“Fighting for justice and fairness,” that’s what the Google employee claimed was her reason for taking pay transparency into her own hands back in July. She created a spreadsheet in which she and a bunch of other Google employees documented their pay and then shared it around on social media. That’s when people noticed the numbers showed unequal pay.
Pay transparency is a pretty hot topic in HR and for leaders of many companies. We all want to do things the right way. But just because pay has been hush-hush for many years doesn’t mean it has to stay that way. In fact, your age may determine how open or private you are with matters of pay communication. Baby boomers tend to be private when talking about how much they’re paid, Generation X employees are still somewhat private, and Millennials are public about pay. A shift in workplace demographics may cause the shift in a company’s pay transparency.
Some companies are making headlines talking about how well pay transparency is working for them. They feel it helps employees trust them, makes recruiting and job offers simpler, and shows they pay their people fairly. Here are some companies who are making it work:
· A Solar-panel installation company Namaste Solar has a completely open pay structure. Every employee knows the salary of everyone else. Their structure includes employees receiving “equal bonuses” and keeps employee salaries closer together so people don’t feel unfairly treated by compensation. They feel it’s working for them.
· Buffer, a social-media company, has a transparent culture that extends to pay. They use a simple formula when determining an employee’s pay and every single employee knows what that formula is; therefore, everyone knows everyone’s pay. The formula factors in job roles, geography and experience. Buffer found that this formula-based pay transparency has helped hiring efforts, as applicants are more attracted to it than discouraged.
· New York City-based SumAll keeps a system in which any employee can look up everyone’s pay. They’ve found that their employees tend to trust them more when they are transparent about most things. In fact, they state that they haven’t lost any employees as a result of their transparent-pay policy. Their turnover rate is under 10 percent so they feel it’s working for them.
· Government jobs have been completely transparent for years. Anyone of us at anytime could look up to see what those who work for the government are making online.
Still, a CareerBuilder.com study showed that nearly two-thirds (65 percent) of employees wouldn’t like it if their companies made all salaries public. Forty-two percent said it would create jealousy and morale issues, while thirty-three percent said it “violates worker privacy.”
Pay transparency doesn’t always work as well as some would like. It can cause confusion when people are comparing salaries of very different types of jobs. One study showed that people who are made aware that they’re not paid as well as others are more likely to cheat their companies.
We hear a lot in the media about the difference between what CEOs are making compared with their employees.
The Gravity Payments story might not be the perfect example of pay-transparency gone wrong, but it shows one example where pay transparency didn’t turn out perfectly. Remember all the media attention CEO of Gravity Payments, Dan Price, got when he decided to slash his own salary and bring every one of his 120 employees to right around $70,000 per year? Everyone knew what was happening. Still, the company lost two valuable employees who believed it was unfair to raise the pay of some employees so much while loyal and long-term employees got close to nothing. Whether this failed because they were so transparent or this was just a radical idea—which it was—is up for debate, but it begs the question: If everyone didn’t know what their coworkers were making, would it have been such a problem?
Either way we look at it, things are changing in our workplaces with what’s acceptable and even right when it comes to being open and transparent about pay. As Baby Boomers begin to leave the workforce and more millennials enter, companies will need to rethink the way they look at pay and consider whether they need to continue to be close-lipped about it.
It all boils down to this being your company. Your company is unique. You have a certain employee demographic. Your people are different; your leaders are different. What will work for your company?
At the end of the Google debacle, the employee felt that “the world didn’t end . . . because salaries got shared, but [things] got better for some people.”
Remember, it doesn’t have to be all or nothing. There are some places you can choose to be more transparent. To learn more about the different degrees of pay transparency and if it may work for your company, join us for a webinar with PayScale discussing way of “Creating Pay Transparency in the Workplace” tomorrow, September 24 at 11 am. Register now!