There are plenty of articles out there on how to prepare for pay transparency legislation, including this one by my colleague Gerry Murphy at Nua which sets out some tangible steps you can follow. I wanted to write a bit about, not how we can prepare for transparency, but why we should embrace it. It feels much of the discussion has stampeded towards implementation, and perhaps lost sight of the reasoning and research behind this paradigm shift.
One of the privileges I have is to hear from business leaders on the topic of people and rewards. Over the past year, a ubiquitous topic of conversation has been around pay transparency – the degree to which it should or shouldn’t be embraced, and the potential obstacles for implementing more transparent reward frameworks.
For the most part the feedback is fairly consistent and leaders agree that we should be moving towards transparency, if not immediately, then over time in a way that allows the HR function to stay on top of the scrutiny and discussions that will follow. However, not everyone agrees…
“Pay should be private!”
From one or two business leaders, I have heard more “traditional” feedback along the lines that “Pay should be private”, or “I don’t like the idea of talking about pay”, or “We should address pay equity in other ways”. This served as a timely reminder that when we are preparing for pay transparency, it is important not to overlook the “why”.
So let’s go back to basics – pay transparency legislation is not intended to drive us crazy with extra work, or make anyone uncomfortable, it is intended to solve a very real problem that has gone unaddressed for a long time which is simply and repulsively that women, and people of color, earn less for doing the same work. The reasons for this inequity are complex but one driving factor is that people who have historically been paid less, are likely to ask for less in their next role allowing pay inequity to persist from one job to the next, one merit cycle to the next, and one promotion to the next. This is why we have already seen the practice of asking candidates for their pay history outlawed in many US states. Disclosing pay ranges, both internally and externally, empowers employees and candidates to ask for pay based on the job, not their historical pay, and removes the hiding places for inequities to persist.
“Increased transparency reduces pay inequity”
If the logic isn’t enough to convince you (or others), then the research is extremely clear – Increased transparency reduces pay inequity. This research by Tomasz Obloj et al., as well as this by Michael Baker et al., both demonstrate, completely unsurprisingly, that transparency will help pay people more fairly. In addition to research, we can also look to public sector, which has long been more transparent around pay, to see that pay gaps are lower with research in 2021 indicating that the private sector gender pay gap was 21% and the public sector pay gap was 15%.
When thinking about your pay transparency communication strategy, don’t forgot to spend a bit of time on the “why” and certainly don’t assume that everyone is up-to-speed on the topic. Ultimately if leaders believe that people should be paid fairly based on what they do and not who they are, and they are committed to building a diverse and inclusive workplace, then transparency goes far beyond compliance – it is a logical necessity.