The recent announcement by professional services firm PwC about releasing projected pay ranges for staff has reignited the argument for pay transparency being introduced across the board in the private sector. PwC is not alone in taking this step. Earlier this year, Westpac became the first Australian organisation to scrap pay secrecy clauses in contracts across its workforce. The benefits seem strong. Being clear and honest with employees breeds loyalty. Fairness, recognition and reward are linked to increased productivity and drive to achieve KPIs and organisational goals. But one of the most exciting opportunities for disclosing pay scales is the potential to help close the gender pay gap and encourage pay equality regardless of an employee’s personal circumstances or background.
While not without its challenges, a widespread reform across professional services would help regulate the market, helping both the employee and the employer, addressing underlying resentment and instilling a sense fairness across the sector.
Create a fair workplace for all employees – while addressing the gender pay gap
According to this article published in the Australian Financial Review on 19 April, PwC’s main driver to disclose projected pay ranges for staff for the 2023 financial year was “part of a push to ensure PwC is best positioned to hire and retain staff in the current competitive job market”. It is certainly a positive thing for employees to know for sure they belong to, or are joining, an organisation that really does look after them. Not only would employees know where they stand compared with other businesses, but they see how they stand against their colleagues. Transparency helps staff understand how they compare to the wider organisation, said Rae Cooper, professor of gender, work and employment relations at The University of Sydney Business School. But in the case of gender equality, “we know from our research that women have a very strong sense that they are not being paid their market value. We don’t want to have a situation where at least half of the workforce is always feeling that they have this nagging doubt that they are not being paid what they’re worth,” Professor Cooper said. Transparency would address this constant sense of doubt.
Set yourself up for transparency success
The key to success is ensuring your business first establishes clear procedures and frameworks for determining pay scales so you are prepared to justify your decisions once you choose to go public. Alison Pennington, a senior economist from The Australia Institute’s Centre for Future Work said “you need mechanisms to address pay discrimination like collective bargaining, better paid parental leave, and family-friendly policies. Removing pay secrecy clauses from employment contracts can also help shift workplace cultures from one of pay silence to open communication”.
The pros far outweigh the cons
This article by Hayes outlines the pros of pay transparency, which first stresses transparency is fundamentally important to employees – they want to know they are being treated fairly and in line with their peers. Pay transparency also:
- Improves trust, morale and engagement because everyone can be confident their pay aligns with their skills, experience and results
- Helps increase motivation when learning what senior leaders are paid – providing something to strive for, driving professional development and a hunger for more responsibilities
- Reduces bias – transparency encourages fairness across workforces with diverse backgrounds
- Improves candidate attraction, especially those who value open and honest workplaces.
Justify your decisions
Employers need to be very clear on pay scales, the formulas used to calculate remuneration and be able to communicate this. Employees need to understand that duties may vary, so it is not always like for like comparisons, and that responsibilities, KPIs and successes all contribute to pay levels. Be clear on how you determine pay. As the Hayes article explores, some organisations opt for full pay transparency, where the salary for each role is available. Others elect to reveal partial salary information, such as a salary range for each role. A reoccurring theme is that workplaces should be clear on how they set pay rates and what factors influence them. Employees should feel they are paid fairly in their current role, and if roles expand or duties increase, they should feel equally confident that their pay will reflect this.
Know the risk and ensure your framework demonstrates fairness
In this article on HRM online, Workplace Law CEO Shane Koelmeyer explains the real risk of causing disharmony in the workplace and damage the organisation’s culture by broadcasting salaries. Koelmeyer’s advice to employers is to take an honest look at your company’s remuneration policies and how they line up with job descriptions. “Organisations should create a rigorous framework around their compensation policies”.
Complete detailed reviews of like-for-like roles annually
With Westpac’s decision to scrap pay secrecy clauses in contracts across its workforce, employees are able to openly discuss remuneration in a major step towards narrowing the pay gap, according to this article. Danielle Dobson, author of Breaking the Gender Code explained that pay transparency “helps organisations to be more proactive in terms of how they structure compensation, and it empowers employees when it comes to review time”. Westpac had already done the groundwork to ensure gender pay equity existed at an aggregate level. To support this, Westpac group executive of human resources, Christine Parker said “when we complete our remuneration reviews each year, we do a full, detailed review of every division and level, and like-for-like roles and like-for-like experiences in terms of pay grades. Where there are gaps, we address them.”
It seems likely more and more organisations will move away from secrecy clauses when it comes to remuneration and support open, frank and honest discussions in the near future. Having a workforce of people who feel fairly rewarded for the work they complete and the experience they bring with them will absolutely lead to a more settled and satisfied workforce. There are many benefits, as well as great societal advances such as equal pay for women, giving women both the data and confidence to negotiate fair conditions and pay. But for it to work well, employers need to be able to back their decisions. Having the evidence and policies to explain pay scales to their teams will encourage retention, build loyalty and allow team members to focus on internal career progression rather than wondering if the metaphoric grass may be greener somewhere else.
If you would like to discuss this topic further, or anything else recruitment related, please get in touch.
In the meantime, happy recruiting!
Alexandra Monks