08 Aug Does Compensation Transparency Really Matter?
Transparency: it seems to be a buzzword we can’t get away from, and it’s being increasingly applied to nearly every aspect of the workplace. In specific, there seems to be a greater demand for compensation transparency than ever before. Yet, some professionals may still wonder: is it really that important?
In short, yes. Not only could pay transparency help your company avoid potentially devastating legal consequences, it can also support a number of important outcomes, such as lower turnover and increased motivation. Let’s take a look at why it’s so important to be transparent with your pay:
- Compliance: Transparency discourages gender wage gaps and other forms of pay discrimination. Not should you avoid pay gaps for legal reasons, but also to support a healthy company culture based on upstanding values.
- Securing Talent: According to a study performed by economists Ronald Wolthoff and Ioana Marinescu, job openings with disclosed wages resulted in 7.8% more applications than those without. If you’re seeking a select set of skills, posting openings with pay grades at or above market value could boost your chances of securing in-demand talent.
- Retention: When pay levels are transparent, employees can get a clear idea of how their pay compares with company averages. This lets employees understand how they’d need to perform to make more. According to Entrepreneur, this level of transparency can reduce turnover significantly by driving workplace satisfaction and giving your people a better level of insight as to where they stand.
- Performance: A report published by the Academy of Management Journal found a correlation between pay secrecy and a dip in performance levels. Specifically, it found that “a pay communication policy that limits employees’ access to pay-related information and discourages the discussion of pay issues” has an “adverse impact on individual task performance.” In other words, if you want your teams to perform well, develop open lines of communication surrounding your pay policies.
- Trust: Lastly, it should come as no surprise that the more information you give your employees, the better you’ll be able to build a culture of trust within your workplace.
Ultimately, the level of transparency you apply to your pay strategy will depend on a number of factors, including your existing company culture and your business strategy. What’s most important is that you apply the same pay philosophy to every pay decision, and that you communicate the ways in which pay is determined so employees are never left guessing.
HRsoft is a leading provider of strategic talent management software that improves manager effectiveness and business results. Our full suite of cloud-based HR software solutions includes applicant tracking software, compensation planning software, total rewards software, stay interview software, performance management software, and content management software. To learn more about our Compensation Management Software, COMPview, click the button below!