For many years, there’s been a debate about salary transparency. For decades, pay was something that was negotiated and kept behind the scenes. However, in the years since the 2008 recession, there’s a more significant push to make pay transparent. Recently, I read Buffer’s blog post about salary transparency and wanted to share it with you. Business people always seek formulas for success, and this could be an idea for your company.
Buffer, the tech company, believes in radical transparency. For those of you who are unfamiliar with the concept, it means what it sounds like it says. It’s an idea spread during the digital age, in particular, to all aspects of society aimed at expanding the openness of all processes and aspects of doing things. So, for governments, radical transparency is about holding officials accountable. And, for business, it could mean being open about their operations, including pay transparency. The drive toward transparency is also a reason why open floor plans took root in business.
Salary Transparency at Buffer
As explained by Buffer, operating with radical transparency is “frightening and exciting.” The company has promoted salary transparency for some time, and also transparency in other ways. For instance, they publish their investor updates publicly each month. Also, all internal emails have a cc list that anyone in the company can read. Finally, Buffer shares accountability and improvements through the I Done This platform.
When it comes to pay transparency, Buffer shared the formula for their “Open Salaries.” As they see it, “Transparency breeds trust, and trust is the foundation of great teamwork.” You can take a look at their Open Salaries formula by checking out their blog post. You’ll also see what the people at Buffer make since they publish the salaries of everyone on the team.
Sharing a Critical Piece of Data
Even though for many years, salary discussions have been a secret, it’s not illegal to share that information. However, the National Labor Relations Act of 1935 prohibits companies from preventing their teams from sharing salary information. So, you might be wondering why your company should consider salary transparency? Well, there are several reasons why considering it is a good thing for your business.
1. Pay Transparency Lessens Pay Inequality
For years, we’ve seen a lot of headlines about pay inequality. Unfortunately, the people who are on the short end of it are women (including those in leadership positions) and people of color. For instance, in 2019, women made $0.79 for every dollar earned by a man. For Black, Hispanic, American Indian, and Alaska Native women, the wage gap between them and men was $0.74 for every dollar. Therefore, it stands to reason when you have pay transparency, it gets a whole lot harder for managers to engage in pay inequality.
2. Employees Are Happier and More Motivated
Buffer is not the only company that adopted salary transparency. So did Whole Foods, for example. In a Time article about that company as well as an analytics firm in New York called SumAll, evidence showed positivity with employees. As the piece said, “There isn’t comprehensive research on how pay transparency affects employees because so few companies have these policies, according to Todd Zenger, presidential professor of strategy and strategic leadership at the University of Utah’s David Eccles School of Business. But anecdotal evidence from Buffer and SumAll suggests it can make workers more productive and satisfied.”
3. Everyone Knows What Top Managers Make
Another benefit often mentioned for pay transparency is that employees know what managers make. And, when team members see that, say, their manager makes $100,000, and they make $60,000, they get motivated to want to work harder so they can move into management.
What’s the Best Approach for Salary Transparency?
Every company has its own company culture. In other words, there’s no “right” answer that you can use across the board. However, there are ways that your business can explore the idea of pay transparency to see if it’s right for you. As an example, RecruiterBox has an excellent overview of full transparency, partial and no transparency. What’s more, they offer the pros and cons of each if you decide to start on this journey. If you want to explore it further, you can hire a compensation specialist.
Still, the reality is although there’s a push, and you see lots on social sites or the news about salary transparency, only 17 percent of private companies do it. Any business leader has to weigh the overall pros and cons of going down the pay transparency route. That said, it’s something that could be worthy of exploration.
© 2020 Wayne Elsey. All Rights Reserved.