Ryan Wong is an engineer-turned-CEO of Visier, a people analytics company.
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Maybe you’ve seen #ShareYourSalary trending. What started out as a hashtag will become the law in yet another U.S. state this fall.
As of November 1, New York employers will be required to post the maximum and minimum salary for roles. Advocates say the benefits are multifold: applicants know what’s on the table, employers save resources by interviewing only the candidates within their budget and salary transparency can help combat disparities in how people are paid.
But for employers, coming to terms with pay transparency isn’t always so easy. Here are some key obstacles and insights on how to overcome them.
Overcoming A Cultural Taboo
In American culture, talking about money has long been considered poor etiquette. Some employers have outlawed the topic completely in the workplace: Over half of U.S. workers are subject to pay secrecy.
The reasons for this taboo are complex, ranging from concerns around privacy to fears of sowing discord among coworkers. Nonetheless, new research shows that among employees themselves, pay transparency right now isn’t just a perk but a workplace essential.
The human resources analytics company I co-founded surveyed 1,000 workers and found that the majority of employees want some form of pay transparency, and 68% said they’d switch to a more transparent employer—even for the same wage.
For employers, it may well pay to start listening. The “Great Resignation” has made attracting and retaining top talent harder than ever. DEI efforts have rightly focused attention on pay disparities due to gender, race and other factors. Meanwhile, rising inflation has sparked the greatest wage increase in the U.S. since 2008, and remote work has brought questions of geographic-based pay to the fore.
Like it or not, the compensation conversation is changing, and companies unable to open up may well be left behind.
Transparency Isn’t One-Size-Fits-All
For companies exploring greater pay transparency, it’s worth bearing several key factors in mind. The first is that “transparency” isn’t a one-size-fits-all solution. It can mean different things in different contexts, and it should be tailored to the needs of your workforce.
For instance, our research shows that while it’s clear employees want some form of transparency, only 32% of workers said they wanted to see total transparency. Meanwhile, 89% of Gen-Zers say they’re at ease talking about pay, compared to just 53% of baby boomers.
In other words, finding the right degree of transparency around compensation is a balancing act. Too little transparency can mean losing top talent, whereas too much disclosure can alienate certain segments of your personnel. Above all, getting this right requires gauging your workforce’s expectations and what motivates them.
For some companies, it may be enough to post a salary range for each role that candidates and employees can view online. Some businesses may choose to go even further and outline their policies for determining compensation and raises. Social media management platform Buffer has made headlines for its radical transparency (paywall): The company publishes employee salaries online, including the CEO’s earnings.
Though Buffer’s approach may not work for everyone, transparency around pay is increasingly imperative across sectors and age groups. Yet there’s one critical step that must come before transparency: education.
Creating A Compensation Education System
Education in the context of pay transparency comes in two stages. First, businesses and their leaders need to educate themselves. It’s critical for companies to root their pay scales in concrete, actionable data. This is where far too many employers fall short, largely because the equation is complex. How much to weigh experience and education? What about pay for comparable roles at other companies? To what extent should geography factor in? How do you prioritize management versus individual contributors? Should roles be paid equally even though they solve different problems? Where do questions about DEI come into play?
This is something a simple spreadsheet can’t capture. Fortunately, increasingly sophisticated algorithms, powered by AI and machine learning, now offer a nuanced comparison between external sources and internal data to create a fair assessment of pay equity within the organization.
Once an equitable framework or model is developed, the next step is ensuring that employees themselves are educated. The greatest misstep that I see companies make is sharing salary information without providing adequate context—a surefire way to spread animosity and second-guessing. It’s important that employees have insight into the underlying thought process. Dedicated training sessions on how compensation decisions are made can give employees insight and give them a frame of reference.
These sessions also serve double duty—they bring the discussion of pay into the light and help shed lingering taboos. Our data revealed one in every 10 respondents had had a negative experience discussing pay with their employer. Women and younger workers, in particular, feel less knowledgeable about how compensation decisions are made and who makes them.
This can have a chilling effect that can backfire on employers: For example, research shows women are less likely to negotiate salary and are less successful when they do negotiate.
There is a critical caveat to this entire discussion: Pay isn’t everything. It’s just one of several levers, including a sense of purpose and day-to-day employee experience, that employers can move to attract and retain great teams.
Nonetheless, employers must remember how transparency (or lack thereof) impacts their workforce. Research suggests that more clarity around pay decisions and practices positively impacts retention, attraction and equity within an organization. The benefits ultimately flow in both directions—empowering employees while putting employers in a better position to succeed.
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