Benefits and Compensation

Salary Transparency Can Motivate Your Employees

The debate over the value of salary transparency has heated up in recent years, with neither side giving much ground. But Kristin Wong describes some studies that weigh in favor of transparency on New York magazine’s Science of Us blog.

A study conducted by researchers at Cornell University and Tel Aviv University, for example, found a link between employee collaboration and pay transparency that suggests employees work together more effectively when pay is transparent. Specifically, workers are better at asking for help from the right people when they know how much those people earn. In other words, Wong explains, salary information gives the workers a way to figure out how skilled their colleagues are, making it easier to know who the experts are in the workplace.

In another study, an assistant professor of economics at Middlebury College found that her research subjects worked harder and more productively when they could compare their earnings with others’. The findings backed up additional work from the researchers who conducted the collaboration study that indicated pay secrecy reduces employee performance and takes a toll on an employer’s ability to retain the best performers.

Wong concedes that transparency isn’t the solution to all problems. She recognizes other variables that warrant consideration when it comes to figuring out what’s in workers’ best interests. For example, transparency alone won’t solve pay discrimination—it can only reveal discrimination, which has the potential to reduce productivity.

Nonetheless, one researcher believes that some degree of transparency is necessary to convince employees that an employer’s compensation system is fair. At the very least, she says, managers should consider adopting a partial pay transparency policy that makes clear the broad parameters of compensation. It’s only one step in the right direction, Wong writes, but it’s an important one.