The wave of new transparency laws across the country has created some interesting scenarios for employers. With new laws, comes change. To implement pay transparency within an organization, one would be wise to be intentional about change management.

We, as humans, are creatures of habit. We often resist change for fear of the unknown. However, Heraclitus, a Greek philosopher once said, “change is the only constant in life.”

So, how do we set about managing something within an organization as daunting as disclosing salary data to the world? Gulp. 

While law is forcing the hand of employers, evaluating the pros and cons of pay transparency is still a logical place to start. How does an organization successfully transition from confidential pay information to an open salary model? Who is responsible for managing the communication and, potential, fallout from disgruntled employees who discover they’re being paid less than the person next to them?

Here are some pros and cons of pay transparency to be aware of as you begin to think about how to communicate pay information to employees and job applicants.

Pay Transparency Pros

• Improved recruiting results. Job seekers know immediately what the pay is for a position and will apply for jobs they’re interested in. Additionally, employers don’t waste time engaging with candidates who don’t like the pay range.
• Better employee retention and satisfaction. Employees can be more motivated when they know they’re valued. Competitive compensation is one way to communicate value.
• Increased productivity. Happier employees tend to produce more.
• Trust and credibility. When employees are treated fairly it builds trust.
• Objective pay structures. When pay is based on objective criteria, such as education and skills, it can decrease the likelihood of discrimination claims.

Pay Transparency Cons

• Pay compression. When new hires are paid as much or more as tenured employees, it presents compensation issues.
• Disgruntled employees. As employees see the same position they occupy posted on a job board with higher pay, they will most likely become upset.
• Worn out managers. Managers will, no doubt, be confronted with some frustrated employees as pay data becomes available.
• Privacy concerns. Some employees may not want their salary information to be shared with peers. 
• Decreased productivity. If employees discover they are paid less than a peer or new hire, they may disengage.

So where do you go from here? It starts with a plan. Get with your key stakeholders to develop a strategy and communication plan to be ready to roll out the details of pay transparency within your organization in 2023. Train your managers on how to have conversations with employees and equip them with tools to navigate potentially uncomfortable situations. 

Feel overwhelmed? We’re here to help! Whether it be communication strategies, comprehensive salary analyses, or manager training, we at Clarity love to partner with companies to help strengthen their organizational infrastructure and culture.

Written by: Marla Monk

November 22, 2022