With many organisations increasing their focus on fairness, inclusion and employee engagement, it's understandable that pay transparency has become a key business issue; not to mention it is also being driven by a growing body of legislation mandating greater openness around pay.
From the EU Pay Transparency Directive to new laws emerging across various US states and cities, regulatory requirements are pushing employers to take a more structured and transparent approach to how pay is communicated and managed.
But does salary transparency actually drive positive change?
A range of studies provides compelling evidence of the positive effects of pay transparency in the workplace, highlighting a host of key benefits, ranging from reducing pay gaps to employee satisfaction.
Pay transparency is increasingly recognised as a powerful tool for closing wage gaps, particularly those based on gender and ethnicity. A 2021 Canadian study found that implementing pay transparency requirements can reduce these disparities by 20 - 40%. Similarly, a 2022 study published in Nature Human Behaviour showed that when organisations publicly disclose pay information, gender wage gaps tend to narrow significantly. By making salaries more visible, salary transparency empowers employees to identify inequities - creating social and organisational pressure for employers to address them.
Salary transparency also improves employee morale and builds trust between employees and employers. According to a Glassdoor survey, two-thirds (67%) of workers believe that pay transparency is beneficial for business, and a further 71% think that openness about pay is beneficial for employee satisfaction. A 2018 study analysed survey data from a diverse sample of employees and found that the amount of pay information shared by employers was positively related to both pay satisfaction and trust in management
When employees understand the “why” behind their salary and how to progress, it fosters a sense of fairness and clarity, even if the pay itself doesn’t change immediately.
In a competitive job market, candidates increasingly demand clear salary information before applying. Organisations that are upfront about pay are seen as more trustworthy and progressive, making them more attractive to skilled job seekers. Salary transparency can also streamline the recruitment process, reducing mismatched expectations and wasted time for both parties.
While pay transparency offers clear benefits, it also presents challenges. Without clear justification for differences in pay, it can expose uncomfortable truths and lead to frustration rather than trust. If organisations lack objective performance frameworks or fail to communicate pay decisions effectively, transparency can backfire, negatively impacting morale, retention, and even productivity. In some cases, it may also lead to wage compression, not by lifting lower salaries, but by limiting increases at the top.
The effectiveness of pay transparency depends on several factors:
The case for pay transparency is growing along with the legal requirements. When underpinned by fair pay structures, clear communication, and consistent practice, it can drive equity, trust, and performance.
We offer a range of pay transparency resources, including our guide, A Roadmap to Prepare for the EU Pay Transparency Directive.
We also run a weekly on-demand webinar, The EU Pay Transparency Directive: Impact & Roadmap, looks at:
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