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Pay transparency is becoming an increasingly important HR topic and has received particular attention as an important part of reducing the gender and racial wage pay gaps. Employers will be less likely to pay women less than men for the same job if salaries are known, and if a woman knows how much her male colleagues are earning for doing the same work, she’ll be in a better position to negotiate a higher salary.
The House passed a bill on March 27, 2019 designed to promote equal pay and transparency by banning employers from asking applicants about their salary history and preventing them from retaliating against employees who compare wages. In the U.S., pay transparency statutes differ by state and are relatively underdeveloped. However, pay transparency is quickly gaining momentum overseas. It’s important to prepare now for the future and carefully consider your organization’s approach to pay transparency in the competition to attract and retain top talent.
Transparency impacts talent acquisition, compensation management, pay equity, and the overall employee experience. It can help your organization build trust and strengthen its relationship with your employees as well as equip managers with the knowledge that helps them have more constructive career development conversations. In the U.S., a handful of major businesses, including Buffer, SumAll and Whole Foods, have adopted salary transparency policies and have seen success in the realms of recruiting and retaining.
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Although there are no hard and fast statistics about how pay transparency aids hiring practices, Buffer found that their job applications increased and they inadvertently increased productivity by creating a more engaged team. SumAll’s initiatives helped drastically reduce turnover.
Whole Foods co-CEO John Mackey recognized the harm in keeping salaries secret more than three decades ago. In 1986, he made compensation data available to all employees to encourage more conversation among staff members and to promote competition within the company. He believes the policy creates a “shared fate” among employees and says, “If you're trying to create a high-trust organization, an organization where people are all-for-one and one-for-all, you can't have secrets.”
Companies start at different points on the journey, and multiple perspectives need to be addressed. Company leadership and line management involvement at each step is important to ensure understanding and buy-in of how far the company will go and by when.
Starting with these six initial steps will help you navigate the journey:
If you’re not taking proactive steps now to become more transparent about pay, you risk falling behind and having the narrative created for you. A lack of equitable pay hinders achieving the workforce diversity needed to thrive in today's economy.
For additional insight and compensation resources, check out Mercer’s Knowledge Library for compensation planning, policies, employee engagement, statistical modeling, and more
Pay transparency goes a long way to holding companies accountable for pay decisions. But just as important, it matters to employees. Only 19% of employees in the U.S. — compared to 22% globally — give their company an “A” grade for equity in pay and promotion, according to our 2019 Global Talent Trends study. In addition, during the past five years, employee perception of fair pay has declined from 57% to 52%, according to our analysis of employee satisfaction data.
Shifting your culture to adapt to the new world of pay transparency won’t happen overnight, but is crucial to staying relevant and successful. Is your organization ready?