THE PROS AND CONS OF SALARY TRANSPARENCY: Tackling concerns and objections
As the big switch to salary transparency becomes inevitable, we ask how it will affect recruitment and retention. Special guests Deborah Rippel (People and Talent Lead at Zefir) and Matt Bradford (The People Collective) joined our co-hosts Virgile (Figures) and Hung Lee (Recruiting Brainfood).
What is driving the move towards salary transparency?
“A few years from now, every company is going to be forced to publish a salary range on job ads,” predicts Virgile Raingeard, whose role at Figures grants him first-hand access to recruiters and their concerns.
Podcast host Hung agrees. “Regulation is catching up with the zeitgeist… I get the sense that there’s pressure now for companies who have not prioritised this,” agrees Hung. “They’re thinking… are we inadvertently communicating something that we don’t intend if we have a traditional salary structure?”
An overnight move to transparency could cause internal cataclysm, but it doesn’t have to be a sudden move, says Virgile.
“People can be freaked out by full transparency… but mature companies can be progressively transparent; they shouldn’t use the excuse of ‘we can’t be publicly transparent on all salaries’. They could be transparent on policy; they could be transparent on salary ranges.”
Instead, senior managers should think in terms of stages of transparency; rather than launching directly into external publication of salaries, they could begin with the less-intimidating, internal transparency, which could include individual salaries or simply salary ranges.
What if you’re not confident about sharing information because you don’t pay as much as your competitors?
What about those companies who pay below-average salaries? What if a company is underfunded or struggling and can’t afford the appropriate compensation levels?
Communication is important, says Matt Bradford of the People Collective: “It’s about having a clear philosophy – being able to stake out the numbers: this is what we’re able to do at the moment; this is what we’d love to be able to do in the future. Just communicating it counts for so much.”
Candidates will be attracted by an open and positive culture, which bolsters their compensation – just like additional benefits such as flexible working. “I’ve seen companies in the 50percentile or below manage to attract very good talent. Good managers, trust and transparency now account for far more than just the pure number in many industries.”
The salary structure might evolve in an open and honest way, says Hung: “If our revenue increases at this level, everybody gets this: you’re aligning business performance with the reward that you’re giving back to your staff.
How many companies are already publishing salary information?
Figures conducted an informal survey of 370 companies and found that 85% of respondents already have full internal transparency on individual salaries.
Virgile says that they’ve reported positive effects from the decision. “I think our result is higher than the general market [because it’s drawn from clients who are already benchmarking their salaries]. But I guarantee that those companies who are doing it now will benefit from it, from an employee perspective – even if they’re not paying top of the market. If they don’t do it now, they’ll have to do it down the line and they won’t get the boost that they could get now.”
Will transparency stop salary growth?
Under the new model, negotiation is taking a back seat. Instead, salaries are determined using a grid and reviewed once a year. “If I say I’m fixing the band and reviewing that once a year, max… are we accepting a little bit more transparency in exchange for a degree of depression at the top level?” asks Hung.
Deborah explains that her experience has shown otherwise. “I think transparency enables companies to benchmark salaries more and I guess they fight against other companies a bit better.” At Zefir, the people team uses Figures to set their salaries at the 75th percentile. This actually empowers candidates to research their expectations. “We end up in a position where the market has a better understanding of what’s happening, and talent can fight with more information.”
There is still room for tailoring your structure and hiring strategy, says Deborah: “If your company is driven by design more than sales, you might not match the 75 percentile in all roles. It’s a company’s choice which roles they want to get super top talent and naturally a lot of companies do that.”
Ironically, well-known or luxury brands may not be compelled to offer high rates to attract talent. “They tend not to pay top dollar for creative talent because they get such an influx of those people, so there is something to think about… which roles do you have a hard time finding and which ones are key drivers for your company?”
Common objections to salary transparency
CON: Those tricky conversations
“I have a business with employees where we’ve decided to pay ourselves in the 75 percentile of the market, but the rest of the team gets the 50 because we think ‘they are more important to the success of the team than you are’,” admits Virgile. “That’s the type of conversation that – if you want to be transparent –you will have to have. At the end of the day yes, it may be a tricky conversation but most of the companies that have been there will be happy that they had it, most people will be happy with this level of transparency. The conversation creates more trust… as a business, you have to be able to justify paying roles at different levels.”
CON: Overpaid employees
“Where it gets tricky is if you realise that you were overpaying a person so much that they will never catch up with the grid; it becomes a more difficult issue,” says Deborah. “I would recommend against making the formula to fit your salary… some companies do it; they try to make the grid work for the existing salaries because they’re afraid of having those conversations. I just don’t think that makes sense ... it’s okay to have one person who’s way overpaid for a while as the grid catches up.”
CON: Some salaries don’t go up
“Salaries, when you make that transition, they never go downwards,” says Deborah. “When you transition, people keep their salary or catch up with the grid. Most people are just excited that some salaries are going up.. you’ll have some level of jealousy, maybe everyone’s salary is going up 10% but mine isn’t.
CON: You risk losing valuable employees
“You often have one person who has all that company knowledge and the fear of losing them is too high,” says Matt. “That fear of loss is also interesting from the recruiting perspective,” adds Deborah. “In my experience, we rarely had candidate loss in the process because our grid didn’t match their expectations. A lot of times it didn’t match their expectations, but they were looking for something else... You can offer less equity and more salary… it can be worked out so that people find what they want.”
THE THREE-MINUTE SUMMARY: TACKLING CONCERNS ABOUT TRANSPARENCY
- YOU DON’T HAVE TO ‘SWITCH ON’ SALARY TRANSPARENCY OVERNIGHT. You can apply transparency to your policy, your model, your grid, or your salary ranges, says Virgile (Figures). “And I guarantee that those companies who are doing it now will benefit from it, from an employee perspective.”
- YOU DON’T HAVE TO SET PAY AT THE 75THPERCENTILE. If you’re one of the companies paying below the 50 percentile, establishing a culture of trust adds value. “Good managers, trust and transparency now account for far more than just the pure number in many industries,” explains Matt Bradford from the People Collective.
- YOU’LL PROBABLY GET MORE JOB APPLICATIONS… The panel’s experience has shown that transparency gives an advantage to candidates. In one role, Deborah saw applications increase from 150 to 3,000 every month after introducing salary transparency. “We end up in a position where the market has a better understanding of what’s happening,” says Deborah Rippol (Zefir), “and talent can fight with more information.”
- YOU DON’T HAVE TO APPLY THE SAME BENCHMARK ACROSS THE BOARD. “Which roles do you have a hard time finding and which ones are key drivers for your company?” asks Deborah. “If your company is driven by design more than sales, you might not match the 75th percentile in all roles. It’s a company’s choice.”
- YOU CAN MAKE THE GRID WORK FOR YOUR BUSINESS. If one person is overpaid, raise other salaries and wait for the teams to catch up. “I would recommend against making the formula to fit your salary… some companies do it; they try to make the grid work for the existing salaries because they’re afraid of having those conversations,” explains Deborah. “I just don’t think that makes sense ... it’s okay to have one person who’s way overpaid for a while as the grid catches up.”