Are we entering the age of pay transparency?

Research shows it increases people's productivity

Are we entering the age of pay transparency?

Many employees are becoming more and more curious about what their colleagues are making, in an ongoing effort to institute pay equity.

But could this mean that at some point in the future, we all know what each other makes for a living inside an organization?

Yes, if most workers have a say in this, according to a new study that shows about two-thirds (67 per cent) of U.S. employees say that their organization should be more transparent with pay practices.

Around half of those surveyed by Lattice, a people management platform, say they wish that everybody’s wages would be made public, at least within the organization.

Thirty per cent of more than 2,000 employees asked in February said that they remain in the dark about how their own pay is structured.

“The mystery behind pay isn’t just about cold, hard numbers — the backroom calculus behind raises and promotions is just as elusive,” says Lattice.

This effort for full transparency has both its pros and cons, according to recruiting firm Randstad.

Having salary transparency allows workers to hold their employer “accountable for fair pay practices” and ensures that workers are getting paid what they’re worth, it says. However, “while salary transparency creates a level playing field for employees in general, it somehow also pits workers against each other and causes comparison trap for some,” says Randstad.

“Staff who are drawing a lower salary than a colleague in the same position are more likely to push away new tasks or projects, call out other people’s mistakes and sabotage each other’s careers, creating a toxic work culture and environment.”

Candidates hungry for data

For those who are on the hunt for a new position, transparency is becoming even more popular, according to another study done by people analytics firm Vizier.

With the rise in popularity of such websites as Glassdoor, the quest for salary knowledge is become even more treasured.

“Though the concept of pay transparency has been around for a while, it started gaining more momentum among legislators, advocates, younger generations, and the media over the past few years, thanks to the ease of access to compensation data on the internet,” says Andrea Derler, head of research at Visier.

“The overwhelming majority of both employees and jobseekers want salary transparency, signalling a significant shift from the traditional belief that pay is a taboo subject in our personal and professional lives.”

People are talking about their own salaries, found the survey, as 85 per cent of respondents discuss their salary with others both inside and outside their organization. Nearly a quarter (22 per cent) self-report discussing pay with coworkers in their same role.

Those numbers skew along generational lines as 89 per cent of Gen Z workers said they are comfortable talking about pay, compared to just 53 per cent of boomers.

However, 41 per cent of respondents across all generations have had a negative experience discussing pay with an employer.

Governments on board

But if you are thinking about doing business in Prince Edward Island, Canada, pay transparency is now the law as the province enacted legislation that went into effect on June 1.

Employers will have to include expected pay in all help wanted ads. The amended regulations to the Employment Standards Act will also prevent employers from seeking pay history information from a candidate and it will also prevent employers from punishing workers who ask for data around salaries.

While organizations may bristle at this new regulation, it should make the interview process more efficient, according to one expert.

“One of the things will be really beneficial is that people who apply, they’ll apply if they’re interested in that pay range; they won’t apply if they’re not so for both the candidate and the employer, they’ll save some time and some disappointment too. When somebody applies for this great job title, because a lot of times people just say titles don’t matter, but they do when it comes to compensation,” says Wendy MacIntyre, of resolveHR in Stratford P.E.I., and the chair of the board for CPHR PEI.

But what are the biggest benefits generally for pay transparency?

“Apparently, it’s been researched to show that when there’s pay transparency in the workplace, that increases people’s productivity because they don’t feel when they can see what people or what positions make, they don’t feel as much like they’re losing on something or that they’re being paid less than others. They can see, we’re about the same, so they pitch-in together,” says MacIntyre.

With the ‘great resignation’ continuing to plague businesses, pay transparency may offer a way for them to successfully attract new people into the organization, says a benefits expert.

“Employees in today’s market have choice and they are looking for organizations that they do trust, where they feel valued, where equality and equal opportunity is the norm do these type of things just are so important for the advancement of employers today, and attracting and retaining talent,” says Liana O’Brien, vice-president benefits consulting at HUB International in Bedford, N.S.