The Pros and Cons of Salary Transparency
Insights From Mettl Company Insights
Confidence About Pay Parity
If you follow a standard procedure to define and determine employee pay and remuneration, transparency can help confidence in employees about pay parity. When the culture is such that the peer pays are known to one another with a standard approach, you can expect minimal friction due to pay disparities which in turn reflect as better employee morale and enhance productivity.
Lesser Affinity to Envy
Although it goes without saying, declaring employees’ pay to everyone can trigger problems to the ones at the lower end of the pay spectrum. But since you have backed up the pay with enough evidence or parameters such as education, work experience, track record, conduct and previous accolades & achievements, the odds of a person feeling jealous for an “undisclosed” reason is reduced to a great extent.
Ease of Management and Employer Branding
Employees have a natural affinity to a transparent work culture and knowing each other’s pay only accentuates that. Following a pay-transparent approach, you can create a better employer brand and can even see the influx of top-notch talent entering your talent pipeline. All in all, this can have miraculous effects on your talent pipeline over time.
Pay Gaps Become Evident
If you are an organization practicing the slightest of disparities in market standards or pay bands, paycheck information going public is no less than a catastrophe. Hiring managers can expect most of the time struggling with why one person gets preceded or succeeded in terms of paycheck. This way, both employee morale and productivity can take a serious hit. The idea of maintaining paycheck transparency can backfire in this case.
Even though you take a rational approach to define pay and perks, the same behavior can’t be expected of employees all the time. When you define why someone is placed above in the pay-band with clear reasons, people on the lower end of the spectrum may develop grudges against them or even indulge in unhealthy competition to outshine the peers. Envy and insecurity can creep-in and when pay creates a divide, the idea of teamwork and a collaborative workplace goes out of the window. The workplace can grow toxic in no-time, which is not conducive to neither the employees nor the organization.
Aside these, the levels where you are trying to maintain transparency can also be the deal breaker. Is it at the junior level, middle or senior management or the C-suite?Within a level, the idea can still work; but not the other way round. Not everyone can deal with pay disparities with equal maturity and rationality and therefore, creating pay parity is easier said than done. It all boils down to how mature your business is and at what stage you are planning to implement the plan. The transition is sure to have abrasions and therefore, you should move gradually and take the “level-approach” to disclose pays with enough backing-up in terms of clearly defined parameters. Until you can come up with a standard formula that reassures employees about pay parity, the idea of pay parity may backfire.