Requirements such as gender pay gap reporting mean organisations are more comfortable shining a light on how much we get paid. But how far should employers go on pay transparency, and how do they get there?
It’s been described as one of the last taboos in the workplace – talking about how much we get paid. But that could be about to change, with more and more organisations being upfront about salary details.
For decades, disclosing salaries on job adverts has been considered a no-no for many UK organisations, who preferred the euphemistic ‘£competitive’ or something vague such as ‘dependent on experience’.
But a new generation of workers who value pay transparency, coupled with a shift towards greater data disclosure driven by gender pay gap reporting and environmental, social and governance (ESG) targets, means honesty on pay is a natural next step.
“There are two drivers behind more employers being transparent on pay,” says Ruth Thomas, chief product evangelist at salary comparison specialists Payscale. “A shift in employees’ expectations and an evolving legislative landscape.”
The latter is happening chiefly in the US, where an increasing number of states now either require employers to post the salary range of all job openings, promotions or transfers or have laws that prohibit employers from asking about salary history. Twenty US states offer legal protections for workers to discuss pay.
Here in the UK, on International Women’s Day in March this year, the government announced it would run a pilot scheme where participating employers would list salary details on job adverts and not ask about salary history during recruitment.
When the scheme was announced, minister for women Baroness Stedman Scott said transparency would “build on positive evidence of the role information can play when it comes to empowering women in the workplace”. The scheme will last between six and 12 months, with feedback due in late 2022, early 2023.
Why be transparent?
There are good business arguments for including salary details on job adverts: four-fifths of jobseekers are less likely to apply for a role if they can’t see a salary, according to recruitment site Reed.co.uk.
Research has also shown that transparency can reduce pay inequality, with transparency resulting in a reduction in the gender pay gap and a less discriminatory approach to pay-setting.
A study of almost 100,000 US academics by HEC Paris Business School, for example, found there was a 20% reduction in differences in pay across individuals within academic departments and institutions when they were transparent about salaries.
Hand in hand with being more explicit about salary is ditching the requirement for candidates to disclose salary history when applying for jobs.
Last week the Recruitment and Employment Confederation teamed up with the Fawcett Society to launch a new guide as part of its End Salary History campaign.
It advises recruiters not to solicit current salary information from prospective candidates, to review background screening software to ensure they don’t pick it up, and – if candidates do disclose – to encourage clients to make salary offers based on a range of criteria rather than current pay.
A survey by the Fawcett Society last year found that asking for salary history makes women in particular less confident when negotiating pay. It found that 58% of women felt they had received a lower salary offer than if they would have if the question had not been asked during the application process. Almost two-thirds said they would.
“Asking a job candidate for salary history goes much deeper than an annoying or awkward conversation – it’s a uncomfortable question that in reality, keeps women on lower salaries. Women, people of colour and disabled people are much more likely to be paid less than men,” says Fawcett Society chief executive Jemima Olchawski.
Furthermore, she adds, salary history questions tend to lead to new employers replicating pay gaps from other organisations, compounding the problem.
Where do we start?
Salary transparency is not as straightforward as simply publishing pay bands or rates on job adverts – “there’s a lot of legwork to do first”, explains Thomas from Payscale.
Firstly, employers need to get their internal compensation practices in order, she advises. “They need to understand the work people do, benchmark those jobs to the market, put a pay structure in place to manage internal equity and ensure that employees are paid against those ranges. After that they can publish ranges more publicly.”
Asking a job candidate for salary history goes much deeper than an annoying or awkward conversation – it’s an uncomfortable question that keeps women on lower salaries” – Jemima Olchawski, Fawcett Society
During this process, reward teams may need to do some “levelling”, adds Thomas, which can be done as part of their compensation cycle. “We’re seeing employers setting aside budgets for equity adjustments, particularly in light of pay compression over the past couple of years. If they’re hiring people at higher rates, they need to look at whether existing staff are paid less,” she says.
There’s also a decision to be made on how transparent an organisation should be. There’s a broad spectrum between publishing salary bands internally to existing employees and having a public record of every single salary in the business, as is the case at companies such as Whole Foods and Buffer.
Are there any downsides to sharing salary data? HEC Paris Business School’s study of academic salaries found that – while transparency did increase pay equity – it did also weaken the link between pay and performance. “Our results illuminate what some might consider an important trade-off between both increased equity and equality and weakened pay for performance,” says Professor Tomasz Obloj, one of the authors of the study.
Larger employers could also face challenges in publishing salaries, particularly at a very granular level, as there will likely be historical reasons for pay decisions that could prove difficult to unpack, Thomas adds.
For front-line workers, transparency over pay and other working arrangements can make a huge difference in where they choose to work. For those in lower-paid shift work, it could also determine how they cope with the cost of living, says Anna Maybank, founder of Breakroom, an employer comparison service specifically for front-line workers.
“With hourly paid roles you might not get sick pay or have a set number of hours. Or if you only get your shifts a week in advance you won’t know how much money you’ll have at the end of the month,” she says. “Transparency around pay is fundamental.” Breakroom shows prospective employees factors such as whether an organisation pays the Living Wage, whether workers get regular hours, and whether there is sick pay.
Being honest about what you pay – and how this is worked out – can also help employees be more productive, argues Thomas. “It takes it off the table because they stop talking about it if they know why,” she adds. “But make sure you communicate the whole package rather than just focusing on pay ranges. It’s crucial to have a broader discussion about reward.”
When Thomas Forstner joined legal technology start-up Juro two years ago as people and talent director, he made the decision to put in a transparent approach where pay is linked to a visible career framework.
Candidates self-select so it drives down time to hire” – Thomas Forstner, Juro
“We set out with a career framework that has five levels and is tied to general salary bands as a baseline,” he explains. There is flexibility to create custom brackets when particular skills are in demand and employees have quarterly progression conversations with managers where they may see themselves move up within their level.
“On job ads, people know we won’t lowball them, while our existing employees know they have the opportunity to have their pay reviewed in line with the market,” he adds. “Quarterly reviews with your manager could be a way to get a small bump in pay, and it’s all tied to continuous improvement rather than having a tiny window every year where pay is decided.”
One of the benefits has been in time to hire. Juro salaries are competitive within the technology market but Forstner admits it can’t pay at the same levels as giants such as Google, so being upfront means time is not wasted on either side.
“Candidates self-select so it drives down time to hire,” he says. “Putting out salaries is also a bellwether for what the market demands. If we put out a certain salary and consistently get applicants that are too junior, that’s useful feedback.”
Going forward, Forstner plans to put out a more formal salary framework together with a “salary philosophy” on how pay is set. The ambition is to have fully visible pay brackets for every single role and the philosophy behind that bracket.
Focus on outcomes
Aoife O’Brien, a future of work specialist and podcaster, argues that organisations should “pay people enough money to take pay off the table”.
“If you pay people enough they won’t complain – the future of work is about outcomes, and measuring outcomes can help you in justifying how much you pay someone,” she says. Offering salary ranges rather than pinpointing specific pay points can present its own problems, she adds. “The other side of the coin is that you might reach the high point of that range and not be able to be paid more. If you reach that level, are you at the bottom of the next rung?”
Placing people in ranges or using rigid talent management tools such as nine box grids equates to “judgements based on other people in the room” because only a certain number of people ‘deserve’ certain rewards, says O’Brien. “Making things transparent to everyone makes it fairer for all,” she concludes.
Evidence suggests that being clearer on pay has a positive impact on attraction and retention, not to mention pay equity in organisations. The journey to salary transparency is not without obstacles, but worth it in the long term.