29 Jul 2019

Is more transparency the answer to pay equality?

A definite cultural shift is taking place around pay transparency. Driven by legislation and technological advances, people are feeling more comfortable than ever to be open about pay. Websites like Glassdoor allow us to easily find information about salaries. Changes to legislation have brought pay disparity into the public domain; gender pay and CEO pay ratio reporting are just the beginning.

It also seems employees themselves are in favour of more transparency. A report published earlier this year by job site, Indeed, shows that more than half (56%) of UK workers want more pay transparency. Could making pay information transparent and available to all really drive pay equality?

What’s stopping businesses from embracing transparency?

While disclosing salaries to colleagues is an act of empowerment for individuals, doing so can be seen as subversive for the business. LinkedIn’s Global Talent Trends (2019) research shows that almost three-quarters of businesses don’t share salary ranges, and 51% of those are unlikely to start.

Unsurprisingly, the main reason for businesses to not share salary ranges is that it could create salary disputes – cited by 75%. Other concerns include that it could limit negotiation in recruitment, and that it’s not a common practice.

What can transparency bring to the table?

On the other hand, transparency could mean that businesses have improved awareness of pay equality issues, and employees can see where pay progression lies, motivating them to achieve their goals. Looking at how some forward-thinking companies are leading the way in taking a transparent approach to pay, can help us understand more of the benefits associated with pay transparency.

Verve

UK-based technology company, Verve, gives everyone in the organisation access to pay rates for all employees; from peers, to managers, to the CEO. The company found that employees were enthusiastic about the move to transparency. The company bases pay on two purely objective measures; market rates and job scope, which means they could provide fact-based arguments if employees questioned pay rates. The benefits Verve has seen include attracting a diverse workforce and streamlining their hiring process.

Buffer

Buffer also openly shares salaries. Like Verve, the business has a robust formula for working out an individual’s pay, which includes experience, market rate and cost of living. The change has seen the company receive an increase in job applications and employee feedback shows people are happy, because the salary formula means they can be confident that they’re being paid fairly.

Starbucks

Starbucks has made transparency a core element of their pay equality strategy. The company is open about salary ranges and, like Verve and Buffer, has a method to determine pay. In 2018, Starbucks announced that they had achieved 100% pay equity in the US and committed to do the same globally.

Driving transparency

If transparency is the right way to go for a business, then there are a few areas to consider. The first would be ensuring a consistent approach. Where businesses risk coming unstuck is by not being transparent all the way. Only being transparent about some areas will likely breed distrust, because it suggests there might be something to hide.

As well as consistency, having a clear narrative or rationale that explains the decision-making process behind setting pay is crucial. As shown by the examples above, a robust method for setting pay can help employees understand why they are paid what they are, and gives them reassurance and confidence that they’re paid fairly compared to their peers.

Understanding what employees want is also important. There will be some employees who won’t welcome increased openness. If this is the case, it’s worth thinking about how to effectively communicate the change, explaining how transparency can help individuals and the business.

While going public will be a daunting prospect, and perhaps not the right approach for all organisations, on balance, greater transparency around pay could be the way forward. It seems that without it, it can be too easy for businesses to be unaware of pay inequalities and not address them. So, for futureproofing pay strategies, organisations might want to consider how transparency can ensure robustness and consistency around pay.

This article is provided by Simplyhealth