How Pay Transparency Ensures Job Satisfaction?

HR Tech Outlook | Thursday, July 09, 2020

Today, organizations are adopting a culture of pay transparency and ensuring that all their employees are paid equally.

FREMONT, CA: When organizations maintain confidentiality about payroll against industry benchmarks, employees conceive that they are being underpaid. However, research from PayScale reveals that 77 percent of employees are paid appropriately and the other 12 percent are paid even higher than the market rate.  LinkedIn’s 2019 Global Talent Trends report suggests that pay transparency is the fix for the culture of misinformation and mistrust. “Salary transparency in the workplace can bolster trust within an organization that could demoralize employees,” says the report.

Organizations often wary of pay transparency as three out of four believe that it would lead to disputes. However, the growth of online platforms where salary information is readily shared is revolutionizing the game. The sites like PayScale, Glassdoor, and LinkedIn have made it easier for people to see and share salaries and observing this trend, organizations are choosing to share their salary information themselves. 

More than half of the organizations that believe in pay transparency believe that it helps to ensure pay equity across teams and demographics. Anil Dash, CEO of Glitch, believes that the end goal is not transparency; however, it helps in paying everyone fairly.  Few retail giants and social media organizations have taken the initiative and took transparency a step further by publishing employee salaries publicly on their website. Due to company policies, comprehensive research on how pay transparency affects employee behavior is not available. Still, anecdotal evidence from these organizations suggests that it makes workers more productive and satisfied. 

Employee contentment depends on being paid fairly and knowing colleagues’ salaries allows them to take steps to close the pay gap. However, there is a lack of research that shows a definitive link between pay transparencies and pays equality. U.S government agencies that are required to release their pay information publicly show that women draw 19 percent less salary than men, according to a report by the Institute for Women’s Policy Research. Even in the private sector, women earn 31 percent less than their male counterparts.

Few companies have started taking small steps by providing salary ranges instead of exact pay, and the information has been shared with the employees. Coffee giant Starbucks has achieved 100 percent pay equity for their employees performing similar tasks. The U.S. based coffee shop chain has developed a calculator that takes experience, and pre-determined salary ranges into consideration before recruiting.  Taking transparency further, candidates are not asked to provide their pay history but are offered a salary range for the position.

Salary transparency in the workplace is a new concept for a lot of organizations, and it will be a long and taxing process to implement this practice into corporates with rigid work cultures. It will require a mind or cultural shift to deploy pay transparency into their organizational models.

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