Does it pay to be more transparent about salaries?
Pay remains one of the more awkward conversations topics at work. But with new regulations requiring companies in New York to put salaries on job ads, is it time businesses were more open about remuneration?
When applying for a new job, it can be difficult to know when to broach the all-important question: how much will I be paid? In some instances remuneration can remain a mystery right up to the point when you’re offered the job.
In a bid to remove some of this uncertainty, companies in New York will soon be required to publish the minimum and maximum possible salaries on all future job listings. It’s hoped that the new law, which comes into force from 15 May, will give candidates more agency when negotiating pay, and help to address gender and ethnicity pay gaps.
However, this hasn’t prevented some business groups from voicing their opposition to the new law. Many argue the mandate is “unfriendly to business”. The Partnership for New York City, whose membership includes CEOs from some of the city’s largest private sector employers, claims that the policy could prove “burdensome and time-consuming” to implement. This in turn, they say, will impact their ability to recruit quickly and create problems for HR teams.
The founder of Limelight HR Sally Bendtson has a different view. She suggests such attitudes are “old-fashioned” and that particularly in a competitive job market employers need to be transparent, particularly on pay.
“It’s very much a job applicant’s market at the moment and people want transparency from their employer,” she says. “If you want to be getting the best people for the job, you need to be transparent from the very point you first recruit them.”
The benefits of pay transparency
One company that has pioneered pay transparency is social media management platform Buffer. All the salaries of people who work for the San Francisco-headquartered company - including the CEO’s - can be viewed online –although people are able to opt out, for example for personal safety concners.
The company’s director of business operations is Jenny Terry. Her $165,759 (£121,752) annual salary is published on the company site.
She explains how the initial decision in 2013 was to make pay transparent internally to better align the company with its values and “so the rest of the team would be able to see what other people made”. Finding that the response to the move was “very positive”, Buffer decided to go one step further and make salary details public.
The policy has since developed to include a salary calculator and career frameworks, which aim to help employees see how their earnings could potentially grow as their career progresses at the company.
One clear benefit of introducing transparent salaries at Buffer was that the number of people applying for open positions has “skyrocketed”, according to Terry. “Candidates were very encouraged to see that level of transparency at the business and it helped for people to know what to expect, in regards to pay, before applying to the role,” she says.
Other business benefits include improved levels of trust among teams, removing the need to negotiate pay rises and helping to eliminate pay gaps between certain groups. According to the Organisation for Economic Co-operation and Development, nearly 80% of the gender pay gap, across a sample of 16 member countries, can be attributed to wage inequity within firms. It describes pay transparency as a “simple way to identify and address gender wage gaps” when they occur in the workplace, by allowing women to easily find out whether they’re being underpaid.
Terry says it has helped deal with the problem at Buffer. “Whether you’re male or female, if you’re in the same role in the same position, you’re going to make the exact same amount because the pay is completely transparent.”
In the UK, the BBC is one of the most high-profile companies to have introduced pay transparency rules. Following a review of its policies in 2019, the salaries of the public broadcaster’s highest earners (described as anyone earning more than £150,000) are published in £5,000 bands. All its job adverts for UK-based roles include reference to the pay band the role will fit into, ranging from band A (£20,536 to £30,804) to F (£61,608 to £112,948).
BrightHR CEO Alan Price says there are benefits for companies that follow the BBC and Buffer’s lead. “A clear and open pay structure is more likely to attract new talent to the business and improve staff retention. It can improve productivity and motivation if employees know they will be rewarded on merit and there are clear objectives to work towards to achieve pay rises.”
Reasons for keeping pay private
Despite so many benefits, there is still reluctance within the private sector to advertise pay in job ads. There are often sound reasons for this. Daisy Wolfenden, MD of Leeds-based digital marketing agency Wolfenden, prefers to keep pay private despite agreeing with many of the reasons for implementing a transparent salary policy,
She says: “As a small agency, we hire team members with specialist knowledge. They often have varying levels of experiences and skill level, meaning each team member is unique. This can make it difficult for us to advertise roles at specific set salaries, as no two members of the team will be doing the exact same role.”
Multinational technology training company Revolent Group also currently opts to keep its salaries private. Company president Nabila Salem says: “Employers might choose to not publicise how much they pay for many reasons. Withholding salary information makes it more difficult to get employees poached by the competition and, in competitive markets such as tech, that is something most employers want to avoid at all costs.
“At the same time, it protects those employees who aren’t comfortable with this information being public – whether that’s for their personal discretion, or out of privacy concerns.”
Other employers have raised fears that being upfront about potential earnings could limit the number of people that apply for roles – ruling themselves out either because they consider themselves too inexperienced for the pay grade or because they think they could earn more elsewhere.
However, Bendtson describes these concerns as “a bit of a fallacy”. She adds: “If you put a range of salaries, then you can cover the minimum and maximum that you’re willing to pay. If you’re willing to pay more than that for the right person, then I’d argue that you should have advertised that in the first place.”
The competitiveness of the current recruitment market is also influencing some company’s decisions to keep pay secret, according to Bendtson. With salaries for new hires being inflated by a rising demand for talent, many businesses will be reluctant to advertise a role if the pay band offered is higher than the one being paid to people within the company.
However, she stresses that being honest and open with employees remains the best course of action. “If you’ve got to hide the salary, then perhaps you know it isn’t good.” With New York enforcing its own pay transparency rules, perhaps it’s time that more businesses broke out of the old habit of keeping salaries hidden.