Pay Transparency – Why And Why Not

There’s been a lot of debate within Project F around the topic of pay transparency lately, not least of all with clients who are on our program (Program 50/50) but also within the tech community group we support, Men Championing Change which ran an entire session on tech’s pay gap in June 2019.

Why has it been a big topic? Because transparent pay has become widely recognised as a significant lever in closing the gender pay gap and supporting equality. Also because the pay gap in technology is reportedly a whopping 7% higher than Australia’s national average pay gap (source: WGEA).

According to a number of studies and data, this extra gap in the tech sector is largely due to the “expectation gap” whereby women’s salary expectations in technology increase at a far smaller rate year on year than men’s.

This article in the AFR in February suggests it highlights the downsides as well as upsides, saying “The upside of transparency is hard to overstate.” and goes on to list many of the benefits.

The article describes how pay transparency is proving to be a highly effective anti-discriminatory tool giving businesses a vital first step towards dealing with gender, racial and other forms of discrimination and encouraging inclusion and diversity. It also lists how Governments around the world are using pay transparency regulations to tackle unjustifiable pay gaps, excessive differences between the highest and lowest paid, and egregious hiring practices.

Not to mention the positive effects pay transparency seems to be having on productivity in some companies, from large chains to smaller tech start-ups who have adopted transparent pay from inception with encouraging results. It seems that

“by trumpeting the policy loudly from the start, these companies have attracted certain types of people who are less likely to view wage comparisons in a negative light.

…transparency has become part of the companies’ DNA and culture. The very promise that all salaries are visible and follow a well-defined procedural rule has eliminated pay imbalances and prevented social comparisons and bargaining.”

So what of the downsides? Well, it seems there aren’t that many. The suggestion is that potential negative effects could be in creating envy and perceptions of inequity if salaries are shared openly with employees. To counter this, what has become clear is that full disclosure is not a necessity to reap the benefits of pay transparency.

Key to success is in creating clear and objective performance measures, along with standing firm on a strong pay standard throughout implementation.

Earlier this year we spoke with Mark Wells, CEO of digital consultancy Cogent, who has upheld transparent pay almost since its inception 12 years ago. Wells told us:

“Respect and transparency are core values for us. We value transparency ourselves and we’re transparent with our customers financially — we’re known for it. For us, it’s a natural way to work.”

Every year Cogent looks at the market and makes any necessary adjustments. One year, Wells revealed, they had to make a significant adjustment to the salaries of their product management team where the market had shifted (incidentally, most were women). He also described how the founders had initially set the pay standard from the start, basing salaries on three clear measures — skills/experience/radius of impact.

Clearly, there is a growing trend globally towards pay transparency so leaders will need to contemplate their own philosophies when considering implementing changes. Defining a philosophy and anchoring it to company values is likely to achieve a smooth transition and bring employees on the journey. Dispelling any misconception that pay transparency means publicly sharing salary information will also help.

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Further reading

How to build a genuinely diverse and inclusive tech workforce without underestimating women’s abilities and potential.
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Uncover the differences between traditional and progressive HR and how the latter is essential to build diversity and inclusion in the tech industry, especially on the verge of the fifth revolution.