Discover how pay transparency increases the quality of talent found during acquisition and recruiting efforts. Plus several other benefits, in this guide.
When you post a job, would you like to see more applications come through with the skill set you are looking for? Do you want to attract top talent and keep them motivated from day one? In today’s job market, you can, but you also need pay transparency.
A recent report from Beqom showed that 58% of employees would change jobs for pay transparency. It is important for workers.
In fact, there are many workers who believe they do not have fair pay. According to the 2022 Job Seeker Nation Report, 37% of employees say their employer does not give them fair pay, while almost half say that if they changed jobs right now, they could make more money.
The unfortunate part of not having pay transparency is that being secretive can lead to discrimination and issues in pay equity. SHRM recently said that new research shows that the pay gap existing between men and women will disappear for many jobs when the employer practices pay transparency.
When you have compensation transparency, you close the pay gap. This is a highly valuable tool for your recruitment efforts, and here is why.
What is Pay Transparency?
We define pay transparency as how many employers are open about compensation in terms of what, why, and how much. Also, it defines to what extent employees may share their compensation information with others.
The goal is to let workers understand why they have the pay rate they have currently. Further than that, it lets employees fully understand what needs to be done for them to reach future steps on the company ladder.
The Benefits of Pay Transparency
Compensation transparency has a ton of benefits for human resources departments. If an employer is generous, they will see competition for the positions at their organization. Likewise, some businesses believe they offer great compensation, but with transparency, they discover they are not as competitive as they once thought they were.
While there can be drawbacks to pay transparency, like a qualified candidate not applying for a job because the compensation is too low, the benefits outweigh the challenges. When you are not transparent, it can do more harm than good.
Attract More Candidates
Typically, you find that a job posting with information on the pay rate will attract more applicants. A recent study discovered that job postings with salaries get 7.8% more applications than one without it. It gives your recruiters a better chance at finding the right candidate when there is a bigger pool to choose from.
Foster Trust
Workers feel they are in a better, stable work culture when the employer is honest about pay. This fosters a feeling of trust and comfort so that an employee will want to stay. If a worker feels uninformed, they will lose faith in management.
Pay transparency helps with employee retention. Beqom released a report with findings that workers who believe there is a gap in pay, even without proof, will cause a 16% decrease in wanting to stay employed at their current company. If you want to keep your amazing talent, it pays to have compensation transparency.
Fairness with Less Bias
Many employees value pay equity. They want the comfort of knowing that the system is fair. Compensation transparency creates trust in the practices of pay.
Transparency takes away the noise of how an employer determines the compensation they offer. This opens a feeling of trust so that employees know they are being recognized for their efforts fairly.
It also takes away bias, ensuring that all races, genders, and other demographics have the same equal treatment, creating a feeling of trust. Making everyone’s salary visible puts the responsibility on the employers to justify the amount they pay someone, which also takes away the potential for bias.
Monster surveyed employers and found that 72% think pay transparency is good for business. That is because it reduces misinformation, increases trust, and assists employees so that they can make informed decisions. With compensation transparency, an employer brand can attract candidates who value this kind of honesty.
Tips for Pay Transparency During the Hiring Process
If you are ready to practice transparency in compensation, here are a few tips to help you get started. You can use a pay transparency spectrum like PayScale.com has to help craft a policy. There are five levels of compensation transparency, which include:
- What
- How
- Where
- Why
- Whoa
First is the “what.” At this level, employers let both employees and their applicants know the least information that is required. This includes how much their rate of pay is and the interval for pay periods.
At the first level, an employer will not engage in a conversation beyond immediate compensation.
Second on the spectrum is “how,” which leverages a basic compensation strategy. It identifies market research data that is relevant for some or all positions. It shares a limited overview with employees and applicants.
When an employer shares a formula for the salary process, this helps build trust between the employer and the applicant. It encourages a higher number of qualified prospects to apply for an opportunity.
Next is “where,” and at this level, the employer creates what is called a “philosophy, strategy, and (pay) range.” This is for both job groups and specific job titles. It allows an employee and an applicant to understand where on the company’s pay spectrum they are currently.
Further, Down the Spectrum, We Go
Then, there is “why.” With the “why,” human resources align company culture with a compensation strategy. Businesses share salary ranges and the rationale that is behind them.
Beyond that, they commit to training leadership, supervisors, and managers so that their people feel empowered to have an open conversation with an employee and applicant about salary. To achieve this, you must successfully execute this transparency level by showing how a candidate’s skills and experience match up to the company’s business objectives.
You will need policies in place that reinforce the support of this aim and philosophy. It must be an everyday practice and how you conduct business.
Whoa, Nelly!
Last, there is the “whoa” sharing model of open salary information. Here, employers disclose a position’s pay publicly and how it is they arrived at that compensation rate or salary. It is a good practice, but it is rare.
The “whoa” approach requires a company to build a culture that supports it, with open examination and dialogue. It is transparent about the value of every function in relation to an organization’s bottom line.
It is Time to Update Your Policies
Once you are ready to take additional steps to practice pay transparency, you will need to create a policy and implement it during the hiring process. You will need to level the playing field. This means offering current employees the same access as a new hire has to the pay data that they discover during the recruitment process.
It will take some thought and some planning. You may uncover inconsistencies in your current structure and possible bias, too. That’s okay because it allows your organization to make needed changes.
We have viewed salary details as a taboo subject for so long, so pay transparency can be an eye-opening experience for your organization.
External Data: Are You Competitive with Other Employers?
You are competing for top talent. If you do not snag the best candidates, your competitor may grab them first. It will be tough to sway a job seeker’s mind to come to join your organization if you are offering far less compensation than everyone else.
In today’s digital world, there are many salary market research tools that are readily available to the public. Your compensation model should align with pay data that is easily accessible online. Colleagues who work in the industry can be a great resource too for information.
When an applicant asks about compensation, you want your answer to be given with confidence. Before recruiting for a position, you want to have a sound explanation for salary justification. A candidate can typically be happy if you can offer a salary range that is not too broad.
Gather Feedback
Do not fear asking for honest feedback. You can ask a current employee, job applicant, and new hire what their thoughts are on the salary data. See if it influenced how they feel about working for your company.
To get an honest answer, you need to let them know you are looking for their honest opinion with no repercussions. It will not affect your hiring decision. You don’t need an overly critical approach either, just a brief one or two questions will suffice.
Recruit PNW Can Help
If you are ready to close the gap and offer pay transparency to candidates, Recruit PNW can help. We help you source and recruit corporate and technical talent worldwide.
For the long haul, we want a partnership with you. We treat job seekers the same way we wish an employer to treat us. We do this throughout the entire hiring process.
Contact us now to learn more.
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