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The Pros and Cons of Salary Transparency in the Workplace

Do you know how much your coworkers are earning? Should you know?

Some Human Resources experts believe that salary transparency poisons the workplace atmosphere. Suddenly Jim – who was happy earning his $70,000 salary – could become resentful learning that Jill, in a similar role, is making closer to $80,000.

Others feel that transparency breeds equity. If the entire staff knows how much everyone on the team is earning, the company would be unlikely to offer wide discrepancies in pay rates.

That is the idea behind the growing pay transparency movement. Many people believe it will boost fairness in salaries. Supporters say that making salary data known could be an important step in leveling the amount paid to women and men and any pay gaps between white employees and people of colour. Any pay inequities related to bias would be eliminated by public scrutiny.

Salary transparency is the law for public servants in many parts of Canada. This is the data source for the annual ‘Sunshine Lists’ that newspapers publish of those civil servants earning over $100,000 yearly.

Salary disclosure is also the law in a growing list of countries. Large companies in the United Kingdom and Denmark are obligated to report wages and bonuses paid out to staff, broken down by gender. Germany, France, and Australia are all considering implementing similar legislation.

Some private companies are jumping on the bandwagon as well. For example, Microsoft has announced that they will publicly disclose salary ranges in all of their internal and external job postings across the U.S., beginning no later than January 2023. Whole Foods and the analytics firm SumAll have also adopted salary transparency policies.

Privacy concerns

Talking about how much we earn is still a taboo topic for many people. It is considered rude to ask someone how much money they make. So, not everyone is comfortable with salary transparency in the workplace. They don’t necessarily want everybody else to know exactly how much money they are earning.

However, support for salary transparency is growing. The team at surveyed thousands of working-age adults for their perspectives.

Strong support for salary transparency

Salary transparency can help both job seekers and employers avoid wasting time. If the wages for a role are public, then companies can be assured from the outset that all of the applicants for the opening are willing to work for the compensation provided. Similarly, candidates want to know what a job pays before they decide to apply. We asked over 2,000 adults, "Do you think employers should be required to disclose salary ranges in job descriptions?"

Eighty-one percent of survey participants answered yes.

Here is some of what they told us:

"Why would someone want to take time out of their schedule to interview for a job that doesn’t pay them what they want?"

"This is important to know for many reasons. You avoid the guessing game, you know exactly what the salary is to make a decision and if the outcome will support living habits. I also feel it is important to know in the beginning. It avoids gender and race discrimination."

It is that last point that is most often cited as the key benefit of salary transparency. It can avoid discrepancies in wages based on gender or race. Seventy percent of our survey respondents agree that making wage data public would close the gender wage gap. Nearly as many (69 percent) feel that this would increase wage equity for racial minorities.

Andrea Johnson, Director of State Policy, Workplace Justice & Cross-Cutting Initiatives for the National Women's Law Center (NWLC), explains, "Salary transparency is one of the leading tools for closing wage gaps, because of the employer accountability it creates and the worker power it provides. For worker power, it ensures that when somebody enters into negotiations about their salary, they’re on a more level playing field with the employer and less likely to lose out. The people who are usually losing out are women and people of color."

Limiting access to top talent

One of the downsides of making wage information public is that it can cause an organization to lose out on hiring the superstar employee they want to bring on board. For example, let’s say that ACME Co. has a team of sales representatives earning $75,000 a year plus commission, and this salary information is shared internally. Then the opportunity to poach the top salesperson from rival DEF Co. presents itself. For $85,000 he’ll jump ship, bringing with him a wealth of industry information and client connections. However, this could cause jealousy and resentment among the existing staff to know that the new hire is making more than they are.

But when you are being poached from one firm to another, you are in a very strong bargaining position, and this is the prime opportunity to boost your income. This brings us to another downside of pay transparency.

Less negotiation power and lower wages

It is well known that workers who negotiate their salary earn considerably more over the course of their careers than those who do not. Part of the pay gap between employees comes down to how strong an advocate each individual is for their own compensation.

When the wages of the entire staff are made public, and coworkers are all paid the same amounts, this diminishes your ability to negotiate a pay increase or a higher starting salary. The employer can simply say, “If I give it to you, I’d have to give it to everyone….” Even if they believe you deserve greater compensation and genuinely fear losing you to a competitor, they may be unable to offer a wage increase for fear of causing dissension in the ranks.

The biggest deciding factors in how much you are paid for a position are how much the employer wants to hire you – as in the case of poaching a top performer from a competing organization – and how much value you bring to the role. The individual nature of those negotiation points is negated when wages are pre-set across the team.

Rewarding top performers

Companies may also want to motivate their employees by rewarding the most productive team members with raises and bonuses. It can diminish that incentive to go the extra mile if everyone is going to be paid the same amount regardless of how much they accomplish on the job.

The perils of sharing salary information

Lexi Larson of Denver, Colorado, made headlines last week when she was fired from a new job after publicly sharing her salary in a widely-viewed TikTok video. When she landed the job, it came with a salary boost from $70,000 per year to $90,000 per year. She wanted to share the achievement with the world. It cost her the gig.

"[My managers] implied that other people at the company were not paid as much. They didn't want people to know that," Larson told CBS News about being fired over the phone.

When it comes to sensitive information, such as wages, whether or not your place of employment practices salary transparency among staff, it's best to keep the details offline. 

Companies are often reluctant to make their salary information public because this can make it more difficult to hire the talent they need and to motivate and retain their top-performing workers.

However, attitudes are changing. Of the 6 percent of respondents to our survey who identified themselves as Human Resources professionals, the majority (65 percent) say that they believe salary transparency would positively impact their work, and 15 percent believe there would be no impact. Very few reported seeing a downside.

Seventy-eight percent of people told us that salary transparency would positively impact their job searching experience. Currently, only 12 percent of jobs on include the salary range in their job descriptions. However, with discussions of pay equity heating up and more jurisdictions jumping onboard, that number is bound to increase soon.

Find your next opportunity on today.

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