Pros and cons to pay transparency in Singapore

Earlier this month, Minister for Manpower Tan See Leng said that releasing guidelines for pay transparency may not be effective unless the underlying causes of the gender pay gap in Singapore were addressed.

The comments came after Tan was asked about the government's measures to close the gap.

"Such guidelines could be counter-productive in the long term if they affect how firms choose to hire their employees," he added.

Growth in pay transparency

In 2023, a report by Indeed found 35% of all Singapore job postings on its site included salaries, a rate 1.8 times higher than in 2019.

"While Singapore has not introduced pay transparency laws, we are seeing more employers actively advertising salary in their job postings,” Callam Pickering, Senior Indeed Economist, APAC, in a statement at the time.

“It comes against the backdrop of talent shortages over the last couple of years as companies competed fiercely for talent.”

But what are the implications of greater pay transparency in Singapore?

Benefits to pay transparency

One of the main advantages of actively advertising job salaries is that it reduces labour market inefficiencies, Michael Schaerer, Associate Professor of Organisational Behaviour and Human Resources at Singapore Management University’s Lee Kong Chian School of Business, said.

“Often, employees only realise that a position does not meet their expectations after they have gone through a lengthy application and interview process,” he told HRD Asia. “This wastes both employees’ and employers’ time and resources.”

Another advantage is that it leads to more efficient candidate filtering, Schaerer added.

“If salary information is made clear upfront, employers are likely only motivating applicants who are genuinely interested in the position,” he said.

Double-edged sword to pay transparency

Schaerer believes the benefits of pay transparency are “a double-edged sword” for employers. On one hand, it helps attract top talent, assuming that a company pays competitively, he said.

“It signals a culture of openness and fairness, and could help improve retention,” he said. “If employees think they are paid fairly, they are less likely to seek outside opportunities.”

On the other hand, salaries naturally fluctuate with supply and demand, Schaerer ssaid.

“Companies may have to pay more at times when certain types of talent is scarce, which would cause them to increase everybody’s pay who has a similar role as well.” 

For employees, pay transparency could have a positive effect on overall pay fairness.

“It will increase the likelihood that companies pay workers the same amount for doing the same type of job – assuming similar performance,” he said. “It could also have a motivating effect on employees if they get a better understanding of their pay trajectory.

“Finally, being able to see other people’s pay may help employees secure better compensation in salary negotiations with employers.”

Employer challenges with pay transparency  

Pay transparency can also present challenges for employers. It could lead to an overall increase in labour costs to fix potential pay gaps that may exist for employees in the same role, Schaerer said.

“It may also reveal large pay inequities across hierarchical roles and cause resentment and lower motivation among employees who feel paid unfairly,” he added.

“Implementing pay transparency may require a cultural shift within the organisation, particularly if transparency is not already ingrained in the company's values and practices.”

Will transparency close the gender pay gap?

Singapore's gender pay gap reduced to 14.3% in 2023, from 16.3% back in 2018.

Tan identified some of the reasons for the gap, including occupational differences, parenthood, and discrimination.

"There tends to be a lower share of women in higher-paying occupations such as those in science, technology, and engineering," he said.

"The gender pay gap in Singapore is also affected by other factors such as the effects of parenthood and caregiving responsibilities, which women tend to shoulder more than men, as well as workplace discrimination."

When asked whether pay transparency could help close the gender pay gap, Schaerer said it depends on which portion of the gap you’re looking at.

“Most statistical analyses on gender pay gaps – such as in Australia and the US – suggest that the majority of the gender pay gap is due to structural differences; e.g., women are more likely to do part-time work, have a preference for jobs that pay less, or work less overtime,” he said.

“There may also be a portion of the pay gap that is due to gender bias, e.g., lower pay for women for performing the same type/amount of job at equal performance/experience. 

“Pay transparency could certainly help with that part of the pay gap, but it won’t address the structural reasons for why women generally still earn less.”

What HR teams can do for gender pay gap

When it comes to closing the gender pay gap, Schaerer acknowledged that fixing the structural issues requires larger measures and a societal shift in areas such as gender norms and family practices. But there are still ways that employers can close the gap.

“What companies could do is make it easier for women to do full-time work and participate in more male-dominated industries,” Schaerer said. “This could include things like support for daycare, flexible hours, restrictions on evening/weekend meetings and less travel.

“However, it is also important to note that some studies suggest that countries that have the least gender discrimination (i.e., Scandinavian countries) actually see a trend where men and women self-select into traditionally, somewhat gender segregated, industries at a greater rate than less gender-equal countries. So, removing gender gaps won’t guarantee that women are more likely to pursue male-dominated industries.”