How Pay Transparency Pays Off

How Pay Transparency Pays Off

The Wall Street Journal recently profiled several organizations, including both scrappy startups and larger, well-established firms, that use open salary information to improve pay and performance discussions, eliminate pay inequity, and spark better performance:

SumAll chief executive and co-founder Dane Atkinson says opening up salary information prevents the nasty surprises that happen when pay is kept secret—when an employee discovers by accident that he’s making far less than colleagues, but can’t discuss it because he isn’t supposed to know. Opening the records leads to “more conversation about salary, and a desire to correct salaries along the way,” he says. … Opening up salaries for comparison “can be a great conversation-starter,” equipping employees to ask how they can improve their performance or advance to higher-paying jobs, says Mark Ehrnstein, global vice president for human resources at Whole Foods Market.

Greater pay transparency is looking more and more like the wave of the future. In one of our recent surveys here at CEB, 86 percent of compensation executives said their organizations would expand the amount of information they share about pay within the next five years, and that’s not necessarily a bad thing. With sites like Glassdoor and Payscale making pay information more easily accessible to all employees, organizations should consider getting ahead of potentially negative salary discoveries that could sour employee perceptions of pay fairness. Such perceptions, our data shows, can reduce employees’ intent to stay and the level of discretionary effort they put in.

Negative salary discoveries are not the only risk employers can mitigate through transparency: Organizations can better challenge allegations of gender-based discrimination and nip PR issues in the bud, such as Google’s embarrassment last year when a employees began circulating a salary spreadsheet that revealed inequities in their pay. There’s also positive signal value in increasing pay transparency, which can make organizations more attractive to values-focused Millennial job applicants, customers, and partners.

(CEB Total Rewards Leadership Council members can read more about how to maximize the benefits of pay transparency here.)