Should businesses be making salaries more transparent?

Inequality around pay has been a longstanding issue and despite some efforts to improve it, such as the legal requirement for businesses to report their gender pay gap, it seems the gap, particularly within Britain’s biggest firms is actually widening.

The most recent set of government data shows women are being paid a median hourly rate 10.2% less than their male colleagues, nearly 1% higher than the 9.3% gap reported in 2018.[1]

This data only includes businesses employing more than 250 staff so the gap could in fact be significantly larger if it was to drill down into SME’s as well.

And it’s not just women who are affected by pay disparity, ethnic minorities were reportedly paid up to £5,000 less per year than their white counterparts in 2021[2] and the UK’s disability pay gap stood at a staggering 20% in 2020![3]

There has always been a taboo around discussing salaries in the UK both in and out of the workplace and this makes it much harder to see the full scale of these inequalities.

What it does do, is prompt the discussion as to whether businesses can be doing more to offer equal pay to their employees and whether salary transparency is a solution to a problem that doesn’t seem to be any closer to a resolution?

The notion of salary transparency seems to scare many businesses, it’s either deemed too big of a task to undertake, that it will open a can of worms, that people will see their salary as being tied to their worth or all of the above!

Yes, salary transparency is something that needs serious consideration before implementing, but if we’re ever going to reduce pay inequality, some serious changes need to be made.

What are the benefits of salary transparency?

Ensures Fairness

If a company hires two people who are both equally qualified for a role, with similar levels of experience, they should be paid the same salary, you’d think. However, candidate A is a really good negotiator, they’ve been told never to accept the first offer and manages to secure an additional £5,000 per year salary.

Candidate B on the other hand is an introvert, they really like the company ethos and are looking for a long term career in the organisation. They take the first offer they’re presented with and start at the same time as candidate A but on £5,000 less.

The point is, people shouldn’t be on a higher salary simply because they’re confident enough to push for it or because they value themselves higher than others. Having defined salary bands for specific roles in a business which are based on experience and skill is a much fairer way of paying people and allows everyone to feel valued, not just those who are good negotiators.

Happier, more engaged employees

Whilst we may not typically discuss salaries at work, there can sometimes be whispers amongst staff which can cause tension and anxiety. Having a fair and transparent pay structure within a business can have a hugely positive affect on the overall wellbeing of a workforce.

In a world where salary transparency is rare, being transparent sets a precedent about a company’s culture. It shows that the value of staff isn’t simply tied to their pay and when employees feel valued, they’re more likely to be productive, loyal and motivated.

Removing barriers to equality also fosters a stronger sense of collaboration because people feel more connected to their colleagues, and this also results in better performance and higher employee retention.

Keeps leaders accountable

There’s nothing worse than a toxic work culture where employees perceive their leadership team to be paid in ways disproportionate to the work they do. In some large, corporate organisations there can be a ‘gentleman’s club’ culture where people are paid based on their connections rather than their merit and this goes unquestioned.

Removing the secrecy of executive salaries means companies are much more likely to engage in equal pay for all. It reinforces that pay is based on performance alone and that those who work hard will be rewarded accordingly. Not only does this approach keep everyone accountable, but it also encourages people to perform and deliver.

Whilst it is true that moving towards more transparent pay structures will be a big step for many organisations, it does prove to be a great antidote to unfairness and pay discrimination. Whether or not businesses see it as a viable

solution remains to be seen.

One company that has successfully implemented salary transparency is Lollipop and they’ve reaped the rewards for their innovative approach to pay.