Written by Elizabeth Exline
Reviewed byBronson Ledbetter, MBA,Vice President, Student Services and Financial Operations
Considering the number of dinners and vacation photos currently posted on social media, you could be forgiven for thinking oversharing is endemic among the U.S. population. And while some posts are designed to inspire envy (“Look at this tropical beach!” “Look at my dinner!”) others have arguably more noble goals. Case in point:pay transparency for equal salary outcomes.
Pay transparency, sometimes referred to as salary transparency, is essentially the practice of an employeewith co-workers, whether that’s actual salary ranges for a role or the manner in which an employer determines what to pay its employees.
A company can establish pay transparency, but a more recent trend has sprung up among employees who have begun, eitheron social media or among themselves.
The thinking is that by making salaries known, companies will be compelled toclose any wage gapsamong employees and that workers will know what a prospective job will pay before they invest in the application process.
But upending the social norm hasother consequencesbesides those intended by its proponents. What happens when colleagues find out they command different salaries? Or when companies want to financially reward an employee for a job well done but are hamstrung by disclosed pay structures? Here, we explore the pros and cons of this emerging trend.
What’s old is new again, as the saying goes, and sales transparencyhas a surprisingly historic pedigree. In fact, theright to pay transparency was established in 1935with the, which determined that employees in the private sector had a right to discuss things like salary, even if they sign a nondisclosure agreement.
Interestingly, this law doesn’t apply to supervisors or government employees. And it was extended in 2014 through ato apply to employees of federal contractors.
Yet, despite these protections, many employees find themselvesillegally discouraged or preventedfrom talking about their salaries. The HR software corporation Paycor, for example, cites a survey from the Institute for Women’s Policy Research, which found that.
Even if you haven’t personally experienced a ban, a prospective employer may have at one time or another asked you about yoursalary history. This relatively common practice has historically helped recruiters and human resources personnel assess what kind of salary a candidate might expect.
۴ý (UOPX) career advisorHeather Livingston, MA, NCC, LPC, says that, while this practice offered obvious benefits for employers, employees had less to gain. More to the point, it didn’t align with the concept of salary as compensation for services.
“You’re not supposed to pay somebody based on what they did make. You’re supposed to pay them for their qualifications and what they’re going to do for you. That’s what matters,” Livingston says.
But change is underway. Not only has inquiring about a candidate’s salary history fallen out of favor, it’s beenand other states. And as of Nov. 1, 2022,are required tolist the salary range of every advertised job.
With laws and culture dovetailing around pay transparency, hopes are high that now is when employers will begin closing the wage gap between men and women, for people of color and even between internal employees and new hires.
But does the data support those hopes?
The fact is there isn’t a whole lot of data to review yet. As Paycor notes, pay transparency is.
With that in mind, we’re left withanecdotal benefitsand predictions that have varying levels of expertise to back them up.
CNBC, for example, citesthat salary transparency policies will helpclose those racial and gender pay gaps.
Paycor, meanwhile, suggests such policies will result inmore productive and happier employees(who are confident in the value of their work) and an increase in job applications and hiring. Disclosing a role’s salary range up front, after all, eliminates unnecessary interviewing.
Livingston points to increased motivationamong employees andimproved trustbetween employers and employees. Transparency may also improve a company’s ability to attract and retain talent, she says.
Ironically, the biggest strength of pay transparency may also be its Achilles’ heel. Knowing what everyone else is making opens the door to equality, which brings an uninvited guest known asawkwardness. In fact, afound one in five workers worried that pay transparency would lead to tension among employees.
Other potential disadvantages include:
How can pay transparency achieve its goals without drifting into the choppy waters of resentment and secrecy? There are a few ways.
For starters, companies may benefit from creatingthat clearly explain how wages are determined. When everyone understands what impacts a salary, from experience to certifications to responsibilities, there’s less room for assumptions and conflict.
Organizations may also choose to offer aprocess for discussing compensation. Giving employees a pathway to ask for a pay increase and learn what is needed to earn one helps reduce frustration for both parties.
Employees, meanwhile, need toresearch what constitutes a fair wage. Pay transparency, after all, is still in its nascent stages. It’s up to workers to understand what they can reasonably expect by doing their due diligence, Livingston says. Some recommended websites for this research are:
“There might be reasons for salary differences,” Livingston explains, “so you have to take an objective look at that. And if you can’t find any of those differences, then you can be very professional andbring it up to your supervisoror your HR representative and have a conversation. In past years, before these transparency laws, HR would be like, ‘I can’t talk to you about this.’ You would be very much shut down. Now, you’re not going to be shut down.People are going to listen.”