Pay transparency can reduce the gender pay gap by up to 50%, but can weaken staff performance, according to a study.
Analysis of wage and productivity data relating to 100,000 academics in the United States, which spanned two decades, found that increased transparency around pay can also result in a 20% reduction in the pay difference between individuals.
However, the study by HEC Paris Business School and the University of Utah also found that transparency around pay weakened the link between pay and performance.
This might compromise organisations’ efforts to motivate employees and attract and retain staff, suggested the study, which will soon be published in Nature Human Behaviour.
Professor Tomasz Obloj of HEC Paris Business School, who was lead author of the study, said that the findings provide a framework on which policy makers and HR professionals can evaluate the consequences of pay transparency.
“Our results illuminate what some might consider an important trade-off between both increased equity and equality and weakened pay for performance,” he said.
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Prof Obloj believed that pay transparency could put pressure on organisations to make their pay-setting practices fairer.
In the UK, employers with 250 or more employees are required to publish their gender pay gap on an annual basis.
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According to the Office for National Statistics, the gender pay gap among full time employees in 2021 was 7.9%, up from 7.0% in 2020. However, this may have been affected by the Covid-19 pandemic, as the 2019 pay gap figure was 9.0%.
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