In start-up organizations where there are very few employees, it is easy to make decisions on what to offer.
But as your business expands, and you start employing more people, there’s every tendency that employees will begin to have indifferences about who earns what and this in some offices attract petty office gossips which can lead to distraction in the workplace.
In a bid to avoid such fallout, some employers apply the salary transparency system, while others think the approach is completely wrong.
So what’s the right approach to this? Is a company’s salary information supposed to be made public?
When we talk about salary transparency, it could mean different things to different people.
Let’s look at what salary transparency is all about…
Salary transparency is an open policy system where employees have access to information about what they and their colleagues earn.
In our society today, especially where we now have different survey tools like Mysalaryscale, Payscale, Glassdoor, it’s quite easy for employees to find out what co-workers are earning.
So now looking at its benefits and downsides will help us come up with ways to address the salary transparency issue.
Salary Transparency Benefits
While some people think salary transparency can cause tension and environmentally unfriendly effects, others say it can increase fairness and employee performance.
Salary transparency if properly explained to employees encourages equal pay and when employees are able to compare each other’s salary, they might realize they’re being paid market rate instead of spending their time thinking they are being underpaid.
Salary transparency enhances employee engagement and makes employees more cooperative and productive. Employees get to know the right people to go to for assistance and they will also work harder and pursue growth opportunities.
It helps companies attract good talents because they get to know what job and salary they are applying for, thereby reducing any monetary negotiations that can arise.
It closes the differences in pay between men and women. Everyone gets to be paid fairly irrespective of gender or race.
Downsides (How it affects co-workers)
As much as salary transparency has benefits there are also some downsides which may affect employees one way or the other. But guess what, there’s no problem that doesn’t have a solution. So were going to tell you what downsides people may likely encounter and how to solve the issue.
Adedotun Lawal, HR Business Partner at Syngenta, explains why he thinks companies should not be open about their salary structure.
“Labour laws don’t mandate salary transparency. Hence you would be likely causing office tension and a lot of unhappiness and companies would face extremely high attrition rates (which might not happen because of low rate of employment in Nigeria, however there would be a lot of actively disengaged employees in companies)”.
Salary transparency can also cause jealousy, low morale and other issues in the company.
According to Abdulsalam Mohammed-Kabir, a Senior HR & Operations Associate at UNICEF, “Full pay transparency opens the door for anger and frustration among employees”.
Ways to address salary transparency issue / what experts say about it.
Looking at the issue of salary transparency will help know the way/s to go about it.
Most of the issues employees have in the workplace is that some of them don’t know how performance is calculated and how compensation works and because of this they tend to calculate their performance differently from the way their employer does; while others just assume that they are being paid less (forgetting that assumption is the lowest form of knowledge).
Also, some employees who earn higher may be more skilled in negotiation, or may also have an in-demand skill and others don’t know about this.
What can be done? In a bid to find out what experts think about salary transparency and if they are In support of it, this is what they had to say…
“Pay transparency requires a plan. If you share salary information, be extremely clear in how you came to those salary determinations. It’s best to get ahead of any pay gaps within any organization by explaining why different pay levels exist. For example, if pay within your organization is contingent on years of experience and expertise, make that known. Clear guidelines and understanding make it easier for a new hire to understand why their senior colleague earns a higher salary. It’s also important to follow legal guidelines to ensure your salary practices don’t break laws”… says Abdulsalam.
“Sure, It will help to form a salary scale / benchmark for a city / state, and will also help transparency in pay differentials. It also encourages career plan with the aim to achieve self actualization”. Timothy Osahon, Human Resources Manager at Standard Street Manpower Limited.
Adedotun Lawal also said “it is important for transparency and proper benchmarking across industries”
We can deduce from what these experts have said, that, if an organization is honest with employees about pay, the chances of them understanding payroll decisions increases and employees will appreciate the honesty. Also, employees should also be advised on what they can do to move higher in order to earn more, this way there tends to be less envy and jealousy in the workplace.
Also, if salary transparency is done correctly, there would be a clearly defined salary range, and it will make that part of salary management easier for both employers and employees.
Am sure the question running through your mind is “how can salary transparency be done correctly”? It is simple!
Looking at the market rate for each position will be the best way because if your company is paying below market rate then you tend to lose great talents and opportunities. There are third party websites that gives a complete breakdown of salary and overall compensation packages like mysalaryscaleand sites like this help do proper benchmarking.
Finally, salary should be fair and made public i.e. both inside and outside the organization because it enhances proper benchmarking across industries.
Need help benchmarking salaries or you have specific requirements you will love to discuss? Engage our Salary Research Service.