Achieving Fairness and Clarity: How Pay Transparency Enhances Company Culture

May 15, 2024
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We’re in the middle of a global movement towards pay transparency. Employees want to know they’re compensated fairly — and the EU Pay Transparency Directive will soon ensure salary information is made public. 

As a result, there’s a growing trend towards transparent compensation practices. This is evident across all industries but pay transparency is becoming even more important in industries like tech, where investment and growth are combined with competition to attract top talent in an employee-led market. 

But what does pay transparency even mean, anyway? At Figures, we define pay transparency as: The practice of openly sharing some or all of a company’s compensation structure. 

This transparency doesn’t just help organizations stand out in a crowded market — but helps create an equitable company culture where fairness and trust are at the very heart of your business.

Here’s how to get it right. 

The Link Between Pay Transparency and Company Culture

At first glance, the connection between pay transparency and a positive company culture might not seem that obvious. But, dig a little deeper and it becomes clear that you can’t have one without the other. 

But first, let’s take a closer look at company culture, which we define as the values, vision, and practices that guide your organization.  

Forward-thinking leaders now recognize that company culture shapes success — even more so than strategy or how your organization operates. Why is culture so important? Because it’s what makes your organization somewhere your employees want to work. 

Imagine a company where salaries and performance reviews are shrouded in secrecy. Discussions about wages are discouraged, but one day, your top-performing salesperson finds out they’re paid significantly less than their teammates. What happens? 

They request a pay review but are told it’s not possible until later in the year. Resentment starts to build, and the employee’s engagement and performance drops. They start looking for a new job, and as they’re well qualified, they quickly find employment elsewhere. Other employees soon follow.  

Because people share their experiences, your company starts to develop a negative reputation as somewhere that doesn’t value its employees, or pay them their worth. Employee turnover starts to increase, alongside fewer applicants to open roles. 

In contrast, let’s imagine a company where salary bands are openly published, and all employees know where they sit within their band. The HR team communicates how salary bands are determined (using best practices like salary benchmarking, of course) and what each employee needs to do to progress to the next level. 

Employees feel valued and as a result, engagement, performance, and retention levels are high. This company has developed a reputation as somewhere that values its employees and places them at the heart of everything they do. Turnover rates are low, vacant roles attract top talent, and the company is seen as a leader in its space. 

The second option sounds much better, right? 

Benefits of Pay Transparency

It’s no surprise that we’re big fans of pay transparency. But if you’re not sure why — here are the main benefits. 

Improved employee morale and engagement 

In return for their expertise and time, employees want fair pay — that’s understandable! And when companies can demonstrate their pay practices are fair and equitable, employee morale and engagement tend to increase.

And in turn, that impacts the performance of your organization as a whole. Research from Gallup identifies that employee engagement is a key indicator for a wide range of business performance outcomes, including:

  • Profitability 
  • Productivity 
  • Customer loyalty and engagement 

Reduced employee turnover 

We already know that pay transparency can help boost employee engagement, which in turn boosts performance. But when employees know they’re being paid fairly, they’re also less likely to leave.

And in a competitive job market, holding onto top-performing employees is crucial. Transparent salary bands are also a great way to encourage internal mobility, as it’s easy for people to see what their pay will look like as they move up their career ladder. 

Enhanced trust and transparency 

By openly sharing salary information, organizations can cultivate a culture with trust and transparency at its heart. 

Showing employees how their salaries are calculated helps make employees feel valued and informed, rather than left in the dark. Many employees are happy to discuss their salaries these days, which means any pay gaps or discrepancies will soon be uncovered anyway.  

With the EU Pay Transparency Directive coming into force soon — organizations of a certain size will be obliged to share specific information. So it makes sense to proactively start sharing this information with your employees as soon as possible. 

Greater alignment with organizational goals 

Most organizations have goals that include profitability and success. And pay transparency can help achieve this. By fostering a culture of trust and transparency, employees know they’re valued and feel more motivated to do their best work, which in turn boosts the company’s performance. 

During transparency conversations it’s also a good idea to share details about the company’s overarching objectives and long-term goals — but clearly link these back to employee performance. That way, employees are motivated to achieve their goals as they understand how their effort moves the needle of overall organizational growth. 

Challenges and Considerations

As with anything, moving towards a culture of pay transparency does have some challenges. But the good news is, these are easy to overcome. We’ve rounded up the most common challenges here. 

And because we love problem-solving, we’ve also offered some potential solutions. 

Challenge: Privacy concerns 

Some employees might be worried about their salary information becoming public — and we get it. They might also be concerned about how their personal data will be used, especially if you’re using third-party sites. Concerns like this can lead to reluctance or confusion around pay transparency and how it’ll be implemented at your company.

Solution: Create a communication plan that states how each employee’s personal data will be protected. Make sure any third-party site has all the privacy measures and security features needed to keep personal data safe. 

For inspiration — check out the Figures Trust Center to see how we keep our users' data safe. 

Challenge: Resistance from leadership

Your leadership team might be under the impression that pay transparency isn’t an urgent issue. Maybe they’re not even sure how it affects the performance of the organization as a whole. C-suite teams tend to have a lot of responsibilities to juggle — so the importance of pay transparency might not be on their radar, meaning they’re not keen on changing how things work. 

Solution: Communicate with your leadership team exactly what pay transparency is, and what it will achieve. Cover things like why now is the right time (hello, EU Pay Transparency Directive!) and what current problems transparency will solve (for example, you might want to mention that it will help attract top talent in a competitive job market). 

Challenge: Employee discomfort 

Some employees may feel uncomfortable that their salary will be made public information. Others may be upset to discover they’ve been paid less than a colleague in the same role. When moving toward pay transparency — HR teams need to accept that they’re probably going to encounter some resistance. But with the right plan, this can be overcome. 

Solution: Create a communication plan that clearly outlines your compensation philosophy and the reasons behind a move towards more transparent pay. A blend of printed resources and face-to-face meetings is best for communicating pay decisions. Make sure every employee knows who their point of contact is, and how they can get in touch with them when they have questions or concerns.  

Strategies for Implementing Pay Transparency

So you know you need to implement pay transparency — now’s the time for action! Here are our recommended strategies. 

Establish clear and consistent communication channels 

Whether you decide for full transparency with every salary individually published, or for a lower level with salary bands for each post, it’s crucial to communicate this with your employees.

Create a foundation with your compensation philosophy and share this with your employees. Then establish clear channels where they can ask for support and advice. This could be a combination of manager and HR communication, plus town hall style meetings. 

Provide employees with information about their pay

After clearly communicating the move towards pay transparency across the entire organization, it’s time to move on to individual discussions about each employee’s role. 

This doesn’t just cover monetary compensation, but should also include details about each employee’s non-monetary benefits. A total compensation statement is the easiest way to achieve this. 

During pay reviews, details about salary ranges and how they’re calculated can be discussed. You might also choose to share the data from your compensation benchmarking tool, to show employees the information that’s backing up these decisions. 

Transparency like this can also foster trust because it makes it easier for employees to understand the data behind the decision. 

For example, if an employee thinks their pay increase is too low, sharing the benchmarking data that shows they’re being paid above market rates can reassure them that their expertise is valued. 

Offer training to managers and HR professionals 

Moving toward pay transparency involves HR leaders and teams learning new skills. By investing in their training, the whole process will become smoother. 

Whether your HR team needs to learn how to accurately benchmark salaries (Figures can help with that, by the way) or managers need to know how to interpret the data for each of their team members, training will help keep the process as smooth as possible. 

Ask for feedback from employees

Moving towards pay transparency is a smart business choice — but this is an ongoing process rather than a one-off project. 

One of the best ways to check transparency policies are having the desired effect is to ask your employees.

Conducting regular surveys can help uncover any questions or resistance that might come up during the process. These surveys can also be used to gauge whether specific metrics like engagement, performance, and retention are changing as a result. 

Make sure employees also know where they can leave feedback in between surveys, and who they can speak to when they have questions or concerns. 

Real-World Examples and Case Studies

How Welcome to the Jungle gave their employees the pay transparency they were looking for, with Figures

Job search platform Welcome to the Jungle knew that their employees wanted more pay transparency — and the HR team was determined to meet this objective. 

First, they created a compensation policy based on the company’s corporate values. Next, they created salary bands for each role. Now, employees know how their pay is determined, and that it’s equitable for all team members. 

Salary bands are also displayed with each job vacancy, making the recruitment process as transparent as possible, right from the start. 

Read the full case study

How Lifen cultivated a culture of trust and transparency, with Figures 

After securing an investment of €50 million healthcare tech solution Lifen needed to expand its operations — and quickly. Operating in a competitive industry and location meant their compensation packages needed to be on point.

The HR team also wanted to ensure pay transparency by having easily accessible data that could be used in compensation conversations during both the recruitment process and salary reviews.  

Thanks to the Figures platform, Salary benchmarking data can easily be shared with Lifen employees, improving transparency and cultivating a culture of trust. It also makes pay negotiations easier, because candidates can see how their pay would be calculated and that what’s on offer is above average market rates. 

Read the full case study

Boosting Company Culture — with Pay Transparency 

Creating a positive company culture, where employees are appreciated and valued, is one of the best ways to achieve organizational success. 

At the very center of this kind of culture sits trust and transparency. And working towards pay transparency is one of the best ways to cultivate that kind of ethos (and prepare for new rules and regulations at the same time). 

Are you ready for the EU Pay Transparency Directive? Take our short quiz for an instant analysis of where you stand — plus our recommendations for what to do next. 

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