HR Executives Favor Greater Salary Transparency

By Stephen Miller, CEBS Feb 2, 2015
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With more attention being focused on pay issues—CEO salaries, minimum wage rates and the ever-widening income gap—one workplace policy likely to become an increasingly hot topic is salary transparency.

While still far from being widespread, the idea of instituting an open-book policy on what every employee earns is gaining traction. One new survey shows that more than half of HR executives would welcome a policy that sheds light on employee salaries.

In the survey conducted by outplacement firm Challenger, Gray & Christmas, 55 percent of respondents said that companies should practice some form of salary transparency. Meanwhile, 39 percent of those surveyed were opposed to opening the books on salaries.

The survey was conducted by Challenger in the last quarter of 2014 among approximately 100 HR management-level professionals. Blind responses were submitted from a pool representing a variety of industries, regions and company sizes.

“There are countless pitfalls related to practicing salary transparency, chief among them the fact that even minor discrepancies between co-workers’ salaries can lead to resentment and conflicts over who earns what,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, in a news release.

“Of course, there could be a number of reasons two individuals in the same positon earn different salaries,” he added. “The person with the higher salary may possess a unique or in-demand skill or it may have taken a higher salary offer to lure the worker from his or her previous employer. It simply may be that the higher earner was a better negotiator.”

Even if companies share the reason for a particular worker’s higher salary, “it may not quell the dissatisfaction among those earning less,” Challenger noted. “The resulting acrimony could sap a department’s morale and productivity and lead to increased turnover.”

Sharing Salary Ranges

Some companies have found a way around this potential source of conflict by not sharing individuals’ salaries but instead sharing information about the range of salaries at each position, along with information about what employees can do to move toward the higher end of that scale.

North Shore-LIH Health System in New York, which was featured in a recent HR Magazine article on the issue of salary transparency, maintains varying levels of transparency depending on the category of worker. For example, its union workers’ salaries are fully public under collective bargaining. Meanwhile, nonunion workers only know the salary range for each position.

In the Challenger survey, 42 percent of respondents said they preferred a policy that provides information on salary ranges for departments and/or job categories.

However, about 13 percent said employees should know exactly how much everyone at the company earns. That is the policy practiced by New York City-based business analytics firm SumAll, also cited by HR Magazine.

“Many believe that sunshine is the best disinfectant and that providing full exposure to everyone’s salary will not only provide employees with information that will help them determine their value to the company, but will also force employers to really think about salaries and possibly fix inequities that have become part of the system,” said Challenger.

Culture Counts

Ultimately, the decision of whether to institute a policy of salary transparency, as well as the success of any such policy, is likely to be determined by the culture of the company, according to Challenger.

“Organizations need to take a long and honest look at the culture they have created,” he said, explaining:

If you have a company where there is a long history of distrust, animosity, perceptions of favoritism, etc., simply opening up the books on salaries is not going to undo all of that. In fact, it will probably just make matters worse. However, if you have a highly collaborative workforce, engaged workers, open-door policies and a bottom-up management style, then salary transparency is simply a natural extension of the culture already in place.

“It’s not that companies can’t change their culture to be more conducive with salary transparency,” Challenger added. “However, that type of deep-rooted change takes time and it certainly cannot start with divulging everyone’s salary.”

Still, with more than half of the surveyed HR executives in favor of salary transparency, it’s an idea that is gaining popularity. More companies are likely to explore and implement such policies over the next five years.

Transparent Policies: Edging Toward the Norm

While 43 percent of employers say they don’t have a transparent wage policy and aren’t working on one, 40 percent either already have one (24 percent) or are working on one (16 percent), according to PayScale’s 2015 Compensation Best Practices Report, based on data from more than 5,500 business leaders at small, medium and large firms.

"Transparency," as used here, doesn’t imply revealing employees’ wages; it more generally refers to making pay ranges public and sharing how they are set and adjusted.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

Related SHRM Article:

Making Pay Public, HR Magazine, September 2014

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