Why Companies Should Disclose Pay Information

One of the social issues that people discuss a great deal is equal pay for equal work. This debate leads to the broader issues of pay transparency in the workplace. Companies give many reasons why it is necessary to keep pay data a secret. However, Employees are beginning to crave more transparency from their employees, especially younger workers. It just might be time to let go of the antiquated concept that pay information must be a tightly held secret.

Here are many reasons a company should disclose pay information and may even benefit from being more transparent.

Potential Employees Know What to Expect

When people are looking for jobs, they spend a lot of time searching for something that matches their skill set, modifying resumes, preparing for interviews, and participating in interviews.

Companies spend a lot of time writing job postings, reading many resumes, and preparing for the interview process. All this effort, only for people to realize the job they applied for does not offer the salary they need/want.

This is a lot of wasted effort for the job hunter, and a lot of wasted money for the company. If the company simply added a pay range to the job listing potential employees would know what to expect. The company will get a list of candidates who actually want to do the job for the pay offered.

As a contractor I look for work on a regular basis. I get a job for a specific project and when my task is complete it is time to find another project. Last year I was in the job-hunting phase and applies for many positions.  On more than one occasion I applied for a job that sounded like it would be something I would like to do only to find out the pay was way less than I needed. In one case the salary was 53% less than I usually make, and they wanted me to work in D.C. Um no, I can’t take a pay cut and live in a much more expensive city.  If I had known the proposed salary up front, I could have saved us both the time and effort.

It Builds Trust

One reason for not disclosing pay data this information provides a competitive advantage for companies. A competitor could see the pay range and know exactly how much it would cost to “steal” employees. However, I would argue that employees who like their work environment, feel engaged at work, and trust they are getting a fair deal from their employer are not usually looking to jump to another company. Assuming you ignore the hubris that a person can be stolen; an employee is not property to steal…just saying.

The issue of trust is also a huge topic when it comes to the gender pay gap. A lot of this angst could be alleviated if people knew what pay was associated with which tasks. Look at the task list and then say for this type of work the company will pay between X and Y. Using this model, no matter who applies, if they can do the task they can negotiate within the acceptable range.

There are valid reasons to pay one person more than another, which is why I think a range is the way to go. One person might have a bit more experience, a degree, a certification. Another might have most of the skills but needs to have on the job training for one or two things. By all means pay the first person a little more than the second person. At least we are all in the same ballpark.

This leads to the second factor of trust. When the company knows what they will offer and the potential employee does not, the employee is negotiating blindly. The company has a significant advantage because they have all the information. Many companies take advantage of this and use it to offer as little money as possible.

The employee will eventually find out and many people feel taken advantage of and stop trusting their employer. Some people will start looking for another job, others will try to negotiate for a raise, others will silently fume and become less productive. Worst case scenario, this is a leading reason for fraud. People begin to think “the company owes me; I am just taking what I am owed.”

Less Attrition in the Workforce

In my totally unscientific opinion, I think that another reasons companies should disclose pay information is it will lead to less attrition in the workforce. I kind of alluded to this in the last section; when people feel they are being paid unfairly, for whatever reason, they start to look for the next employer.

When I was in school, we looked at how much money companies spend each year looking for and hiring new employees. It can cost a company anywhere from 10% to 30% of the salary, on average, to replace an employee. It can cost significantly more to replace an employee with a lot of responsibility or an in-demand skill set.

The funny thing is “fair” is a relative term. You might have an employee who is happy with the money they make until they find out their counterpart is paid more than they are. This is especially true when the employee feels like they are expected to do more work than the higher paid counterpart. This feeling is one reason companies try to keep pay a secret at all costs. In my opinion, if you had transparency the angst over this issue is less.

There is no one size fits all to the issue of pay transparency. Some companies are old fashioned and hold on to the policies they have had for years. Some companies think transparency is an ideal that sounds good on paper and does not work well in reality. Others embrace the idea and have had success implementing pay transparency policies. Like any idea of this kind, I think whether pay transparency works is all in the implementation. A poorly executed policy will probably backfire. A thoughtful, well executed policy just might make employees happier and trust their employees more.

This can be a touchy topic, but as always, respectful comments are welcome. What are your thoughts on the issue of pay transparency?

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