The document discusses the importance of pay transparency in organizations, highlighting various levels of transparency from simply disclosing salaries to complete openness. It examines the potential benefits, such as increased employee trust and satisfaction, alongside risks like employee dissatisfaction with salary comparisons. The article advocates for a strategic approach to implement transparency, taking into account company culture and the opinions of employees.

1. Pay Transparency Rewards
& Risks: How To Do It
Right?

2. Everything you need to know about pay transparency
Pay transparency (aka salary transparency or compensation transparency) is one
of the most hotly debated topics. It is because it isn’t rare for two people with the
same qualifications to be earning different salaries for the same position. Nobody
would have known a decade or two ago since salaries were considered a taboo
conversation subject.
However, today’s workforce doesn’t follow the same rules, and salary discussions
are more open and more legislation is coming into place. Almost 40% of the
responders to a Blind survey said that they had discussed their salary with at
least one other co-worker.

3. It is becoming more common for companies to be transparent about this. Glitch,
for instance, decided to share salary ranges for each of the roles. This move
toward transparency has been beneficial, according to their CEO. It created trust
between employees and the company. Including a salary range in the job
description also increased the application rate and earned the company praise on
social media.
Now, the question is, are you ready to be transparent about salaries and
decisions associated with your organization, and how transparent should you be?
Who is this article for?
Before you keep reading: this article is designed for companies who
are NOT currently under any legal obligation for transparency. If you
have legal obligations, please follow the guidelines stated.

4. If you are...
● NOT in a region where pay transparency is mandatory,
● Looking to boost retention & create a more fair compensation structure,
● Wanting to get ready for incoming pay transparency legislation.
then this article is for you!
Do You Need to Bare It All – Levels of Compensation Transparency
Choosing to be more open about salary discussions doesn’t necessarily mean you
need to publish all the numbers out in the open.

5. There are multiple levels of transparency, ranging from telling a person only
what’s owed to them to having an open salary structure. The level of
transparency ideal for your company depends on multiple factors, including the
type of workforce, company culture, practical possibilities, etc.
At this level, salaries are not published inside the company. Everyone can
negotiate their salary according to their negotiating skills, even if a hidden salary
grid may be in place to frame and define wages. There's a minimal discussion
about it, so companies don’t know whether employees are satisfied or not. And
employees have no idea of their potential increase if they move up within the
company, which can be a source of demotivation.

6. There's a minimal discussion about it, so companies don’t know whether
employees are satisfied or not. And employees have no idea of their potential
increase if they move up within the company, which can be a source of
demotivation.
Level 2: Knowing Your Salary and How It Is Calculated
A step ahead of Level 1, in this case, someone compiled guidelines for the
different roles and levels of each and assigned an appropriate salary range to
each group. Now, employees know how much they are being paid and can
compare it to the market standards. For example, someone can know that he is
being paid X amount based on a market study of salaries earned by people with
similar qualifications and experience.

7. At this level, it becomes crucial to have a reliable benchmarking tool that
provides data from companies in similar stages of growth. It will allow
companies to have trustworthy and unbiased information, but this will also
reassure employees on the validity and seriousness of the approach.
Level 3: Knowing the rationale for salary decisions
This step is another significant one toward pay transparency. One-on-one
discussions about the policies and the reasoning for different salaries can be held
open. Employers must be available to discuss why they can or can’t match
salaries being paid by another company.

8. Contrary to what you may believe, clearly stating that the company cannot match
the market standards will not make all your employees leave.
While some companies cannot match the salary, they can offer other benefits
such as a remote location, or working for a positive impact project such as the
French start-up EcoTree, labeled B-corp.
Level 4: Knowing Your Salary in Comparison to the Minimum and
Maximum Range

9. To reach this stage of transparency, companies need to have a defined salary
structure. An employee knows the salary range earned by people in similar
positions across the company and knows what they need to do to make more.
For example, Whereby achieved this level of transparency by using a simple
process to build their salary grid:
1. They decided on their philosophy, i.e., which company they wanted to
become (flexible, inclusive)
2. And then, they decided to translate this into a set of rules
3. Which translated into a salary scale accessible to all

10. As Jessica Zwaan, COO of Whereby, explains, “this means we lead with the
philosophy first, rather than looking at our team’s salaries and then coming up
with rules based on our current pay rates.”
It is important to remember because it enables companies to be as fair and
objective as possible and create a philosophy that is not driven by past decisions.
Level 5: Knowing It All
The final step of the pay transparency spectrum is about putting all your
calculations out for public viewing. Employees know how much they make in
comparison to others. Everyone else does too. An online search for “position at
company X salary” may give you the exact amount paid. This is not an easy level
of transparency to maintain.

11. Buffer decided to make all salaries public in 2013, and even though employees
were initially a little wary following this decision, they wouldn't go back! The
team is openly talking about money and asking for fewer raises because
everything is more apparent with a base salary based on average wages in the
field and the cost of living.
The Rewards and Risks of Pay Transparency
There are a lot of advocates for pay transparency, but while some believe that
clarity brings about equality and trust, others wonder whether it can divide the
workforce. There are both advantages and disadvantages to starting a discussion
about salaries.

12. Let’s Talk About The Rewards First
The ‘How’ and ‘Why’ of salary structures make employees more satisfied with
their current position while showing them the steps they need to step up to the
next salary bracket. Happy employees can focus better on their responsibilities
and are more productive.
Pay transparency instills an essential level of trust in your organization. When
people know why they earn what they do, they’re more likely to trust that your
compensation decisions are made strategically and not on an ad-hoc basis. As a
result, 81% of workers say they are more productive when paid fairly.

13. Our 2022 adjusted gender pay gap analysis showed that transparency drives
equal pay:

14. It also facilitates the annual salary review. When it’s time to ask for a raise, the
employees will be in a more informed position, and employers will have to see
fewer rounds of negotiations.
Sweden’s Example and Approach to Pay Transparency
Taking a proactive approach to pay transparency can also help with compliance
in light of how governments push new legislation about pay transparency. The
Swedish Discrimination Act was passed long ago in 2008. This law requires all
companies in Sweden with over 25 employees to issue annual surveys on salaries
paid. If wage discrepancies are discovered, the firm faces a high fine.

15. Sweden’s commitment to an open salary policy and equality has been influential
in cultivating trust at every level amongst co-workers and between employers
and employees. Swedes are also permitted by law to request the tax returns of
any other Swedish citizen. It cannot get more transparent than this.
Other countries like the UK and Norway also have similar transparency laws.
European measures are also being discussed on pay transparency, and a draft
directive on gender pay transparency was published last spring.

16. The Flip Side Of Pay Transparency
No matter how rationalized, employees may feel bitter about their colleagues'
earnings. Some employees may feel uncomfortable knowing their salary is public
knowledge. 27% of the respondents to a survey said they would not like to discuss
their compensation publicly.
Employees who suddenly discover they are “underpaid” become more
dissatisfied with their employer and more likely to depart. They may be
uncomfortable collaborating with colleagues who earn more, and projects could
slow down. Ultimately, good employees may leave your company if they feel
undervalued.

17. One problem raised with pay transparency is that it causes individuals to focus
on comparing salaries rather than improving performance.
However this is one drawback to a practice that your employees and candidates
otherwise benefit from.
How To Do Salary Transparency Right
There are pros and cons of pay transparency. It doesn’t have to be all or nothing.
Your approach is what matters.
Until your company has legislative obligations from a directive or law, preparing
for transparency doesn’t follow a specific path, but there are a few basics you
need to get done.

18. #1 Define company culture towards transparency
Firstly, as an organization, you need to assess what company you want to be and,
thus, which level of transparency you hope to achieve. Radical transparency can
be just as extreme as keeping silent. Next, you need to define salary policies
clearly. You need trustworthy benchmarks as market research. You also need a
clear strategy, well-structured pay ranges, and a plan for its execution.

19. #2 Ask employees about it
Pay policies are primarily about employees, so ask them what they think about
your compensation philosophy and desires in this regard! Are they comfortable
sharing their salary? What are their fears? What are their suggestions? This will
help you finalize (and reconsider maybe) your approach to transparency.
#3 Communication is the key
Finally, you need to train people in communicating your compensation plans.
When employees want to talk about salaries, they usually turn to their managers.
Hence, your managers need to understand the basics of your company’s
compensation structure. Guide them on connecting the dots between the
compensation offered and the company’s cultural values.

20. The communication across the company needs to be consistent. People may get
different salaries based on their roles and qualifications, but equal opportunities
must be available to everyone. For example, if stock options are available to one
employee of a specific pay grade, they should be available to everyone in that
segment.
Key Takeaways on Compensation Transparency
Following a policy of transparency for salaries has many advantages, but you
need to think carefully about how you plan to go about it.

21. Without a transparent company culture backing it and a clear compensation
communication strategy, transparency can be troublesome. After all, people are
emotional about salaries, and part of their self-worth links to the perception of
where they stand compared to others.