Don’t fear pay transparency
“If your pay is so competitive, why not tell us what it is?”
If you have been near the web or LinkedIn recently, you are bound to have seen posts like that. Pay transparency is a topic of raging debate in the recruitment sector.
And it is not just spoiled-for-choice candidates putting pressure on employers to disclose salaries upfront. Governments and lawmakers are doing it too. Despite employees seeking improved working conditions, flexibility, and benefits post covid, pay transparency is the final bastion of equitable working. Broadcasting exactly what everyone earns still feels inconceivable. “The European Commission’s most recent data shows that the gender pay gap in the EU is 14.1 per cent and only diminishes at a snail’s pace,” says Christian Wigand, a spokesperson from the European Commission.
On International Women’s Day, the UK government announced a pilot scheme in which participating employers have to list salary details on job adverts and stop asking about salary history during the recruitment process. And Germany is a step ahead, with a law in place since 2017 entitling employees of companies with over 200 staff to know what their colleagues are earning.
Imposed salary transparency could help to dramatically reduce the gender pay gap, according to research by HEC Paris Business School. Researchers found that, over the course of two decades, radical transparency, whereby salaries of all of the participating 100,000 academics were posted online for universal access, reduced the gender pay gap by up to 50 per cent.
Yet many employers are still offering candidates “£competitive”. Is making the switch to pay transparency really a good idea? What are the risks and benefits if you decide to take the plunge?
Closing the gender pay gap
Pay transparency has been shown to impact gender pay gaps positively. Italy’s Code of Equal Opportunities Between Men and Women, introduced in 2006, mandated pay gap reporting every two years for companies with more than 100 employees. Italy now has one of Europe’s smallest pay gaps at only 4 per cent.
The new pilot scheme in the UK also aims to level the playing field for women. Studies show that listing a salary range on job adverts and not asking candidates to disclose their salary history enables women to negotiate pay on a fairer basis. If you are looking to close pay gaps in your own organisation or attract more talented women, pay transparency is a step you cannot afford to skip.
While we have all seen the headlines about candidates prioritising flexibility over salary, there is no doubt that money still talks. It is especially effective in catching the eye of individuals who are already quite happily employed but could be tempted by something that stands out to them; in other words, these quality candidates would otherwise need to be headhunted. Of course, this only works if your salary and benefits really are competitive, so do your benchmarking homework first.
And more benefits of transparency...
Surveys have shown that pay transparency comes with many other benefits, including boosting employees’ trust, engagement, and morale. Beyond just putting salaries on job adverts, being transparent about pay bands will increase motivation and employee retention by letting your people envision what the next stages of their career progression will look like enabling them to better manage their own career paths within a business (and outside of it, too).
Pay transparency can often create healthy competition and orient the entire team towards a shared goal.
What are the pitfalls?
Pay transparency can be a double-edged sword, and it is important to manage expectations. Make sure your current salary structure is fit for public scrutiny before you make it public–that includes making sure your employees are all in the appropriate bands. You will face justifiable anger if someone finds out they are in a lower band than a colleague in the same role with the same level of experience.
There is also the risk that if you are transparent about salaries, you may open yourself up to the competition, who could offer a few thousand pounds more and poach your employees or potential candidates. But recent data demonstrates that the opposite happens—there is no exodus from organisations that become transparent, and amid the Great Resignation, we should not apply the lens of the ’80s and ’90s, when it was enough to offer great incentives.
An example of large-scale salary transparency is taking place in Iceland, where, as of 2018, companies with more than 25 employees have had to prove they pay equally for equal work and correct any pay equity gaps. If companies can show they pay equally, they receive certification, and those without will incur a daily fine. A similar scheme for companies with 10 or more employees was implemented in Canada at the end of 2021, with a view to correcting all pay equity gaps by September 2024.
However, this brings us back to the truism that pay is not everything – especially not now with talent in limited supply. If you focus on building your unique employee value proposition, there is no need to get into a bidding war with your competition.
Transparent salaries allow employees to know how exactly their work is valued and help eliminate discrimination, making the workplace more equitable and welcoming.
The pros of pay transparency far outweigh the cons. In the current war for talent, attraction and retention are key–and potential employees deserve to know.
Redline Group’s mission is to enable high-technology companies to build world-class teams through knowledge-led recruitment. For more information from a trusted partner with over four decades of experience, don’t hesitate to contact us on 01582 450054 or email info@RedlineGroup.com or view our latest job opportunities by clicking here.