The Benefits and Downsides of Pay Transparency


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Pay transparency is a popular topic, as many businesses are trying to be more transparent about salaries within the company. Some companies are trying to achieve pay equality by being more transparent.  Let’s dive in and explore the pros and cons of pay transparency. 


Closing Pay Gaps  

 Tim Mitchum, President WINPRO Pet 

 In society today, there is a great deal of attention on gender and racial wage gaps in the workplace. Many companies are trying to close these pay gaps and ensure that their employees are paid appropriately, thus moving towards pay equality. Adopting full pay transparency policies will allow all employees to know what their colleagues are making, and will help to ensure that they are being paid fairly. This will boost employee morale, and will most likely lead to a higher rate of productivity amongst employees.  


Happier and Healthier Employees 

 Jay Levitt, Founder and CEO Lofta 

 When employees feel valued by their company, this can lead to them leading happier and healthier lives, and having an overall better well-being. When employees are compensated fairly, this will help them to feel appreciated. When salaries are transparent, workers will be more motivated and they will also be better at collaborating with colleagues. By being transparent when it comes to pay, this will go a long way in helping your employees to be more engaged in their work, and will help to retain them over time as well.  


Increasing Employee Retention 

 Jae Pak, Founder Jae Pak MD Medical 

 Pay transparency creates more satisfied team members and increases employee retention. Over the past few years, employee perception of pay has decreased, which has built distrust within companies and dissatisfaction at work. To regain that trust among employees, varying degrees of transparency can be beneficial with partial pay ranges during recruitment can lead to establishing trust from the beginning. However, the downside of being fully transparent is that prospective employees may go to other companies who are willing to pay more. 


Fewer Salary Negotiations Will Be Needed 

 Jeremy Gardner, CEO MadeMan 

Pay transparency will work wonders in the interviewing and recruitment stages of the hiring process, as it will cut down on unnecessary salary negotiations. If your company chooses to provide potential applicants with the exact salary amounts up front, then you will most likely attract candidates who are genuinely interested in the position, and are happy with the pay as well. Salary negotiations can be uncomfortable for both the employee and the employer, which is why being transparent about the pay up front will eliminate many of these time-consuming negotiations.  


Challenges of Pay Transparency 

 Isaiah Henry, CEO Seabreeze Management 

 Pay transparency is a controversial issue, as it can often be seen to raise unnecessary concerns and create problems between team members. However, there is something to be said about the transparency of everyone who does the same job, and that they should be compensated equally. Yet again, we also have to consider the length of employment, levels of training and overall experience. These factors are all unique to each specific individual. So, it’s very difficult to apply a standard pay rate and to maintain fairness, while attempting to showcase equality. 


Comparing Pay 

Steven Vigilante, Head of New Business Development OLIPOP 

 While there are many benefits to pay transparency, a downside of it is that employees will be able to directly compare their pay with other employees, which could end up turning some of your employees against each other. In order to prevent this from happening, you’ll want to reassess any pay gaps amongst employees and be sure that your employees are being compensated appropriately. Time at the company, skills, and certifications can factor into the pay, but ultimately it is best for the pay to be relatively similar, in order to keep employees motivated and feeling like they are all important and part of the team. 


Creating A Sense of Unity and Productivity 

 Inesa Ponomariovaite, Founder Nesa’s Hemp 

Pay transparency offers two key benefits. First and foremost, it creates a sense of unity and productivity. Indeed, if pay transparency is not actioned on, employees – especially women in corporate settings – will feel as if they are underpaid in the workplace. With pay transparency, however, employees will spend less time focusing on office politics, and more time on tasks at hand. Additionally, with the veil of salaries and bonuses uncovered, companies are more likely to engage in equitable and fair payment of executives. More often than not, employees at large corporations feel as if upper management is paid in ways disproportionate to the work they do. With pay transparency, however, pay for all employees is more likely to be equitable, objective, and based upon performance alone.


Promoting an Open Culture 

 Travis Killian, Owner and CEO Everlasting Comfort 

 Salary transparency promotes a more open culture, and is a trending idea that many companies are beginning to implement. Pay transparency holds companies accountable for what they are paying employees and what skills they are rewarding. By being transparent and showing what each employee is getting paid, this can help to make salaries more “fair” amongst employees, but it is up to the company to ensure that this happens. If businesses stay on top of this, then the employees will be more likely to stay within the company and will be more productive overall.  


A Better Recruitment Process 

 Alix Greenberg, Founder ArtSugar 

 Pay transparency in the recruitment process can get your business seen as an “Employer of Choice.” With openness about compensation information during the application process, candidates will know what they will make and when to expect raises. In a tight labor market, transparency in your company’s pay practices will establish trust, which can make your business stand out as “Best Company to Work For,” attracting top talent and motivating new hires. However, pay transparency in the recruitment process could also lead to some applicants making false comparisons between your company’s pay practices and those of your competitors. So, it’s best to research compensation data websites to help determine how your company’s pay practices stack up in the industry. 


Your Company Could Attract More Workers 

 Jason Sherman, Founder TapRm 

 A major benefit of pay transparency is that your company could attract more workers by being up front about the pay. During the pandemic, many big box retailers and restaurants began raising their pay and being public about this. This strategy was not only beneficial for the current employees who received raises, but it also was a great way for these companies to receive positive publicity, leading them to attract more workers who were impressed by the newly announced salary information. By attracting more workers, this could help your company to retain highly qualified and skilled individuals with a passion for your company. 


Creating a High-Trust Organization 

 John Mackey, CEO Whole Foods 

 If you’re trying to create a high-trust organization, an organization where people are all-for-one and one-for-all, you can’t have secrets. When you reveal a pay structure very transparently … sometimes things aren’t just. And people will complain about it. And that gives you an opportunity to correct it. At other times, though, [the pay] is correct, and you can defend it. And then you’re pointing out to people what the organization most values and rewards. Many companies believe that wage transparency is going to stoke envy. So it’s better to try to keep it hidden. I believe envy can be a problem, but I think about it differently. 



Focus on Teamwork 

 Joel Gascoigne, CEO and Co-founder Buffer 

 It really helps with having great teamwork and less politics. Taking the extra step and making it public as well is extending that trust to a different set of people — to customers and blog readers and prospective team members. I think the key is to remember that you can change everything. As we grow, it can be harder to remember that, but it’s always true.  

This content is provided by an independent source for informational purposes only and does not contain legal advice. Consult an attorney or financial advisor when making decisions. This information is provided by legal writers and does not reflect the views or opinions of The Daily Sundial editorial staff.