Are transparent salaries a good idea?

28 July 2021

Employers, employees and even friends are notoriously bad at discussing salaries. For some reason, there’s a huge taboo around what people earn, and we don’t like admitting it to the people we work with. We’ve always been taught that it’s rude to discuss how much others earn, and it’s created a culture of secrecy surrounding salaries.

In the past, companies have benefitted from this secrecy as it can help them to save money. If employees don’t know what their colleagues are earning, they won’t question their salary. Similarly, new recruits will have no idea whether they’re being paid fairly for the work they do and can end up being paid less as a result. If your employees aren’t aware that they’re underpaid compared to their colleagues, they’re less likely to ask for or have the leverage to secure any costly pay rises. To many, this secrecy seems largely unfair, especially when you bring gender and minority pay gaps into the equation. These groups traditionally face more challenges negotiating for fair pay, and secrecy surrounding other colleagues salaries then feeds into the enduring wage gap for them, lowering their expectations in future roles too.

However, sights like Glassdoor and LinkedIn changed all of this. Now many people can see the benchmark salaries for their role within their industry. They can even see these for their city and company, giving employees greater insight into their worth. Also, with new laws around gender equality, many companies have to publicly reveal their gender pay gap statistic every year. This is something unions are now campaigning for to be made mandatory for minority and ethnic group pay gaps. Plus, many people are now arguing that job advertisements should put a clear salary or at least an expected range rather than “competitive” to help set candidate expectations.

There is an undeniable shift with so many developments towards equality, and salaries are becoming less of a taboo topic. As a result, many companies are following suit and making company-wide wages transparent.

There are some advantages and disadvantages to having a transparent salary policy, and we’re investigating them all:

Advantages of transparent salaries

Help to fix pay gaps, gender or minority

The most significant advantage is that it will help fix discrepancies in pay and pay gaps. It will mean that employers can no longer get away with paying specific people or groups of people less to save money. With transparent salaries, everyone in the business knows what others are earning, meaning if they feel they are owed more than their colleagues, they have more leverage to fight for it.

Creates a culture of trust

If there is no secrecy surrounding salaries, employees will be more trusting and less likely to look elsewhere just in case there is potential to earn some more. In addition, employees feel more relaxed as they can talk about topics that were traditionally under-wraps. There are no feelings of secrecy or whispering behind the scenes. At a startup or scaling tech business, you sink or swim together, so a culture of trust is vital if you wish to scale successfully.

Helps employee development

If employees know the milestones and salary brackets to aim for, it helps them to develop a clear path for their progression. It gives them a clear target or goal which is actually attainable, rather than floating in the same role without knowing what’s next. This will motivate teams, make employees more productive, as well as helping them to see they have a future with your company, which can help your employer brand perceptions.

Shows that you’re a pro-employee organisation

Really, the only reason that there’s been a culture of secrecy surrounding salaries is that it benefitted leaders to do so. It meant that senior team members could be on high wages, and new teammates or younger talent could work for less. Now, the trend of transparent salaries ensures employees know they’re fairly compensated for the work they do, and it shows your leadership team are all in the same boat. It levels the playing field and helps your employer brand. Even if senior team members earn a significantly higher wage, other employees will see that this wage is deserved and will know that higher salaries are attainable if they work hard and stick with your scaleup.

Candidates know how much to expect

Transparent salaries also help your recruitment efforts. So many job descriptions have little to no mention of salary, and who knows what “competitive” means when they’re applying for a new role? In such a competitive jobs market, you need to do everything you can to encourage suitable candidates to apply rather than deter them before they’ve even begun the application process. This will create a better candidate experience, help candidates to self-select whether this is a suitable role for them and even set expectations where necessary. All in all, it will help your employer brand perceptions and reduce recruitment costs as you’ll have more relevant candidates with the appropriate skills and experience.

Problems with transparent salaries

Remote work

We’re all adopting remote or at least hybrid work more than ever before, but this causes issues for future salaries. For example, if a worker’s office is in London, they can benefit from a London wage but could actually live and work outside of the city, only commuting into the office when necessary. The future of remote work will bring salaries into question sooner or later. So, if you’re trying to be transparent with your teammates, this could cause further problems. For example, if you have employees in London and others in Manchester, salaries will vary alongside the cost of living. By being transparent about salaries, you will have to explain this difference to your team or balance out salaries. Neither solution will please everyone.

Could cause resentment and jealousy

Sharing the salaries of everyone in your business may not please everyone. While it’s thought to create a culture of trust, it could just as easily do the opposite. If employees find out they earn less than teammates but feel they work equally hard or even harder, it could cause resentment and jealousy. It could also lead to them leaving the business. It’s never going to be a nice feeling to see your value listed alongside your colleagues. Some people won’t feel comfortable with having their private information shared, and it could create a weird atmosphere in the office once this is released. But, as with any policy change, it will just take some getting used to. Once this is evened out and everyone has settled down, this will no longer be an issue.

Should you be paid more for staying longer?

Traditionally, the longer you stay with a company, the more your pay increases. However, with transparent salaries, this could be brought into question. For example, employees who have been there for years may be angry if a skilled new hire comes in and earns more than them, while new employees who are senior may be annoyed if someone who does less work than them is paid more just because of their tenure. It’s an awkward situation and will need a lot of contemplating and clear communication. Of course, you want to reward employees for their loyalty, and the longer they stay, the more valued they should feel. However, if you’re transparent about compensation, it will mean salaries and benefits have to be considered, and policies clearly communicated to make a fair culture.

No room for negotiation

In a candidate-driven market, future hires have a lot more room to negotiate their salary and compensation. This means that they could gain a higher salary as they know employers are desperate for tech talent. Existing employees can also negotiate and ask for more if they think they deserve it; otherwise, they could seek employment elsewhere. However, with transparent salaries, it’s much harder for them to negotiate. As there are clear boundaries, milestones and structures in place for pay-rises, it’s challenging to justify someone else coming into the business and demanding more than other teammates. Realistically, you can’t do it. Therefore, it could hinder your talent acquisition efforts if candidates and employees think they can get more elsewhere.

Where do you start with a transparent salary policy?

If you wish to make the salaries within your tech scaleup transparent, then there are things that you must consider. First, you need to research industry benchmarks to ensure you’re offering a reasonable salary compared to your competitors. Otherwise, you don’t stand much chance of attracting or retaining top tech talent in such a competitive market. Salary is always a factor when looking for a job, and if candidates or employees know they can get more compensation elsewhere, why would they stay with you?

Next, you should ask about pay ranges. Talk to employees about their salary expectations and goals for the next few years. There may be a lot of work and negotiating to ensure your employees are all on equal (enough) salaries, so involving the broader team in your process will help keep your culture of transparency alive and manage expectations.

Consider brackets for salaries. This way, your employees have something to aim for and can see their progression. It also gives you a little more flexibility when negotiating salaries, which could help your retention and talent attraction efforts.

Finally, it would help if you considered other benefits. We all know that compensation isn’t just the pay you take home. Many other factors can influence whether someone wants to work for you. For example, benefits from healthcare to discount packages all add up and can be costly to an employer. So to ensure salaries are transparent and meet industry standards, you need to consider the benefits you have on offer. Firstly, you need to ensure that these are equal, or at least transparent, across your business and whether they make up for not meeting salary expectations.

The issue of transparent salaries is a complex one, and it’s no one size fits all. If you’re a startup about to scale, you’re in a better position to implement this, while more established names will stumble trying to please everyone and will face teething issues. However, one thing’s for sure. If this remains and gains traction, it will help fix the pay gap issues and finally get rid of the salary taboo, resulting in more trusting workforce cultures.

If you’d like to talk about how outsourcing your tech recruitment can help you hire talent in a candidate-driven market, contact us.

Talent Works are a tech RPO provider with offices in Manchester, Northampton and Boston, MA. We have in-house insight, creative and digital teams who support our recruiters to offer a uniquely flexible approach to tech RPO perfect for startups, scale-ups and beyond.

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