Pay transparency is a hot topic and employers recognize the need for openness around salary. Last year, Indeed surveyed 100 hiring HR executives in Canada to discover whether their businesses were adopting pay transparency policies and explore its impact.
The majority of HR leaders surveyed (87%) said they had adopted salary transparency to some degree. Among them, 32% had begun to share salary internally but not publicly, while 36% publicly shared salaries for open roles. More importantly, 99% reported that they were looking to improve salary transparency practices within their business in the next 18 months.
Closing the gender pay gap
Pay transparency helps build a framework for fair pay, and it’s supported by research. Alongside the transparency trend, we’ve seen a steady improvement to the gender pay gap over the last decade, with the percentage women earn compared to men improving from 86% to 89% between 2011 and 2021 thanks, in part, to legislation. The current Federal Government’s Pay Equity Act ensures transparency and equality for federally regulated workplaces, while Ontario requires employers to include a salary range for publicly posted jobs. Other provinces are increasingly following suit, and in the next few decades, trends suggest salary transparency could become a standard practice across the country.
Improving talent attraction
In a recent survey, Indeed found that 63% of Canadians believe that all companies should disclose salaries in the hiring process, and nearly 75% of people — including 81% of women — say they would be comfortable with their salary being made public if it could help with unfair discrepancies between men and women’s wages.
According to a 2021 Beqom report, 51% of people would consider switching companies if they offered more pay transparency than their current employer.
Building a fairer workplace
Two reasons for introducing internal salary transparency were to improve employee happiness and performance, and reduce bias when recruiting.
With legislation increasingly mandating salary transparency — while talent attraction, employee happiness, and the gender pay gap are improving in correlation to its adoption — pay transparency implementation has its hurdles.
Difficulties in implementing fair pay practices
To get the most from salary transparency and gain buy-in from stakeholders, organizations need to review their pay practices and consider how they’re going to share and promote their progress:
1. Current pay structures
When asked what they saw as the main argument against salary transparency, respondents to our survey highlighted increased tension among employees as their greatest concern.
Among the Canadian businesses surveyed, 88% had some form of structure in place and only 12% decided compensation on a case-by-case basis. The largest segment (29%) of those with a structure followed a set structure with flexibility based on experience. In contrast, 26% followed a set structure with flexibility based on experience and performance.
2. Issues with performance-related compensation
While, at first, the idea of linking pay and performance seems like a wise one — where employees are motivated to perform well in exchange for financial rewards — in reality, there’s a real risk of bias influencing decisions around performance. What constitutes high-performance is often down to a manager’s discretion.
Interestingly, studies have shown that pay transparency prompts those allocating pay to weaken the link between observable performance metrics and pay, suggesting that when performance-related pay becomes visible to all, it’s largely viewed as unfair, pressing organizations to change this practice. So, if you are going to align performance with pay, you need to ensure that you have clearly defined and measurable metrics that scale appropriately with rank.
Coupling your transparency practices with an equitable pay structure based on clearly measurable factors ensures your staff and new hires have trust that they are being compensated fairly. Organizations that move to embrace salary transparency and commit to fairer pay structures can cement their reputation as an employer dedicated to equality, and reap the reputational benefits. To achieve this you’ll need to reevaluate how your organization approaches and discusses pay.
Successfully implementing pay transparency
1. Build a transparent and fair culture
Conduct a payroll audit to identify and resolve any salary discrepancies. Clearly define roles and their responsibilities, and outline the hierarchy within your business. Establishing reasonable pay brackets for different roles can help prevent major gaps from appearing, while allowing employees to progress within a role. Lastly, evaluate how your pay structure compares to your competitors’.
2. Share your values
How your candidates perceive your policies on transparency and pay is as important as how employees see them. Salary transparency can have a hugely positive impact on how job seekers view potential employers, but you’ll need to display a clear, open and broad view of salary in your organization through your employer branding.
Additionally, by highlighting your company’s attitude to salary at every stage of the candidate experience, you can build a relationship of trust with your new hires that mirrors those established with your current employees.
3. Use salary transparency as a recruitment tool
Disclosing salary in job postings is a great way to boost applications, with 88% of people agreeing that it is beneficial to the hiring process, and shows you respect both your candidates’ and recruiter’s time.
Your job ad may be the first contact point with your candidate, but they’ll likely look for further information before applying, with 86% of employees and job seekers researching company reviews and ratings to decide on where to apply for a job.
Encouraging your employees to speak openly about your company’s salary practices in reviews can help give candidates insight into life at your company, considering employee voices are three times more credible than the CEO's when it comes to talking about working conditions.
Salary has long been considered a sensitive subject in interviews. It’s no surprise that candidates are anxious about discussing pay with interviewers; an Indeed study found that only 33% of Canadians feel comfortable negotiating salary.1 If you’ve outlined your salary offer in your job postings, interviewees should come in with a clear expectation of what’s offered. It is still good practice to raise the subject in your introduction.
Onboarding is the perfect time to reinforce your company’s commitment to fairness and transparency, and help convince your new hire that they’ve made the right decision.
At Indeed, we internally share salary brackets for every role outside of the senior leadership team in the company and have a Slack channel where employees can openly discuss compensation if they choose to.
Reaping the benefits of choosing transparency
Salary transparency has been shown to bring numerous benefits to businesses — from improved employee happiness to a reduction in the gender pay gap. Coupling your transparency practices with an equitable pay structure based on measurable factors will help to eliminate bias in your organization, create a less subjective pay structure, and cement your business’s reputation as a fair employer.