Pay Transparency: How much do your colleagues make?

Would you like to work for a business where everyone knows how much each other earns? No hushed conversations. A culture of salary openness. Well, that may only be just around the corner; pay transparency is gaining more and more traction.

Despite governments increasingly promoting transparency by introducing legislation to prevent pay discrimination, plenty of organisations still follow the ‘strictly no salary talk’ policy. Others, such as Buffer, publicly list each employee's salary (including their names and job titles).

This transparency trend has increased in popularity over the last few years due to several factors. One is that third-party websites, such as Glassdoor and Payscale, allow employees to share their salaries anonymously and, therefore, easily access the salaries of companies—including their own employer.

Similarly, multiple recruitment agencies produce annual Salary Guides, which show market pay rates for permanent employees and contractors based on thousands of placements. These guides provide the average salaries organisations are paying for any given position.

Finally, the vast number of professionals in the global workforce (a generation comfortable with sharing personal information online) is also a significant contributing factor.

Pay transparency legislations

The below post on LinkedIn has received a huge amount of engagement from users. However, Finland is not the only country introducing legislations to help stop gender based pay discrimination...

Canada’s Equi’Vision, an employment equity tool, provides citizens with user-friendly, online information on employer wage gaps. It will present aggregated wage gaps in the form of hourly rate gaps, supported by:

• Bonus pay gaps
• Overtime pay gaps
• Hourly pay gaps
• Representation rates

The Pay Transparency Act, introduced in Ontario, requires (a) all publicly advertised job postings to include a salary range, (b) prohibits employers from asking about past compensation, and (c) mandates that employers report gender earning gaps to the Province.

In Australia, the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 requires employers with 500 or more employees now need to report on a wider range of gender equality indicators. The WGEA is required to publish gender pay gap information for relevant employers.

Based on the Transparency in Wage Structures Act of 30 June 2017, as last amended by Article 25 of the Act of 5 July 2021 to enforce the right to equal pay for women and men for equal work or work of equal value. Employers are legally obligated to ensure equal pay for equal work, regardless of gender.

Since 2017, as per the Gender Pay Gap Reporting, firms in the United Kingdom with more than 250 employees are required to report salaries and bonuses by gender.

In Ireland, the Gender Pay Gap Information Act 2021 requires organisations with 150 or more employees to report on gender pay differentials, including bonuses, and indicate the reasons for any such differentials.

The above are just a few examples of countries introducing pay transparency legislation.

Note: Listing all countries would exceed the length and purpose of this article. However, a quick search of ‘pay transparency law [country] provides great insights into what other countries are doing.

Benefits of pay transparency

1. Exposing and closing pay discriminations based on gender

Source: UN

With multiple countries introducing legislation, Baker et al. examined the effectiveness of these transparency laws on the gender pay gap in their research paper, "Pay transparency and the gender gap.”

They examined the impact of the introduction of pay disclosure laws in Canada on university faculty salaries. They found that these legislations have, in fact, led to a statistically significant two percentage point reduction in the gender gap.

This effect represents a 30 percent reduction in the gender gap, compared to a base of 6-7 percent.

Employees who discover they are underpaid are empowered to negotiate for a higher and fair salary by exposing pay differences.

For more research on this topic, see:
How much does your boss make? 
Does Pay Transparency Affect the Gender Wage Gap? Evidence From Austria,
Pay Transparency & Cracks in the Glass Ceiling. 
Research: The Complicated Effects of Pay Transparency

Which companies have full pay transparency policies and why?

Despite some potential risks to open salary policies, more organisations are now fully embracing salary transparency.

Buffer, for example, not only communicates their salaries internally but has gone one step further and has published each and every employee’s salary publicly. Buffer’s statement reads:

“Transparency is one of our core values. We’ve found that it builds trust, holds us accountable, and can push our industry forward.”

For Whole Foods CEO, John Mackey, this concept of openness is nothing new. He introduced this open policy in 1986. In the book ‘The decoded company: Know your talent better than you know your customers’, Mackey explains:

“If you’re trying to create a high-trust organisation where people are all-for-one and one-for-all, you can’t have secrets.” 

Mackey wants employees to understand why there are pay differences amongst people. When employees know what types of performance and achievement earned certain colleagues more money, he thought, perhaps they would be more motivated and successful, too.

At SumAll, a marketing analytics company, it is a company-wide policy to publish employee’s full salaries, including stock and all. While it can be hard for people to come to terms with their dollar-value rank, they quickly up their game to stay competitive. CEO, Dane Atkison, explains:

“It began as a simple way to avoid dishonesty, but it has since morphed into a unifying productivity booster that keeps people around.”

So, what’s next?

While the literature is growing and pay transparency is gaining increasing attraction, more research is needed on exactly how pay transparency impacts employees, their relationships, and organisations as a whole.

Pay transparency is a rapidly evolving trend that benefits job seekers significantly. By understanding its impact, leveraging available information, and negotiating confidently, you can make informed career decisions and secure fair compensation.