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Why Salary Transparency Improves the Workplace (and how to do it)

Talking about money can feel super uncomfortable. Imagine how awkward it would feel to ask a co-worker how much they make. The conversation becomes even more risky when you consider that 23% of companies ban discussion of salary and 38% discourage it.

Yet salary transparency is growing in popularity. More people are sharing compensation details with each other. Resources like Glassdoor, Salary.com and PayScale.com have further legitimized salary transparency.

Believe it or not, this could actually be a good thing. Salary transparency can improve your workplace in four ways:

  1. Increases your negotiation leverage
  2. Decreases the gender and race pay gap
  3. Forces better HR practices
  4. Increases engagement (i.e. you’ll like your job more)

1. Transparency improves your negotiating power

Before you joined your company, salary consideration was likely near the top of your list. Were you terrified of asking for more than what was offered? You are not alone. Turns out that many groups, like the majority of women and people in technical fields (e.g. engineers), don’t feel comfortable talking about salary.

Or maybe you really needed the job and didn’t want to rock the boat by asking for more. If you fall into these buckets, you could benefit the most from salary transparency.

One of the reasons companies have the upper hand in salary negotiations is that they know what everyone in the company is paid. They have an idea of what’s fair. But you don’t. A tech startup isn’t going to pay the same rate as Google. You may think you’re getting a great deal, but you have no frame of reference. Even resources like Glassdoor and Salary.com are far from perfect.

Salary transparency improves your ability to negotiate a better salary …or it might not. Remember, salary transparency works both ways. If you’re looking for a big jump in salary and it’s out of the published range, you’re going to have to make a very strong case.

Related: 3 Unconventional Strategies That Get You Promoted

2. It helps close the pay gap

No matter how you feel about the gender pay gap, it’s real and observable. In fact, the breakdowns of gender pay by race and state are staggering and symptomatic of more complex societal issues. There are steps we can take steps to close this gap.

Dane Atkinson of SumAll practices extreme salary transparency. He makes all employee salaries public for anyone to see.

“Salary transparency is the single best protection against gender bias, racial bias or orientation bias.” ~ Dane Atkinson, Founder, SumAll

Salary transparency lets everyone know what their company thinks their contribution is worth. What would happen if the entire office learned that the women were paid less than the men? Suddenly, there is hard data that cannot be denied. If your office culture lends itself to seeking this kind of transparency, it can create a more equitable and trustworthy culture. Even if your office decides not to do it, now you know the kind of office you’re working in.

So.. why did he get that salary anyway?

Chart of Salary-Negotiations-Men-Women

89% of companies set aside funds for salary negotiations. And yet, only 30% of women even bother to negotiate.

Pay differences are of course oftentimes justified. Top performers deserve top salaries. If you’ve exceeded performance expectations, pay differences make sense.

But that’s not the only reason why people have higher salaries. As it turns out, many companies adopt an art over science approach when it comes to compensation. Unfortunately, that can result in compensation imbalances.

For example, studies show that men are significantly more likely to engage in salary negotiations. That alone can widen the pay gap.

Related: How to Have a Better Negotiation with your Boss

3. Salary transparency forces HR to be really good

Every company tracks their employees’ salaries. But not all of them track why those salaries are what they are. If your entire office knows everyone’s pay, everyone will know when those pay rates change. HR will have to make sure that the reasons for those changes are sound. Your collective knowledge makes management accountable to all of you.

Managing compensation is one of HR’s most important responsibilities. If you think talking about it is hard, imagine trying to justify a pay gap of $20,000 between two employees in a similar role.  Transparency creates incentives for HR and management to work together to determine salaries fairly.

4. …it also increases trust and engagement

Think about it. What kind of company would you trust more: one where salaries (or salary ranges) were made public or kept secret? If everyone was on the same page regarding what it takes to make it to a certain position with a certain salary, then everyone (employees and the company) would be more accountable to each other.

That being said…read your employee handbook

Some of you are at companies that forbid or discourage disclosing your pay. You should be familiar with your company’s policy and the consequences of violating those policies. If salary transparency is that important of an issue for you, consult your HR handbook, your HR team, or a labor relations professional, and decide how far you want to go with it.

Related: How to Find Purpose in Your Job

These companies made it work

Salary transparency may sound radical, but there are companies putting this in place right now. There’s early evidence that salary transparency is associated with higher work performance, which your boss should absolutely love. Even big companies are adopting this model. Whole Foods believes salary transparency improves the workplace so much that they’ve had this policy in place since 1986.

Members of the startup community have also reaped the benefits of salary transparency. Namaste Solar is a solar energy company in Boulder, CO that began with an employee-owned co-op model. Not only are salary ranges transparent, but employees also get equal voting rights on issues as important as board member placements. The result? They are one of the only profitable solar companies in the country, and they’ve been around for 13 years. Namaste’s founder, Blake Jones, has credited his company’s success to that high level of transparency.

There’s something to be said for Namaste’s success and the trust that seems to have been built into the company’s culture via this level of transparency.

Related: Three keys to success from the founder of the Container Store

Try it out… just be skillful.

One of the biggest fears people have when they even think about talking about salary? Reactions from co-workers. One of my old professors said it best when she said “people don’t ask why you’re making that much money. They’re asking why they’re not making that much money.”

But before you march into HR or your boss’ office:

  1. Do your research. Find out the pay range for your role and your geography using the online resources in this article. Keep in mind: location makes a big difference.
  2. Try bringing up salary with a few people you trust. If they are co-workers, read your employee handbook first.
  3. Don’t forget to count benefits when comparing to others. That bonus pool, healthcare package and free gym membership are worth something.
  4. Make sure your own contribution is up to par before asking for more. Build your case.

A lot of times, you’ll find that pay differences are justified. Most companies don’t mean to sow discontent with their pay policies. But if you find something is off, discuss it with your superiors. Just be sure to do it in a skillful way. Learning how advocate for yourself and, by extension, the good of the company is one of the best skills you can master.


 

 Photo by Alexis Brown 

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Thank you very much for the wonderful content. I have shared it on my facebook page.

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