What is pay transparency? A question we still get asked far too often.

Surprisingly, some companies still treat salary discussions like they’re part of the Fight Club mantra, with 23% of private sector workers in the US not allowed to talk about it, and another 38% discouraged from doing so.

But here’s the twist: when pay decisions are kept in the dark, employee performance takes a nosedive and job satisfaction goes out the window. Thankfully, some companies have come to realise this.

One of which is Buffer, a social media company that achieved a jaw-dropping 94% retention rate by embracing pay transparency. As well as this, (we don’t mean to brag but…) 3R Strategy has also only said goodbye to two employees since we were founded six years ago.

In this day and age, employees don’t care what Jim from sales gets paid. They just want to know they’re being treated fairly.

We don’t need to share everyone’s salaries with the world, but we do need to realise that being open and honest about our decision making is a recipe for trust, fairness, and attracting top talent.

What Is Pay Transparency?

Aside from being 3R Strategy’s ‘why’, we are referring to the degree of visibility employees have into their company’s pay and reward practices. It’s all about being upfront and honest with employees, letting them in on the secrets of how and why pay decisions are made. It helps build positive relationships with employees and demonstrates fairness in the pay process.

The level of transparency can vary between organisations, but the overall goal is to build a culture of trust and reassure employees that they are being treated fairly.

How Does Pay Transparency Benefit My Organisation?

Not only does a culture of trust and honesty make for a much nicer work environment, but it can help remove the ‘Devil Wears Prada’ attitude of some managers and ensures consistency around the organisation.

Here are five reasons we are striving to help organisations build a culture of trust through pay transparency:

1. Employee Advocacy

Being open and honest with your employees all about showing them that their opinions matter and that you appreciate what they bring to the table. This builds trust and loyalty, which is essential for developing your brand and reputation.

But it’s not just about business. Being trustworthy and appreciative also makes you more relatable as a leader. You become a real person instead of some mysterious manager locked away in an office with the door shut.

When your team sees you as someone they can connect with on a personal level, they’ll feel more able to voice concerns, come to you with questions, and they’ll be more receptive to constructive feedback.

2. Managing Expectations

A lack of defined transparency can cause people to believe that they’re paid less than they deserve. Communicating clearly to employees about how and why you make salary decisions will likely address most of their uncertainty and demonstrate your commitment to fair and equal pay.

With clear and frequent communication, employees are less likely to make false assumptions about their job or their organisation. It will also help them to understand exactly what they need to do to progress their salaries and careers.

So, instead of being bombarded with questions about why Oscar gets paid more than Kevin, even though they’re both in the accounts department, employees will know exactly how those pay decisions have been made and what factors contribute to progression.

3. Customer Relationships

As a result of all the cultural improvements pay transparency brings, you’ll notice a greater sense of purpose among employees. They’ll start to care more about your company’s goals and successes, which will be reflected in their performance and behaviours.

what is pay transparency

The way your employees feel at work translates to how they treat clients. It won’t go unnoticed by consumers and as your customer relations continue to improve, so too will your organisation’s reputation.

4. Thriving Creativity

These days, it seems like the sheer possibility of coming up with something no one else has thought of is diminishing each day. So, encouraging innovation and surrounding your organisation with creative people is a huge benefit.

Transparency isn’t just about being able to recruit the right people, though. Once you have built a culture of trust through honesty, you’ll have a more open, thoughtful atmosphere where employees feel safe and able to share new ideas.

Only by being transparent at every level of the organisation will your people begin to realise that the sky really is the limit when it comes to problem solving and collaborating with colleagues.

5. Team Collaboration

When communication is prioritised from a manager, or even CEO’s perspective, it will be reflected in the way other employees work too. You’re setting an example for those who look to you for guidance and answers about how the company runs.

People who can trust their employer and see them making an effort to communicate frequently are far more likely to do the same in their day-to-day responsibilities. This is particularly evident in hybrid and remote roles, where employees spend about 50% more time engaged in collaborative work.

Conclusion

Now that we’ve answered the question ‘what is pay transparency’, what is it not? We don’t want you to confuse transparency with disclosure. We’re not suggesting that you publish the salaries of every employee, because for some, it is a personal topic.

When managers are open and honest about how they make pay decisions, employees feel more included and valued. It also helps them feel confident in their own decision-making abilities and their ability to move forward in their career.

So, instead of worrying that everyone will know how much you forked out for that brand-new Mercedes last summer, simply prioritise communication and be open to having conversations with employees about their salaries.