Diversity, equity, and inclusion discussions have gained significant traction in professional circles, especially among HR and People teams. However, only around 17% of companies practice compensation transparency, which plays a key role in ensuring equitable practices by paying employees fair wages for their work.
While openly discussing salaries was previously seen as a social faux pas, this is no longer the case as today’s candidates and employees demand more from their employers and seek out companies that walk the walk when it comes to equitable compensation practices.
Continue reading to learn why compensation transparency is crucial to your company’s DEI initiatives, and see how transparent compensation practices can benefit both employers and employees alike for better employment outcomes.
When comparing all women to all men in 2022, women still earn less at an average of 82 cents for every $1 men earn. The pay gap is even worse for women of color and women 45 and older. For instance, women aged 45 and older earn only 73 cents compared to men in the same age bracket.
Studies have found that not only is there a pay gap, but many workers said they aren't allowed to discuss their pay with other employees in the first place. The Institute for Women’s Policy Research found that 75% of workers were discouraged or prohibited from discussing wages and salaries in 2017. While this represents an extreme, well-intentioned companies are also keeping the pay gap alive by not actively practicing compensation transparency.
What exactly do transparent compensation structures look like? Take a look below for a few ways employers can get started with:
Implementing transparent compensation practices can also do wonders for your company culture by fostering a positive, honest, and trusting environment that promotes a diverse workforce. For candidates and employees who are members of historically underpaid and underrepresented groups in particular, joining a company with clear compensation transparency policies in place can be a major relief and motivating factor.
Why choose a role at another company where they might not be paid fairly, when they can accept a role at a company they know will pay them what they truly deserve?
When employees know that they’re being paid a fair wage and work for a company that values equitable pay practices, they have more of an incentive to perform well and meet their goals.
Failing to establish equitable compensation practices can build distrust and lead to employees harboring resentment toward their employer, if they suspect they’re being underpaid. These employees are ultimately much more likely to be unmotivated and underperform as a result, which can waste valuable time, money, and potential for everyone involved.
Compensation transparency can also help teams improve their retention rates. Buffer, a social media scheduling tool company, found that their employees placed greater trust in their company thanks to pay transparency, so much so that workers were 110% more likely to stay at the company.
Ultimately, these results aren’t entirely surprising. When companies promote an open and collaborative environment, pay all workers fairly, and create trust, employees are much more inclined to remain at a company and put their best foot forward instead of searching for greener pastures.
Interested in implementing these practices at your organization? Welcome’s Total Rewards has helped 50% of customers conduct more frequent salary reviews to maintain compensation transparency and achieve lower attrition rates. Get a firsthand look at how this could benefit your company by booking a demo.
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