Transparency or Taboo: Should Companies Publish Pay Data

Business interview

While people seek – and find – much more in their working lives than just a salary, the need to earn a living is the primary reason most of us work.

A recent study by Indeed found that 57% of employees rank their pay as the most important factor in their job.

But if earning a salary is a priority for workers, keeping those salaries confidential has traditionally been a priority for their employers.

While employees’ attitudes to discussing their salary publicly can vary from country to country – Britons are famously coy while Americans can be more open about what they earn – this is a matter of personal choice.

By contrast, the idea of employers revealing what they pay individual staff members has tended to be a taboo almost everywhere.

Nevertheless, pay transparency has started to hit the headlines more and more in recent years, both through laws surrounding the disclosure of companies’ gender pay gaps and through the high-profile publication of the salaries of the BBC’s talent.

While by no means commonplace, it is a policy that more employers are beginning to embrace. We decided to look at why it might be a good idea for your company, and why it might not.

The Swede-est thing

An interesting point of comparison to the UK is Scandinavia, where pay transparency has long been second nature.

In Sweden, the Public Access Principle is part of the constitution, and it allows any citizen to request salary information from trade unions or equality watchdogs, while companies with more than 25 staff have to carry out a full pay audit every year. Similar rules are in place in neighboring Finland and Norway.

Reports from these countries are overwhelmingly positive. Such rigorous, statutory transparency can be seen as a bulwark against pay inequality; proponents say it can empower people to recognize their own monetary value, while at the same time preventing companies from denying it.

But if it works that well, why haven’t all countries adopted it? And even if it is not a legal obligation, why don’t all British employers implement it?

Information is power

The Indeed survey that confirmed how important salary is to most employees also revealed a sizeable appetite for pay transparency in the UK. A majority (56%) of the 2,000 employees questioned backed salary information being made publicly available, in a similar way to how it is already in Scandinavian countries.

In fact, only a third of British workers said they would directly oppose such disclosures.

Compelling though it is, such survey data remains hypothetical. In practice, the overnight publication of such sensitive information would be likely to cause problems, at least initially. Employers would have to treat the instigation of pay transparency as the start of a series of conversations with their employees – many of them potentially difficult ones.

Morale can be a fragile thing at the best of times. How would an employee react if, for example, they learn they are paid 20% less than the person who sits next to them? Especially if they feel they are the more qualified or experienced member of staff.

The upside is that this transparency should lead, fairly quickly, to these grumbles being resolved and something close to pay equality being established. It should spur those who feel underpaid to do something about it. It may also improve the productivity and performance of those who are paid more handsomely, if they become aware of a need to justify that salary.

And yet it all feels like a curiously un-British thing to do. Stereotypically, Britons are uncomfortable about discussing money; so turbocharging a national conversation about salaries would be a highly uncharacteristic move.

Gender still on the agenda

To circle back to Scandinavia, it is striking to look at those countries’ gender pay gaps, given the blanket transparency that has long been part of their culture.

Sweden’s gender pay gap is 15%, while Finland’s is similar to that of the UK, just shy of 10%. It suggests that pay transparency does not necessarily translate to pay equality.

An interesting finding from our survey might help show why. It found a significant disparity between men and women when it came to the importance of salary.

While 60% of men ranked pay as the most important factor in their jobs, only 54% of women did; still a majority, but an indication that money matters more to male workers.

This tallied with Indeed’s findings last year that men were more likely to ask for a pay rise, with only 38% of women indicating they would do so in the coming year compared with 51% of their male counterparts.

There is an element of “don’t ask, don’t get” that might be seen as a contributing factor to the gender pay gap. Therefore, full pay transparency might force employers to be more proactive in addressing these imbalances themselves, meaning those who are not comfortable demanding more money – in particular women – are less disadvantaged.

No clear view on transparency

Conversely, with the UK’s larger employers now legally obliged to publish details of their gender pay gap, the law is already seeking to address inequality. Seen in that context, some might ask if there really is a need for full transparency.

There is no short answer to any of this. Clearly what we earn is as important as it has ever been, despite the rising prominence of non-salary perks – financial and otherwise – in recent years. However imbalances remain, and while the gender pay gap is improving, there is always more that could be done.

Whether full pay transparency is the solution, however, looks questionable when we look at the countries that already have such a policy in place – and yet still have a gender pay gap. Are the potential morale and motivation problems that might be kicked up by total transparency ultimately worthwhile? Expect this debate to rumble on, and resurface, in coming years.

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