Compensation

Let’s Talk About Pay (Or Not): Pros and Cons of Open Salary Policies

Transparency is a corporate value to strive for, but not all companies are ready to be completely transparent about pay. While some employers feel the benefits of open salary policies outweigh the risks, others are understandably concerned about the potential challenges they can create.

How Common Are Open Salary Policies Today?

 Companies with open pay policies make employees’ compensation ranges or specific salaries accessible to everyone in the organization—and, in some cases, available to the public as well. While this is a trend making news, as companies like Whole Foods, SumAll and Buffer have embraced it, pay transparency may not be as common as you think. Only 11 percent of advertising and marketing executives recently surveyed by The Creative Group said their company has an open salary policy.

Open salary policies may be rare today, but perhaps your organization could benefit from making compensation information public. If you’re on the fence, consider the following.

The Potential Pros

  • Reduced inequalities: When a company decides to publicize employees’ salaries, discrepancies will be discovered and, ideally, addressed.
  • Increased performance: As uncomfortable as it might be at first, adopting an open salary policy may boost staff output. When you can specifically share why someone is paid what they’re paid, and how that figure compares to what others in the organization are making, you’re likely to see improved productivity because employees can stop wondering whether their pay is fair. They’ll know.
  • Improved retention: Publicizing compensation information shows your staff what kind of growth potential they have. To maximize its retention effect, an open salary plan should include salary ranges as well as details on cost of living increases and bonus opportunities.
  • A boosting in recruitment: An open salary policy can increase the chances of bringing on the right talent. When a company states a salary range up front, candidates and hiring managers are on the same page, making the process more efficient.

The Potential Cons

  • Decreased morale: The biggest hindrance to adopting an open salary policy, according to the creative executives we surveyed, was the idea that pay transparency would decrease staff morale. In fact, many thought this risk outweighed any benefits such a policy would bring, as employees may be upset if they find they are underpaid compared to their colleagues.
  • A tough transition: If a company is considering implementing an open pay policy, managers have to be prepared for some difficult conversations about why people are paid what they’re paid. In addition, employers may need to award raises en masse to resolve salary discrepancies.
  • Privacy concerns: Some people are very uncomfortable with the idea of having their salary being made public, and companies need to be sensitive to this fact. Some employees may even leave just to avoid the situation.
  • Turnover: If their pay scales are common knowledge, companies may fear competitors will lure their top talent by offering more pay.

 Moving Forward

Whether or not you decide to move forward with an open salary policy, keeping up with compensation trends is crucial. If you’re not paying employees at–or above–market rates, there’s a good chance you’ll lose them to other offers. You can benchmark your salaries using industry reports and online resources.

When it comes down to it, your company culture will lead you to the right decision on whether to adopt an open salary policy.

Diane Domeyer is the executive director of The Creative Group, a specialized staffing service placing interactive, design, marketing, advertising and public relations professionals with a variety of firms. Robert Half, parent company to The Creative Group, offers annual Salary Guides, which contain salary information for a range of positions that you can adjust for your local market.