Pay Transparency and the Effect on Workplace Culture
Pay Transparency and the Effect on Workplace Culture
The late 2000s introduced a call for more transparent, genuine and accountable leaders, otherwise known as authentic leadership theory. It is hard to believe good leadership could be anything but transparent, genuine, and authentic. What was tolerated before this point?
Now, there is the call for transparent-everything, including your pay. Surely, there is a place for discretion and privacy. It’s not clandestine, just some things are better kept confidential. Right? Or am I being that leader, pre-2000, yet to be enlightened?
During the pandemic, with our health on the line, trust was #1. Open communication, with our whole lives on display- the cat, dog, children, and more- became the norm and with it, what we were paid. 2022, and the boa- constrictor squeeze for talent clinched the deal for pay transparency. Since then, pay transparency has been insistent and on the rise.
However, pay transparency and its effect on workplace culture isn’t as clear-cut as we think.
A fairer working environment.
This is the real crux of the matter. Viewed as being a fairer working environment, 78% of workers in England view salary openness positively. Changes to the gender pay laws brought pay transparency to the forefront.
Women globally earn around 37% less than their male counterparts, in similar roles and progress in closing the gap is described as painfully slow. 21 out of 38 OECD countries require mandatory, systematic gender pay reporting by private sector firms.
Additionally, pay transparency is a tool to bring about change to all pay inequities. It requires pay to be fair and unbiased across all demographics, such as gender, race, ethnicity, etc. It is needed, highly advisable, eminently valuable, and has powerful effects on workplace culture. It’s a no-brainer.
So is attracting talent.
Advertise the salary range, and you are guaranteed a high level of job applications. 85% of Gen Z are less likely to apply for a job without a salary range, a critical consideration when, globally, 27% of our workforce will comprise Gen Z workers by 2025. For the rest of us, 98% found listing salary on job adverts as important. With the global skills shortage, its business and culture imperative to select from an ample and diverse range of job applicants.
Nothing to hide, no reason to be afraid.
If only life, business and humans were that simple. Pay transparency doesn’t give us the whole picture. For some, it can make us dangerously nearsighted, showing us only what we want to see. A top performer who generates 40% more value than the rest of your team. It sounds reasonable, except if it acts as a demotivator to their colleague who puts in maximum effort but will never quite achieve the same levels.
Or the same top performer whose values are not aligned with the business. You might choose not to pay at a higher level. Sounds reasonable but as a consequence found dealing with resignations and staff turnover. These present every reason to be cautious, wary, and yes afraid.
Or the person who has been with your organisation forever. They are engaged, loyal and live the brand. We all know the value employee retention delivers. It’s touted in every HR and leadership forum. So, perhaps a yearly bonus that sees them earn more than their cohorts is justified, but to share with everyone else though? Research shows when individuals receive bonuses and similar, it's demotivating for their peers.
The full-monty.
Instead of an all-out full-monty disclosure, perhaps consider a more delicate approach. There are many other ways to demonstrate trust and openness. It doesn’t have to be about making all information accessible. An environment of clear goals and expectations, an understanding of salary banding, how salaries are determined and what is required to earn more and receive promotions, goes a long way to bridging the transparency gap
and leveraging a positive workplace culture.
Transparency in every way continues to evolve in all aspects of life. As for pay transparency in our workplace, well that’s a given, and expect it to amplify even more. Apart from fairness, equity, and better workplace culture, it’s a societal necessity.
As a final point, the authentic leader? They are key in the pay transparency strategy. When 75% of leaders say pay equity and transparency are a priority, but only 45% of employees agree, we have another sizeable gap to fill! Fill both with one solution; your transparent leader!
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