median for a particular job title and its responsibility in the firm. The middle ground system will help people to perceive their potential salaries in their respective careers and would understand how the salary is going to be derived.
The good points are more powerful in comparison with bad points and all comes down to how an organisation handles pay transparency. There will be prospects for better job matches, more pay fairness, increase in diverse applicants, less unemployment spells and equality in pay, if pay transparency is adopted.
The number of research that has been conducted proves that salary transparency is good news with better productivity to an organisation, improved careers for job hunters and overall brighter vision for the prospective economy.