Does Pay Transparency Matter In The Workplace?
What Is Pay Transparency?
The reasons are many: Employees are burned out by working “as usual” through a global pandemic, with many risking their mental and physical health on the frontlines. Some workers are pursuing hobbies discovered in quarantine, realizing they can monetize those newfound interests and create their own schedules. And other employees are fed up with their employers’ work culture and lack of benefits or flexibility.
Another major reason employees are leaving their jobs? Pay. Hordes of workers are quitting around issues like minimum wage (currently $7.25/hour in the United States, considered an unlivable wage in most regions), pay equity, and pay transparency.
Pay transparency (or salary transparency) is a practice employers can use to widely share how much employees are compensated, in base wages and sometimes including rewards, promotions, and bonuses.
What Pay Transparency Offers For Employees & Employers
We often hear of women finding out they’re making less than their male counterparts for the same role. The same can be said for BIPOC employees in comparison to their white colleagues. The New York Times notes “America’s overall raw wage gap was 17.7 percent in 2020, though it’s far bigger for Black and Hispanic women.”
These pay gaps happen for many reasons, including varying levels of experience, differing costs of living, and discrimination or bias—but these gaps are often exacerbated because of a lack of pay transparency.
With pay transparency, companies openly publish the salaries or range for a specific role, either internally or externally. For example, maybe every position is listed online with a defined salary. Or from an equity standpoint, all managers within a department start at $60,000 per year. Or an organizational chart explicitly identifies pathways to predetermined promotions and raises. When shared externally, this information becomes clear not just to current employees but also to prospective ones, often streamlining the hiring process.
Following this practice can help avoid racial and gender disparities altogether. A 2018 study looked at Denmark-based companies required to report their gender wage gaps from 2006 onward and found the pay gap reduced over time.
The benefits are twofold in other ways, too, for both employer and employee. Employees can better see if they’re being underpaid or fairly paid, in alignment with their peers and across their industry. (Because even with transparency, one employee may make more than the other for the same role.) Sources like Payscale, Glassdoor, and industry-specific spreadsheets (like this open-source one for media companies) make compensation information readily accessible.
And since you don’t know what you don’t know, this data is especially empowering, according to lawyer and career strategist Cynthia Pong, JD of Embrace Change: “Knowledge is power… With that knowledge, the employee can then act accordingly, whether it’s advocating for a pay increase or helping an underpaid colleague advocate for a pay increase.”
Sarah Wagstaff, Operations Manager at Abeego, a beeswax wrap brand and certified B Corp, also encourages employers to offer pay transparency.
“From stability, security, and trust, pay transparency has brought nothing but good things to Abeego,” she explains. “Being open with our employees about the company’s compensation mix allows everyone to understand the logical, equitable, and justifiable method to compensation and reduces the potential stress and animosity that stems from secrecy or closed-door policies.” Wagstaff argues that there really is no reason for a company to hide their compensation for employees unless it is inequitable.
For transparency’s sake 😉, there are potential pitfalls to consider, too. According to TIME, full transparency can have a harmful effect on employees, “stoking envy among the company’s lowest earners.” And since pay differences can be taken out of context, “it might be more beneficial to explain how pay is determined—without revealing specific figures.”
However, based on existing case studies, companies have largely benefitted from being open about compensation and equity and learned where hiring teams might have biases or gaps to close. Feedback shows that pay transparency has helped build stronger work cultures and boosted higher productivity and retention rates. Plus, employers can better control the narrative around its culture and benefits, rather than current or former employees (or even third parties) doing it for them. The chance for misinformation spreading is worth avoiding.
Ultimately, pay transparency offers a clear line of communication around compensation for hirees, current employees, and even HR and payroll.
How To Fight For Pay Transparency
Of course, it’s not always easy to bring up pay transparency in the workplace. According to one survey conducted by Elements Global Services, nearly half of employees surveyed in the U.S. (49 percent) say they avoid reporting issues to HR out of fear of retaliation. And while there are federal and state laws prohibiting retaliation, at-will employees can be terminated for bringing up the issue.
Having a thoughtful strategy in place is key. Here’s what HR experts we spoke with recommended:
1. Practice due diligence.
If you suspect you are being underpaid, see if you can confirm this firsthand, whether through resources like Payscale, open-source spreadsheets, or within your own company.
If your colleagues are willing to have a candid conversation, consider that there’s power in numbers, too; Pong says, “Find allies and organize with your coworkers. If you can gather even a small number of employees who want to advocate for pay transparency, then make a strategic plan for how you can jointly raise this issue with the decision-makers in leadership.”
One note here: Avoid having these conversations through company channels like Slack, company phones, or work emails. Aim for private conversations with those trusted colleagues.
2. Consider company culture.
Tiffany Grant, a financial wellness expert and founder of Money Talk With Tiff, urges readers to then consider if their workplace is a safe space for conversation. “Many companies tout open-door policies, but unfortunately, they may not be as honest or accommodating as they seem,” she explains. Instead, Grant encourages readers to “make sure the culture does support you in advocating for yourself.”
What does a supportive culture look like? It’s usually one where you’re given autonomy and trust, can host open conversations around feedback, have clear pathways for advancement, and where employees’ values align with the company’s. Ask yourself, do you feel seen and heard by your supervisor? Have you witnessed retaliation against other employees? Does leadership show that they truly care about the well-being of all employees?
Depending on your experience, that company may not be the right space for you or one where you can safely advocate for transparency.
3. Request a meeting with your supervisor (and take notes).
Many experts, including Grant and Pong, advise approaching your direct manager about your compensation before heading straight to the CEO or HR.
Once there, share market research or typical ranges for your role and geographical area—but never name drop, even if you know your colleagues’ rates. Instead, share the value you bring to the company, backed up by your accomplishments and relevant data.
If you’re hoping to convince your employer to implement pay transparency at large, send them this feature. Just kidding, though feel free to! Your employer is a business, after all, so outline the many benefits of pay transparency for the company, like more trust and higher retention.
You can first position this to your manager by saying, “I’m concerned about pay equity. Is pay transparency on our radar to implement as a company-wide protocol?” Your supervisor may direct you to HR, but you can start by ensuring that your manager will advocate for you first.
Most importantly, Grant says to “document, document, document.” Just as HR documents employee reviews or company complaints, you should too, for your records. A paper trail ensures that your feedback isn’t misconstrued and that you took the appropriate steps to broach the conversation safely.
Hopefully you’re able to get the conversation going, but remember, if it’s not an open, supportive culture, you may want to find a new role entirely instead of pursuing retaliation (though it’s ultimately up to you).
Pay transparency may not be an option for every company you find yourself at, but it’s worth considering, especially as many states and federal governments enact this policy. You deserve to know and appreciate your worth in the workplace—we all do.
Henah Velez (she/her) is an Editor at The Good Trade. She holds a Master’s in Social Entrepreneurship and is a proud Rutgers grad. Originally from NJ, Henah’s now in Santa Barbara, CA, where she loves shopping small, hanging with her pets, or traveling. Say hi on Instagram!