Salary Transparency – is it a good thing or a bad thing?

It’s both.

Transparency can have a lot of positive effects. Gender equality is an obvious benefit. Others are more subtle.

A recent study by PayScale (a company that compiles a large database of salary information for both individuals and companies) concluded that how people perceive their pay matters more than what they are actually paid.

It turns out that the more people know about why they are paid what they’re paid – especially in relation to their peers — betters the chances they will be satisfied.

Full transparency is, however, most managers’ nightmare. It sets the stage for some very difficult discussions.

Unfortunately, most people believe they are underpaid and undervalued. Or to put it another way, they believe they are worth more than what they’re paid.

One way to avoid these sticky situations without going to full-blown transparency is to provide a median salary for each type of job. Employees will see if they’re above or below their peers, and managers can have less painful discussions as to why they are where they are.

Or, to state the obvious, just be more specific about why you’re paying someone what they’re paid and how they will qualify for increases.

Employers, take a close look at how you value (and therefore pay) your employees. We all know about rainmakers and their value, but what about all the people that helped them get those fabulous results? Administrative staff, associates and subordinates all help get the job done. Their value should be considered just as carefully as the rainmaker’s.

The PayScale study makes it clear that paying people more than their market value does not make them any more satisfied with their job. It’s more effective to pay people fair market value for their job and be more transparent about how that compensation was determined. Just paying people more to stay with you rarely works.

But transparency can cause problems as well; employee morale can suffer which will negatively affect productivity. If everyone knows what everyone makes, it can create overall dissatisfaction and cause employees to either leave or start lobbying for change; neither of which is a desired result.

Carefully consider all issues within your company before making any change. Or, consider implementing partial transparency as a baby step by sharing medium salary information.

We realize this is a totally indecisive answer to a delicate and emotionally-charged issue. So, as always, the best policy is clear and open communication, however you approach salary transparency.

 

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