What Salary Transparency Stands For

How would you feel if your co-workers knew exactly how much you made? What if it turns out that a colleague with the same jobs as you does charges something more or has a better condition because at the time he knew how to negotiate? Would it be unfair or should he be left alone because he is part of the negotiation?

These are the doubts but also the virtues proposed by salary transparency, a concept that is gaining strength and that proposes that there be greater internal and external light inside and outside companies . The most obvious objective, of course, is to avoid gaps and inequalities due to gender or any other condition .

For some, the idea is uncomfortable and stressful. For others, such as younger people and employees of companies that already practice pay transparency, it may seem like a natural step towards a fairer workplace.

It seems clear that it is more difficult to pay people unfairly when salaries are open to public scrutiny, but also that a rival company can learn how much a rival’s employee is paid and raise its offer.

In Europe, and also in Spain, it is still largely in its infancy . A few weeks ago, the term of a European directive was extended again that proposed to oblige companies to publish the salary in their offers. At the earliest, it will arrive in two years.

Now, a new study is in favor of how this policy could impact employment on a large scale.

How Pay Transparency Impacts Employees
Tomasz Obloj of HEC Paris and Todd Zenger of the University of Utah business school are two researchers who collected the salaries of nearly 100,000 US professors from eight states over a 14-year period.

Their findings, to be published in the journal Nature Human Behavior later this year, show that pay transparency (schools in some US states already practice it routinely) had a large effect on both pay equity -the equity with which academics were paid, especially with regard to gender- and equal pay -the salary similarity between academics and their peers-.

Not surprisingly, once salaries and rewards become transparent, there is both internal and external pressure to close those gaps, the study found.

The salary gap between men and women, for example, was reduced by up to 45% in transparent organizations, compared to those that participated in the study that did not disclose such data.

Pay inequality was also reduced by about 20% , whereby all wages in a given organization become more similar, with fewer outliers and fewer differences between bosses and employees.

Whoever charges the most does not always produce more for the company
It may sound like a no-brainer to some, but Obloj and Zenger came to a third finding that could also serve as a lesson for companies exploring pay transparency: When wages were made public across organizations, the link between payroll and performance it was revealed that it was not significantly lower, around 40% . This means that there was no correlation between the professionals who produced the most -in the case of the experiment, professors who produced studies or research- were the ones who received the most.

The authors also found that while job achievement was rewarded less in transparent companies, the link between achievement and pay was actually clearer and more data-driven in transparent companies than in their non-transparent counterparts.

The question now fascinating researchers is whether such a change in the relationship between pay growth and job achievement is a good thing or a bad thing.

On the one hand, companies could argue that offering salary incentives is crucial to attracting and retaining talent , a practice that results in people being paid very differently or offered different terms based on negotiation.

On the other hand, it can be argued that paying people based on their performance is itself discriminatory. For example: The academics of the study can receive a salary increase for each article they publish in a magazine, but that does not have to ensure that all those studies are of a formidable quality.

It definitely seems that here, as in so many aspects of employment in recent years, many things remain to be explored.

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