Uncovering a Disconnect on Pay Transparency
Employees these days know what salaries they can expect to earn. In many places, job candidates are entitled by law to know the pay range for a job as they go through the recruitment process. Taken together, those two facts mean not being transparent about pay–at least to some extent–is becoming more of a negative than a positive for employers, according to a new study from Mercer.
Mercer’s 2019 Global Talent Trends Study found that 20% of U.S. employees report they would leave their current company because of competitive compensation, yet only 6% of HR leaders believe competitive pay is why employees leave.
Tauseef Rahman, a principal with Mercer, says being transparent about pay enables employees to understand how their pay and pay opportunities over time compare to public information in the market.
“It also helps organizations build trust and strengthen their relationship with their employees in a way that enhances their brand and business success,” he explains. “Transparency also gives managers knowledge that helps them have more constructive career development conversations with their employees–a critical step in retaining top talent.”
Rahman offers three reasons why pay transparency matters:
- A lack of equitable pay hinders organizations from achieving the workforce diversity they need to thrive in today’s economy. Pay transparency goes a long way to holding companies accountable for the pay decisions they make.
- It’s important to employees. Mercer’s Global Talent Trends Study found that only 19% of U.S. employees give their company an “A” for equity in pay and promotion. Additionally, over the past five years employee perception of fair pay has declined from 57% to 52%, per an analysis of employee-satisfaction data.
- Compensation is no longer information controlled by the company. The digitization and democratization of pay and career data have made it easy for employees to develop their own perceptions about pay for their jobs and an organization’s pay philosophy.
Adapting to pay transparency requires employers and their leaders to let go of traditional, long-held beliefs of what employees need to know and what employers can control in terms of compensation data, Rahman says, adding that it can have more upsides than downsides for employers, particularly by helping them attract and retain top talent and enhance their brand.
“Organizations that don’t take steps now to become more transparent about pay risk having someone else tell their story,” he says. “Many companies, in fact, are already transparent on pay in the sense that their employees and job candidates are sharing that information on websites that provide information about salaries and compensation.”