Talking about salary in the workplace is still viewed by many as taboo. But times are changing, and workers are increasingly placing precedence on inclusivity, equality and transparency. Rosa Rolo, Group Strategy Director, Major Players & Arrows, discusses how by being open with pay from the outset, organisations can foster greater trust, promote pay equity and in turn, be able to positively affect company culture.
If 2023 was the year pay transparency became a big issue for business, 2024 is the year for companies to fully embrace it.
According to a study by broking firm, WTW, just 16% of UK companies disclosed all pay packages to their workforce last year – but a further 54% were at least considering boosting pay transparency.
There is plenty of evidence to suggest it is important they do so. Research by the Equality and Human Rights Commission reveals almost two-thirds of women (61%) check out possible gender pay gaps at prospective employers. For the creative industries this could pose a particular problem, since – on average – women are paid almost £10,000 less than men holding similar roles in the sector. Our own research has found black women’s salaries fall doubly short, at £20,000 less on average than white men.
Pay transparency is going to continue to get coverage and in a competitive landscape for talent, it’s an important factor for businesses who are on a recruitment drive. This will only be enhanced by the EU Pay Transparency Directive which has recently come into force further highlighting the issue. Whilst the UK is no longer subject to European law, many observers expect the idea of similar legislation to gain traction on these shores, with calls for an equivalent UK law gathering momentum.
What you have to gain from pay transparency
The benefits of pay transparency policies are clear.
Employee morale and motivation – 82% of workers say they would be willing to work harder if their company implemented an open salary policy. Fair pay fosters feelings of being valued, which in turn fuels work ethic but also supports creating a more diverse workforce. Seventy-four percent of jobseekers argue that salary transparency creates a fairer environment for employees. Meanwhile, a Harvard Business Review study shows that pay transparency reduced employee turnover rates – as it alleviates employee concerns about being underpaid and eradicates the issue of businesses paying more for external talent than internal talent.
A boost to productivity, besides helping to create a sense of self-worth among individual employees, pay transparency promotes a culture of trust, where salary suspicions are sidelined and shared goals are the order of the day. In turn, an entire workforce that is pulling in the same direction will drive productivity. As a result, revenues and profit are likely to receive a significant boost, with Forbes reporting that organisations with a high degree of transparency report profit margins that are 21% higher than average.
Wider economic benefits – It’s been calculated that ending the divisive issue of pay inequality can pump serious money into many sectors. For example, a report prepared for the House of Lords for International Women’s Day claims £1.5 billion would be added to the total value of STEM-led industries if they did a better job of attracting more diverse talent currently put off by opaque pay strategies.
Bringing diversity to the fore – attracting diverse talent in this way creates an inclusive platform at every level of an organisation. It also promotes fair pay and equal opportunities for all staff members, building trust in the organisation. A clear DE&I policy places a value on workers from minority backgrounds that is so often missing. It can propel them to climb ladders, be visible and inspire the next generation. That’s an invaluable impact.
An open-door policy – Ultimately, pay transparency builds a culture of confidence and trust. By having access to the salaries of their counterparts, employees can determine if they are paid fairly for their skillset and negotiate to close any salary gaps. Employees that believe they are valued feel more comfortable asking tricky questions of business leaders. This aids greater communication on all issues, beyond pay, with the potential to create harmony far and wide across the organisation. Who doesn’t want to work in a progressive place like that?
In essence, pay transparency is a strategic approach that enhances workplace culture, productivity and the overall success of a business. It’s a no-brainer.
Making pay transparency work for your business
As you might expect, an issue as traditionally thorny as pay transparency takes a great deal of insight and ingenuity to implement smoothly.
To get it right there are a number of key considerations to be mindful of:
• Ensuring access to market data – so roles are benchmarked and compensated in accordance with competitive companies
• Utilising insights from internal sources – HR data is another key layer of benchmarking information
• Aligning pay decisions – if you work in a large organisation, the chances are managers have the final say on pay decisions in their departments, which can quickly lead to disparities – a more centrally agreed system creates a level playing field
• Ironing out pay idiosyncrasies – with pay benchmarking to hand and a culture of compensation beginning to blossom, the final step is to sort out any lasting disparities before ‘going transparent’ across the business
A further crucial lens through which to view pay transparency is acknowledging the simple importance of paying people what they are worth. We launched our Earn Your Worth pledge in 2019. The scheme asks candidates to focus on a package they’d like – and expect – based on their skills and experience, rather than focusing on how they are currently compensated.
This initiative is informed in the fact that ethnic minority groups generally earn less than their white counterparts; which is perpetuated by incremental pay awards. Candidates are supported by trained consultants to aid negotiations based on what they desire and the industry benchmarks they are given access to, leading to a more satisfactory result that levels up their professional lives.
I believe that businesses which hitch themselves to the pay transparency bandwagon will win the war for talent. Perhaps nowhere more so than in the creative, digital and tech space, where the best future-focused competencies such as user experience, technology leadership and digital marketing skills continue to come at a premium.
I believe the benefits not only to the individuals but the collective benefit to business and overarching economy should not be ignored. This feels like a win-win and ultimately the right thing to do.