15 August 2020

Why salary transparency is the key to attracting the right people

HR Success Guide
Author: Lingappa Amiyappa (Paybooks Technologies)

When a company keeps its salary policy a secret, it works as a factor for reinforcing a gap in the salary pay. There are various companies that are concerned that salary transparency can result in unhappy workers.

However, contrary to the traditional views, various researches have shown that companies that fail to share openly about their salary policies to their employees can cause considerable friction in their organization.

An assistant professor of economics, Ricardo Perez-Truglia explains that "Employees have to make all sorts of decisions that depend on salary information, such as negotiating their salary, choosing positions within an organization, or even deciding whether to switch employers. If salaries are more transparent, employees will be able to make more informed, and thus better, decisions."

In today's corporate world, there are innumerable open jobs which makes it difficult for employers to find the perfect talent for their organization. However, it is now believed that following a transparent salary policy can help in providing a competitive edge.

There are various well-known companies like Starbucks, Glitch, Buffer, and more, who have adopted a salary transparency policy for the closing of race and gender pay gaps, to build trust between their employees, and to make corporate life transparent, respectively.

Such companies use tools such as payslip software (paybooks.in) to provide mobile apps to their employees from which employees can check the complete detail of their salary in real time.

Here are the top ways in which salary transparency can help in attracting the right people:

 Salary transparency helps in creating a cohesive workforce

If your employees feel that you have left them in the dark, they will lose trust in their co-workers and managers. Hence, more than 90% of workers prefer companies that prioritize transparency.

If your employees see their work landscape in the form of a zero-sum game, they will work against one another instead of working with each other.

Through a salary transparency policy, companies can remove these harmful incentives. They can create an inclusive work culture that would attract aspiring candidates. It also helps the companies to describe their compensation policy to their potential hires.

Job seekers find it extremely dissatisfying when the hiring process lacks the clarity of information.

 Salary transparency helps in minimizing distractions

Salary transparency policy prevents the employees from being overwhelmed regarding the uncertainty of their next raise. It also prevents them from worrying whether they are being paid equal to their colleagues.

According to the Journal of Business and Psychology study of 2016, compensation transparency leads to higher and quality job performance. The employees do not have to stress about asking for a salary hike.

Hence, everyone at the company from the bottom to the top levels can focus on their present working conditions and requirements. This creates a compact workforce that makes both the customer and the employees happy.

 Salary transparency prevents leadership politics

Managers in the corporate world are often regarded as human shields. People think that managers separate C-suite politics from the larger workforce. Transparent compensation policy ensures that the quality of the work remains of utmost importance.

Managers get highly benefited from such policies as they do not have to interfere among employees or executives who only worry about running a consistently profitable business. The managers do not even have to act as a liaison among employees who are unhappy about their pay.

Even job seekers at different levels prefer transparency in salary policies. When they see a transparent and clear compensation policy, they would be able to know what they would have to do for exceeding in their career. Hence, employees will know that their pay would be determined by the quality of the work and not the office politics.

 Salary transparency helps in attracting a diverse workforce

The pay gap is one of the crucial factors for preventing the maintenance of diversity in the workforce. Pay transparency has eliminated the practice of salary negotiation from the hiring process. Hence, it prevents the formation of a gender gap when it comes to recruitment.

Salary transparency helps in maintaining at least 50% of female employees in the workforce. This creates a sense of diversity and less discrimination among the aspiring candidates. This tangible proof helps in attracting young minds to your company while making your company make a name for itself in the industry.

Moreover, by closing the gender pay gap, the company helps its female employees by showing that they are not being discriminated against compared to their male colleagues. Hence, when transparency is complemented with accountability and equal footing, it can prevent both gender and racial gaps in terms of the pay scale.

 Salary transparency prevents employees from quitting

According to a research, it was seen that companies who pay their workers below-the-market wages, can yet successfully retain their highly talented employees if they follow a policy of salary transparency.

It provides a feeling of appreciation and importance to their existing as well as potential employees. This prevents the employees from feeling anxious or undervalued, hence they love working for the company.

This also allows the employees to have a reasonable discussion about their pay to their HR or managers in times of need. Providing justification for the pay scale of employees can help in preventing various work complications.

For instance, Hailley Griffis, the public relations manager of Buffer stated that their job applications for working at Buffer drastically increased after their company made its salary policy and data public. Transparency helped in making employees more collaborative and productive.

Closing Notes

Even today, leaders in the corporate world often hesitate in being transparent with their employees. However, it can be concluded that when the ambiguity of overcompensation is removed, it allows the employees to keep them fixed on their work rather than anything else.

Therefore, aspiring candidates always prefer companies that can offer them ideal working conditions which have the least complications in terms of salary policies. Apart from retention and productivity, it also helps in boosting the morale of the employees while working effectively to close any existing discrepancies.

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