The practice of sharing salary bands or income among workers helps avoid toxic gossip that can occur among employees.
Many people working in corporate America recall the days when salary information was kept under lock and key. Inquiring about someone's pay was taboo and not encouraged.
But, with increasing frequency, employers are disclosing salary information to their workforce. This is due in large part to the rise in popularity of third-party websites such as Glassdoor, Comparably and Fairygodboss, along with the influence of millennials — a generation accustomed to sharing personal information.
While salary transparency is on the rise, it's still not ubiquitous. The Institute for Women's Policy Research reports that while 17 percent of private employers have adopted transparent pay practices, one-quarter of private businesses continue to prohibit discussion of salary information.
As organizations determine whether salary transparency is right for their workforce, there are several significant benefits to consider.
Improved Transparency and Trust
In the past, employees had to rely on water cooler conversations or illicit fact-checking to uncover where they landed in the pay range. The practice of sharing salary bands or income among workers helps avoid toxic gossip that can occur among employees. By making this information available to employees, they are more likely to trust an organization is treating them fairly.
More Efficient Recruitment and Retention
If employers disclose salary information, it also makes for a much more efficient recruitment process. When a recruiter or hiring manager is allowed to openly provide a candidate with pay range details, everyone involved can quickly assess whether it's wise to move forward with discussions about employment.
Likewise, when someone accepts a job offer with a full understanding of their pay range, the organization is more likely to retain talent because there aren't any surprises around income or earning potential.
Productivity has long been linked to rewards — the better the reward, the more potential there is that an employee will be productive.
"Those (workers) exposed to relative earnings information supply more labor effort on average than those without access to this information," according to a working paper published by UC Berkley.
This research illustrates that there may be concrete benefits around productivity if an organization decides to disclose rewards in the form of "peer earnings information."
Demonstrated Commitment to Pay Equity
HR and business leaders alike are rightfully concerned about how to avoid pay discrimination based on gender, racial and orientation bias. When employees have open access to organizational pay data, it allows a firm to demonstrate its commitment to pay equity. And, in the cases where issues are identified, employees are able to highlight those gaps, bring those issues to the attention of HR and hopefully resolve any inequities.
There are also challenges when employers disclose salary information. Any inconsistencies will require explanation, formulas and rationale, all of which can be difficult. For this reason, organizations must carefully consider whether this level of transparency will benefit their workforce.
If HR leaders decide to disclose salary information, they can prevent potential conflicts with a strategy that seeks to create context, plans for frequent competitive salary analysis, and provides communication — as well as training — to address employee questions about this sensitive topic. With the right approach in place, most organizations may be surprised by the benefits this innovative approach to communication around compensation delivers.