Pay Transparency: What can HR do?

Did you know that new research shows that sharing information about salaries actually makes employees work harder?

A study, conducted by Emiliano Huet-Vaughn, an assistant professor of economics at Middlebury College, revealed that participants who disclosed their earnings and made comparisons with others generally worked harder to increase their performance. In addition, another study, conducted by Elena Belogolovsky of Cornell University and Peter Bamberger of Tel Aviv University found evidence that pay secrecy can cause a decrease in work performance.

The idea of sharing salary information to everyone in the company is enough to make senior managers cringe but the demand for pay transparency is picking up pace, with younger generations flocking into the workforce each year. In fact, whether you like or not, these young workers may have already shared such private details with each other or obtain such information from the many salary sites found on the Internet.

Let’s face it, there is no way for employers to prevent this change from happening and employers should anticipate that one day, employees would walk into their office and enquire about the market pay for their jobs or demand answers as to why their colleagues are getting paid higher than them.

So what can you, as a human resource (HR) personnel, do to handle this delicate situation?

Hire and offer a fair pay from the start

You have to start by paying your employees fairly from the very beginning. Conduct your research and audit your own pay scales to ensure that your company salaries are at a competitive market rate. This is also the time for you to be familiarised with the various salary sites found online and note the strengths and weaknesses of these sites. Never try to undercut your employees. Remember that your employees deserve a fair pay in return for the high work expectations from the company.

Promote an open work culture

As a HR personnel, you need to be approachable and encourage a work culture where employees can feel comfortable to approach you with enquiries pertaining to their salaries. Always show openness towards employees’ queries. With your knowledge and familiarities on the various salary sites found online, you can then be prepared to have an open dialogue about how the pay structure is determined, how performance is related and how employees are matched according to benchmark jobs.

Educate employees

When the inevitable happens, you can use this as an opportunity to educate your employees. Help them to understand their salary ranges, the job nature, and why it is important to compare job descriptions instead of job titles. For example, anyone can hold a ‘Manager’ position, however each manager would possess different sets of responsibilities. You can also encourage them to explore ways to improve themselves in their jobs such as learn new skills, go for training or pursue certifications that can boost their growth within the company.

Plan for improvement

Do not wait for employees to come to you. Always monitor and plan for improvement. Consider conducting internal surveys regularly to get a feel of employee engagement and the perceptions on compensation. Encouraging employees to voice out makes it easier for you to identify some of the underlying problems lurking in the workplace. It makes a difference when the company is addressing the concerns of employees especially when it is about pay fairness, work performance or promotion.


Needless to say, your employees are the backbone of the company hence the importance of addressing every concern pertaining to their salaries. Having said that, paying them more than their market value will not guarantee that they won’t leave. The key here is transparency.

Foster a strong bond of trust by practicing good communication from the very beginning. You’d be surprised at just how much impact it can make in terms of employee satisfaction and retention if you are willing to have open conversations with your employees and educate them accordingly.

 

 

Source: Reviewsnap (image)