At Gray Scalable, we spend a lot of time working with companies to mature their compensation practices, and at a certain point we always get the same question:
“Should we have salary transparency?”
It can be a daunting concept to even the most people-first leaders, but with salary transparency laws becoming more common and employees feeling more empowered to ask for compensation info, it’s a necessary conversation.
Here’s what to consider as you decide what’s right for your org.
Do you have alignment on what salary transparency means?
The phrase “salary transparency” can scare leadership teams, but that’s usually because they don’t understand their options or have full alignment on what is feasible and best for their team. A shift to salary transparency can look a few different ways:
- The company shares its compensation philosophy and pay strategy, but does not disclose salary ranges.
- Each employee knows the salary range they’re currently in.
- Each employee knows the salary range they’re currently within and the range above them.
- All salary ranges by level/seniority, type of job, and geography are shared internally.
- All employee salaries are shared internally.
All of these give employees more insight than knowing just their own salary, and each gives varying levels of increased information. And remember, you can shift to more transparency over time, but it’s very difficult to roll back decisions. A common scenario for a company looking to offer transparency is to start with Option 1 or 2 and then move toward Options 3 and 4.
Are you ready for salary transparency?
Before you consider salary transparency, you have to make sure you are in a safe position to do so. We generally recommend that companies act like their salaries could be fully transparent, even if they’re not - would you be able to explain your decisions? This means the work to prepare yourself for salary transparency is the same work every org should be doing no matter what is shared with employees. An org is ready to think about salary transparency when:
- You have documented, consistent salary bands.
- You’ve made decisions as to how you’re going to handle employees living in different geographies and working in different types of jobs.
- You’ve addressed any internal issues around pay equity and consistent pay practices.
- You are committed to adhering to your salary bands moving forward.
- You have assessed if your managers are ready to discuss compensation and have the capacity to support them in compensation conversations as needed.
- You’ve discussed how salary transparency might impact or tie to other related initiatives such as: performance reviews and your raise process.
The benefits of salary transparency
Again, salary transparency can make org leaders nervous but there are a number of benefits to consider:
- Salary transparency engenders trust and can reduce attrition. Being able to talk about how you pay can positively change an employee's understanding of compensation. Even in a scenario where an employee is unhappy with their salary or salary band, the suspicion that the org is hiding anything from them is reduced. It’s a way to show that you are making a good faith effort to be fair and straightforward with employees.
- Offering some level of salary transparency makes the communication path clearer and cleaner for associated conversations such as: career paths & growth, raises, salary implications of moving teams/role/geography. Once you have a consistent system for decisions and have shared it, you can have better conversations with employees about where they stand and where there’s room for improvement.
- Sharing info about salary ranges gives employees some understanding of what is possible when it comes to a potential raise. This can also be a challenge (more on that below), but if an employee understands your compensation framework and salary bands they are more likely to make requests that align with how you pay, versus citing a number they found online or from speaking with friends.
- It can help with hiring. Having some version of internal salary transparency means you don’t need to worry about any potential awkwardness if/when you share salary ranges with job postings. Employees will already have some context for the ranges you’re posting rather than seeing them “in the wild” and making their own assumptions. Salary transparency can also be used as part of your employer branding efforts and be compelling to candidates looking for a more progressive workplace.
- If you’re trying to tie concrete actions back to your stated values or results from an engagement or inclusion survey, salary transparency can be a big win. It’s considered foundational to equity work, as well as fostering trust and communication between employees and leadership.
The challenges of salary transparency
There are, of course, challenges to salary transparency. Compensation can be a fraught topic, and it’s important to know the work ahead:
- With increased transparency employees can more easily see the pay differences between different roles, levels, and geographies. They may be unhappy with where they are paid in their role’s salary range or how their salary range compares to that of another team. They may also disagree with your overall approach to compensation. If done well, you will have data and reasoning to back up your compensation philosophy and how you’ve decided to pay everyone, but that may not satisfy some employees and can lead to challenging conversations. In addition to the time these conversations take, they can take an emotional toll on both employees and managers.
- There is a potential cost to increased salary transparency. As noted above, employees may use info on salary ranges to advocate for themselves. Even if you feel someone is paid appropriately, it’s common for a company to feel pressured to give more raises while shifting to transparency, as they want to retain high performers and show they’re open to compensation conversations.
- The roll out of salary transparency will take time and effort, especially from HR, leadership, and managers. To optimize the benefits of salary transparency it’s important to train managers in how compensation decisions are made and how to talk about these decisions. An org needs to be very thoughtful about how salary info is shared with staff and give space and time for everyone to meet with their manager to discuss. To not do so both undercuts the value of salary transparency and can potentially do more damage than not having transparency at all.
- Rolling out salary ranges is not a “set it and forget it” exercise, especially in the current competitive and shifting market. The company will need to have resources committed to keeping up with the market and making adjustments when needed.
There is no “right” answer when it comes to deciding about salary transparency, and no matter your enthusiasm there will inevitably be bumps in making a shift. That said, deciding what’s right for your company is an important conversation - just make sure you’re balancing employee needs with the company’s capacity and readiness.
If you’re at a small or growing company and have a question you’d like answered in a future post, email me at email@example.com.