The benefits of salary transparency for employees & organisations

November 21, 2023
min read


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The benefits of salary transparency for employees & organisations

As a HR professional, you know that pay transparency is a hotly debated topic in the workplace.

Some people believe that salary information should be kept confidential, while others advocate for greater openness and transparency.

But with the recent buzz surrounding the EU Pay Transparency Directive, it's time that we show the benefits of pay transparency for both employees and organizations, and explain why it's a good thing for everyone involved.

What are the benefits of salary transparency for employers?

You may be thinking, "is salary transparency a good thing?" And although it does have some draw backs (namely getting started), overall transparency is the best step for most companies. 

Remember: for now, there are options for what level of salary transparency you want your company to have (like only internal, external, and frequency).

#1 Attracting and retaining top talent

Salary transparency can help attract and retain top talent by demonstrating a commitment to fairness and equity.

The proof?

  • A survey conducted by LinkedIn in 2022 found that 27% of job seekers said salary transparency was one of the most important factors when considering a job offer.
  • In addition, acccording to a study by Harvard Business Review in 2022, companies with high levels of transparency and fairness had a 13.2% higher return on assets than companies with low levels of transparency and fairness.

#2 Reducing the gender pay gap

It's been proven. Pay transparency reduces the gender pay gap across any industry and any country.

The 2022 Figures Transparency Study concluded that salary transparency reduces the gender pay gap:

  • Pay gap of 0% for companies with full transparency (compensation policy, salary grid, and individual salaries)
  • Pay gap of 2% for companies with transparent compensation policies and salary grids
  • Pay gap of 2.4% for companies with a transparent compensation policy
  • Pay gap of 3.5% for non-transparent companies

Many companies are taking action by measuring the gender pay gap and sharing with their employees like MeilleursAgents.

#3 Boosting employee morale and productivity

When employees feel that they are being paid fairly, they are more likely to be engaged and motivated in their work. This can lead to increased productivity and a more positive work environment.

#4 Enhancing employer brand and reputation

By demonstrating a commitment to fairness and transparency, companies can enhance their brand and reputation in the marketplace. This can help attract new customers and clients, as well as top talent.

#5 Being ahead of the EU Pay Transparency Directive sanctions

With the EU Pay Transparency Directive taking effect in 2024, companies that don't comply will be subject to sanctions and fines.

But beyond avoiding legal trouble, being ahead of the curve and taking action now to prepare for transparency is a great way for your company to stand our from the competition and build trust.

Overall, salary transparency can provide many benefits for employers, including attracting and retaining top talent, reducing the gender pay gap, improving employee morale and productivity, enhancing employer brand and reputation, and reducing legal risks.

What are the benefits of salary transparency for employees?

Now on the other side, the benefits of pay transparency for are quite apparent including many employees and candidates joining the movement against companies sharing the term "competitive salaries" in job descriptions.

#1 Encourages Fairness and Equity

When salaries are kept hidden, it’s easy for disparities to occur. For example, two employees with the same job title and responsibilities could be paid vastly different salaries.

Pay transparency encourages fairness and equity by providing employees with a clear understanding of how much their peers are earning. This can help to reduce the likelihood of pay discrimination based on factors like gender or race.

#2 Boosts Employee Morale

Employees who understand how their pay is calculated and how it compares to their peers are more likely to feel valued and respected.

By contrast, employees who feel that their employer is being secretive or unfair with their pay may become disillusioned or disengaged. Pay transparency can help to boost employee morale by fostering a culture of openness and transparency.

Remember: Compensation decisions are only effective at building trust if there is clear communication

#3 Promotes Greater Trust

When salaries are kept hidden, it’s easy for employees to feel like they’re being kept in the dark.

This can lead to mistrust and suspicion, which can ultimately damage the employer-employee relationship. By contrast, pay transparency promotes greater trust by giving employees a clear understanding of how their pay is calculated and how it compares to others.

This can help to build a more positive and trusting workplace culture.

#4 Facilitates Better Negotiation

When employees have a clear understanding of how much their peers are earning, they may be more empowered to negotiate their own salaries. This can help to ensure that employees are being paid fairly and that the company is competitive in its compensation packages.

Additionally, pay transparency can help to reduce the likelihood of salary negotiations turning into a contentious or confrontational process.

#5 Supports Career Development

When employees have a clear understanding of how their pay is calculated and how it compares to others in their field, they may be more motivated to develop their skills and advance their careers.

Pay transparency can help to provide employees with a clear sense of the opportunities available to them and the potential rewards for achieving their goals.

By implementing pay transparency policies and practices, employers can create a more equitable and transparent workplace, which can ultimately benefit everyone involved.

Why is everyone talking about salary transparency now?

What is pay transparency?

Salary transparency (and/or pay transparency) refers to the practice of openly sharing information about employee salaries, including base pay, bonuses, and benefits, across the organization. This can be done through a variety of means, including posting salary ranges for specific positions, sharing salary information during the hiring process, or creating a company-wide salary database that all employees can access.

Why is salary transparency important?

Salary transparency is important because it promotes fairness, equity, and trust in the workplace. It helps to reduce pay discrimination, improve employee morale and engagement, and attract and retain top talent.

Does pay transparency work for reducing the gender pay gap?

Yes! Transparency drives equal pay.

To go a bit deeper: for both adjusted and non-adjusted gender pay gaps, we found that the most significant strategy is having fully transparent individual salaries v. just salary grids.

How do I start implementing salary transparency?

Implementing salary transparency requires a thoughtful and strategic approach.

Here are a few first steps to get started:

  1. Set up your compensation philosophy
  2. Investigate quality benchmark data to see where you compare to the market
  3. Reach out to our expert compensation team at Figures to learn the next steps

And don't forget - transparency is a journey, not a sprint. 

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