Your team members may not trust your compensation decisions. This could be leading to turnover or, perhaps worse, a disengaged workforce that will only contribute the bare minimum. Employees won’t give their all to companies they don’t trust, and top-tier talent certainly won’t stick around when they have seemingly better opportunities available to them. Pay transparency can help.
Pay transparency refers to clearly communicating pay practices to help employees understand how their salaries are set.
In practice, this can look different at different companies. Some may provide salary ranges to team members and their managers, and train managers on how to have clear, effective salary discussions with their reports. Others may publicly share their compensation practices and employee salary information internally—or even externally.
Pay transparency is a spectrum, and most companies skew toward less transparency. Only 37 percent of companies share pay ranges, 16 percent share market data when making an offer, and 19 percent share market data when giving a raise.
But, at the very minimum, pay transparency should mean that each employee understands why they earn what they earn, and how they can earn more. The specifics of what information is shared should vary based on the organization’s values, culture, and team.
Only 22 percent of employees agree they are paid fairly, which isn’t surprising given the low levels of pay transparency in most organizations. And only 52 percent say that employees know how to move up in their career paths.
When employees don’t feel they’re being paid what they’re worth and don’t see opportunities for advancement, they may be more inclined to look elsewhere for employment. In fact, compensation and career advancement are often listed as top reasons people leave their jobs. Given the high turnover that’s been predicted for the post-COVID workplace, it’s important to cover all your bases to improve retention and ensure you can still meet business goals.
Pay transparency garners a certain degree of trust in your organization’s compensation decisions. When people know why they earn what they do, they’re more likely to trust that your compensation decisions are made strategically, and not on an ad-hoc basis. This can improve employee engagement, productivity, and loyalty. Most (82 percent) workers feel more engaged and fulfilled by their work when they are paid fairly, and 81 percent say they are more productive and loyal to their employers.
When people know what it takes to earn more (and legitimately have opportunities to do so), they can feel confident that they will achieve career and pay progression over time. This benefits everyone. Your team members will be able to reach their career goals, your employee retention will improve, and you will have a skilled workforce ready to fill future roles. In addition, job seekers are 75 percent more likely to apply for a job if a company has a reputation for paying fairly.
Keep in mind that it’s not enough to pay fairly—you must also effectively and transparently communicate with your team so they trust that they are being paid fairly.
Pay transparency requires strategic planning and an ongoing commitment to get it right. It often evolves over time. Consider where you are now, and where you’d like to be—then go at your own pace.
Here are some tips to help you get started:
With one in four workers considering quitting their jobs after the threat of the pandemic subsides, retention is top of mind at many organizations. Pay transparency can be a powerful tool to garner trust, retain employees, and build a more engaged workforce. Including it in your employee retention strategy can result in a more well-rounded and successful effort.