Pay Transparency: Figurative Laser Eye Surgery for the Modern Workplace

In today’s age of information, the public is becoming increasingly knowledgeable about the elements that influence their life. One subject that has become a mainstream is that of job satisfaction. Workers today, in any field, are longing for a sense of control over their occupation situation. Pay transparency has been at the forefront of these discussions. In this paper we will explore the effects of pay transparency in the workplace and whether or not it is an overall positive influence on the workplace.

Before we can examine the effects of pay transparency, we must first define and examine pay secrecy. Pay secrecy is an enforceable company policy that prohibits co-workers from discussing and comparing salaries with one another. Pay Secrecy as company policy would not exist if it did not bring its own advantages to the table. In “Pay Secrecy: Pros and Cons,” Nebojša Janićijević explores the leverage that pay secrecy can provide a business. These points of leverage can be categorized into “improved organizational control and less conflict, greater possibilities of differentiation between good and bad workers, ensuring employees’ privacy, and reduced turnover of employees (Janićijević 231).” In essence, the less information employees can access, the greater control managerial positions have over them. This puts the employee into a position where there is no grounds for discussion of compensation, thus leading to a reduction of salary conflict. Conflict can be detrimental to a company’s productivity as it can redirect a company’s attention away from its original mission statement and lead emotion to govern decisions, rather than logic. The second advantage is to contrast between the effective and ineffective workers. In a pay secret environment, companies are able to discern productive workers from the rest and compensate the preferred workers accordingly. The last advantage of a pay secret workplace is that of lowering employee turnover. Loss of employees is detrimental to a company mainly that newly recruited employees are generally less productive, require time and resources to train, and the uncertainty that they will be a good fit for the organization. Pay secrecy minimizes these risks as employees are not able to compare salary with one another creating a mindset of uncertainty that discourages risky decisions, such as leaving to work elsewhere.

Pay secrecy is not without its disadvantages. The negative effects of a pay secretive workplace include a decreased motivation, trust, and loyalty of an organization. “The reason for such behaviour is the strong need of the employees for distributive justice, that is, for the feeling of internal equities accomplished (Janićijević 228).” In effect, companies that unsuccessfully employ pay secretive policies can be seen as having something to hide and lose employee trust. This is because the role of the manager is to serve the employees. Managerial positions exist to allow the employees to become more efficient and productive, to let the worker focus on their work. Pay secrecy is a smokescreen in the eyes of the employee leaving them feeling like an insignificant part of an organization. Employee apathy inevitably leads to decreased motivation to work, decreased productivity, and ultimately a departure from the organization.

The prevalence in pay secrecy was bound to give birth to a counter movement. Pay transparency has been gaining popularity as employees are becoming more savvy of business practices, possibly thanks to information currently available through a simple internet search. The current main body of employees belong are millennials who are less concerned about work life balance as the generation before them. Work life integration has been on the rise and as a result workers are treating employment as an integral part of life rather than a task to be done. Consequently, a sense of control over employment and its components is desired. Pay transparency is seen as a step toward this idea.

Pay transparency comes with its own suite of advantages as well. Namely, it is a step toward narrowing gender, racial, and ethnic based pay gaps. Even though there are laws prohibiting salary discrimination based on a gender, racial, and ethnic basis, transparency of salary holds organizations and companies accountable for fair compensation distibution. Essentially it acts as a clear and visible safety measure against salary discrimination. “Other benefits of salary transparency for an organization include enhanced employee understanding of the business, a culture of trust, collegiality, openness as employees and managers share information, and the ability to create performance-based system of compensation that is understood by all employees (Trotter et al.).” An open flow of information between employees and managers gives the employee agency over their decision to remain in or leave an organization. As a result, organizations will have to maintain a favourable reputation with employees in order to sustain a healthy workforce. 

Pay transparency is not all roses however. Transparency disallows companies to acquire outstanding production talent for lower than acceptable rates. Though this may seem like an advantage for transparency, it acts as a double edged sword. Transparency means that companies will be forced to have smaller teams. Talent acquisition is immensely important for company output. If companies cannot achieve the same quantity and quality of production that consumers or clients are used to, it will lead to a bottlenecking of growth. This can lead to loss of work for talent as the company will not be able to reach consumer demands and another company that practices pay secrecy would absorb the business. “Competitors would just need to offer an employee another $20,000, and soon they can take our whole engineering team (Cooney)” Similarly to pay secrecy, pay transparency can also lead to employee apathy. This is due to our nature of comparing ourselves to one another. In an ideal situation, an employee would see a difference in pay as a motivator to improve the quality of their work or boost their productivity. In reality, this can lead to apathy as workers will feel like they are not being compensated adequately for work being done. Nancy Modesitt, Associate Professor of Law, introduces us to a study that demonstrates that employees that are below median salary for their position were dissatisfied and desired to change jobs. She finds that “This was not offset by improvements in employee morale among those who were paid higher than the median salary. Thus, there was a net overall decrease in employee morale.” 

Many companies are reluctant to implement pay transparency as it comes with a laundry list of policies and government guidelines to follow. “Pay transparency means that pay practices will have to survive under new conditions, subject to closer scrutiny by applicants, employees, upper management and audit committees, unions, customers and the government (Friedman).” Elena Belogolovsky and Peter A. Bamberger suggest the concept of “partial openness” as a solution, or stepping stone, towards complete transparency. “For example, organizations might provide employees with information on pay ranges and/or the schedule detailing how, at the aggregate level, merit increases and/or bonus payments link to performance rating and position in the pay range (Belogolovsky 1727).” In Ontario, the Pay Transparency Act, 2018, is delayed from January 1, 2019, “to a day to be named by proclamation of the Lieutenant Governor.” With the increased ease of access to information, the reasoning of employee privacy security is becoming less and less relevant. Pay transparency puts the power to decide to keep working at an organization in the workers’ hands. Ultimately, pay transparency is a step towards personal agency and freedom. I believe that this demand for complete honesty can be applied to broader topics, such as politics, where we can strive for universal transparency in terms of our occupations and our governance. 

Works Cited

BELOGOLOVSKY, ELENA, and PETER A. BAMBERGER. “Signaling in Secret: Pay for Performance and the Incentive and Sorting Effects of Pay Secrecy.” Academy of Management Journal, vol. 57, no. 6, Dec. 2014, pp. 1706–1733. EBSCOhost, doi:10.5465/amj.2012.0937.

COONEY, SAMANTHA. “Should You Share Your Salary With Co-Workers? Here’s What Experts Say.” Time Magazine, 14 Aug 2018, https://time.com/5353848/salary-pay-transparency-work.

FRIEDMAN, DEBRA S. (2014). “Pay Transparency: The New Way of Doing Business.” Compensation & Benefits Review, vol. 46, no. 5-6 , Feb. 2015, pp. 292–294. Sage Journals, https://doi.org/10.1177/1541204014560482. 

JANIĆIJEVIĆ, NEBOJŠA. “Pay secrecy: Pros and Cons.” Review Paper, 5 Feb 2016. SemanticScholar, https://pdfs.semanticscholar.org/351f/4830afa4f3f08b09cc37a5b43807bb276245.pdf?_ga=2.250979718.1404171673.1574381238-1382578936.1574381238.

MODESITT, NANCY. “Why pay transparency alone won’t eliminate the persistent wage gap between men and women.” World Economic Forum, 5 Apr 2019, https://www.weforum.org/agenda/2019/04/why-pay-transparency-alone-wont-eliminate-the-persistent-wage-gap-between-men-and-women.

TROTTER, RICHARD G., SUSAN RAWSON SACUR and LISA T. STICKNEY. “The New Age of Pay Transparency.” Business Horizons, vol. 60, no. 4, Apr. 2017, pp. 529-539. ScienceDirect, https://www.sciencedirect.com/science/article/pii/S0007681317300356#!.

WONG, KRISTIN. “Want to Close the Pay Gap? Pay Transparency Will Help.” New York Times, 20 Jan 2019, https://www.nytimes.com/2019/01/20/smarter-living/pay-wage-gap-salary-secrecy-transparency.html.