Just 1 in 4 workers say their employer is transparent about salaries, according to a new report from compensation database Salary.com.
The December 2021 survey of 561 workers, ranging from executives to individual contributors, found that due to a lack of pay transparency, nearly half don't think they're paid fairly compared to people in the same role at other companies. Roughly 1 in 3 don't even think they're paid fairly compared to their co-workers.
The findings aren't shocking but are nevertheless disappointing, says Salary.com's vice president of consulting David Turetsky. With a growing number of>Why companies are reluctant to be transparent about pay
Just 35% of HR professionals say their company has a transparent pay policy, according to a separate Salary.com survey from fall 2021.
Experts like Andrea Johnson, director of state policy at the National Women's Law Center, say the aftermath of the 2008 financial crisis played a big role in employer salary secrecy: "The economic power dynamics in hiring shifted. Applicants had less power, and employers could hold their cards close."
Employers could slash operating costs by hiring people willing to work for less money. Since then, Turetsky adds, some employers have said publicizing pay would lead competitors to poach their top candidates.
Open pay discussions, meanwhile, "give everyone the opportunity to criticize," he says. HR departments may not readily share salary data if they don't have a formalized compensation structure that can be explained and is free of bias.
Another problem: If someone sees that they're being paid at the maximum for their role, they'll probably want to know how to get to the next level. If the company can't answer how they're nurturing and regularly promoting employees, workers could be motivated to leave.
Transparent pay goes beyond publishing salary ranges
At least 10 states and cities have passed laws that require employers to affirmatively state their salary ranges, either in job descriptions or when an applicant requests it.
It's a big step, but workers expect more, according to the Salary.com survey. Workers say they want more transparency from their company about how they're paid compared with competitors, compared with their co-workers, based>Workers want transparency to close the pay gap
Employees, for their part, have more power than ever to voice their support of more transparent pay practices. Turetsky suggests framing it as: "How do I learn about and help support transparent pay here?" and not just, "How do I get more money?"
Economists have long said that greater pay transparency could help close racial and gender wage gaps. Workers want this to happen. Roughly 2 in 3 workers say it's important to them that their company's pay practices support efforts to improve diversity, equity and inclusion. But only 1 in 3 believe their company's pay practices actually do this.
Meanwhile, legislation to promote pay equity has existed at federal and state levels for decades, but employer pay practices continue to create wage gaps that have barely budged in years.
Turetsky hopes companies consider the context of today's labor market and employee demands for equity to get more serious about pay transparency: "You don't have to be an expert to know that a wage gap exists. But there's a gap of people who think it's important versus organizations actually doing something about it."
