Open salary policies are gaining traction with employers but new research suggests they could have a detrimental impact in the workplace.
Open salary policies have become more common over the past few years as employees are now demanding increased organisational transparency – however, HR professionals may want to think twice about introducing the system after one new study revealed a major setback.
The survey of marketing and advertising executives found that 82 per cent work within a firm which doesn’t publicise salaries – but the vast majority think that’s the best approach anyway.
In fact, of the respondents who aren’t privy to pay information, 61 per cent said they felt pay transparency would actually decrease staff morale.
“Compensation can be a touchy subject,” says Pina Nicoli, metro market manager for The Creative Group – the staffing firm behind the recent study. “Some companies may be sensitive to the fact that people don’t want their salary information shared.”
While many employees were wary of decreased morale, others did point to some advantages and 18 per cent said the greatest benefit of introducing an open salary policy would be increased productivity while 17 per cent said it would improve recruitment and retention.
“More and more professionals want to work in organisations that they trust to be both corporately and socially responsible, and being transparent, whether through salary policies or otherwise, is one way companies might do that,” says Nicoli.
A further 16 per cent of respondents said the greatest benefit would be helping to close the wage gap while 15 per cent said it would create an atmosphere of trust.
“Some companies choose to be transparent with their pay because they want to establish an open conversation around performance and compensation,” says Nicoli. “It can help establish an environment that is fair and promotes trust among employees and with the company.”
Despite the multiple benefits, survey found that more than one-quarter of the creative executives (27 per cent) said the potential risks outweigh any rewards.
If organisations do opt to introduce a transparent pay scheme, Nicoli says it’s important that they demonstrate any system’s inherent fairness.
“Establishing and communicating a well-defined pay formula or system that is introduced and explained to them from day-one can help reduce confusion or resentment among employees,” she tells HRM.
“Offering benchmarks in the form of salary ranges for employees can be a really helpful way to give them a better idea of how they compare, or where they can expect to be, based on their experience level, tenure etc.”
