Salary

How Salary Transparency Empowers Employees -- and When Not to Use It

How Salary Transparency Empowers Employees -- and When Not to Use It
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In a 2016 Glassdoor report, only 36 percent of employees surveyed worldwide said their companies were transparent about salary -- but almost twice that number, 70 percent, agreed with the statement that open discussion of pay boosts employee satisfaction and overall business success.

Related: 5 Examples of Companies Succeeding Through Transparency

In fact, social media company Buffer has proven the positive effect pay transparency can have on a company. When Buffer set up shop, its leaders decided to post all employee salaries on the company’s public blog. Everyone -- from the CEO to an entry-level worker -- could see what his or her colleagues were taking home.

To many readers, this level of salary transparency may seem problematic, but in fact Buffer grew its staff from 10 to 65 employees in six years. Company officials say conflicts around salary are rare. When all employees can see how much worth the company places on any given role, no one wants to be called out for slacking off. 

Another interesting point: A recent PayScale survey of more than 70,000 employees found that people surveyed said they were less likely to quit their jobs when they understood how their pay was determined. Even employees making below-market wages can be persuaded to stay when the reasons for the discrepancy are transparent.

In the PayScale survey, 82 percent of respondents reported being satisfied with their jobs once they understand why were being paid less than they might be at a different company.

Salary transparency is not for everyone.

Salary transparency isn’t the best strategy for all companies: Some executives simply aren’t comfortable making pay information so public. This is often true with startups, which sometimes struggle to pay employees competitive salaries.

Many entrepreneurs, whether they're connected to startups or long-time companies, work on a shoestring budget; so when funds are limited, they instead offer unique employee benefits.

In addition, salary transparency may be a bad idea because it can raise conflicts based on assumptions about finances, abilities and how much someone is doing at work. While one employee may take longer to complete a task than another employee, the output might be the same.

In these circumstances, making salary data public could create animosity.

Related: What Your Salary Says About You

The practice could also inadvertently punish your rock star employees. If they have to fix a problem created by someone who makes more money, they may feel undervalued.

The most important factor for entrepreneurs, then, is to keep the team focused on keeping the company’s doors open -- because conflicts combined with a loss in productivity could lead to no paychecks for anyone.

How to instill confidence in employees in other ways

While salary transparency is not always the best option for every startup, there are other ways to boost employees’ confidence in their pay rate. Here are three:

1. Salary ranges for each position

salary range offers a minimum and maximum pay rate for each role, as well as several mid-range rates. Such documents, listing companies' pay figures based on market-pay studies, are often similar in describing employees with comparative responsibilities in a given region of the country.

And they can be reassuring to job-seekers: Because most job-seekers today conduct online salary research, salary ranges based on regional and market factors assure them they'll be compensated appropriately.

My own business takes a salary-range approach and offers percentage-based bonus structures to employees. This means that workers are compensated based on the percentage of tasks and projects completed within a specific time frame.

2. Project management software

Clear communication about tasks and responsibilities can streamline an organization and keep employees informed about who is completing which tasks. Knowing that everyone is being productive helps employees see that, regardless of the numbers on a paycheck, everyone is earning his or her keep.

Project management software can help entrepreneurs relay information to their teams efficiently and keep clients informed. Clearly laying out a company’s tasks and assigning them to the correct person can ensure that everything is distributed evenly and in an organized manner.

My team’s project management software allows us to see what’s on everyone’s plate so we know what everyone is working on -- and who’s not producing. We also assign time frames to each portion of a project. Once a project is marked "completed," we know who worked on what across the project’s development.

3. One-on-one meetings

Nothing beats an in-person one-on-one meeting, especially with so many of us communicating digitally. Face-to-face meetings help build strong relationships with employees and show individuals they’re valuable to the company.

I’ve always had an open-door policy, but I found that employees sometimes feel uncomfortable interrupting me during the workday. So, I started hosting regular one-on-one meetings with everyone, allowing me to get to know each person and gauge his or her individual satisfaction levels.

These discussions often naturally drift to the topic of compensation because of our bonus structure. And here, I want everyone to feel rewarded for putting in effort, just as  I want everyone to have the opportunity to correct or self-evaluate when there’s an obvious lack of productivity.

Related: Collaboration Tools of the Most Productive Remote Teams

Overall, the most important thing entrepreneurs can do for their companies is show employees how much their contributions are valued. This is particularly vital in the early stages. That's why instilling confidence in employees about what they're being paid and why can be essential for attracting the best talent and keeping it around.