Sixty-two percent of companies that lack salary disclosure policies intend to institute some form of it, without any push or guidance from local governments, a recent WTW survey found. Data points, including starting salaries and salary ranges for candidates and employees, are all up for consideration, as organizations continue their push to recruit legitimate, long-term talent.
“We expect the recent wave of pay transparency legislation to continue,” said Mariann Madden, North America fair pay co-lead of WTW. “Regulatory requirements are only one factor in the expected increase in disclosures and communication about pay. Job seekers and current employees want to know and understand that they are treated fairly and are provided with equal opportunities to thrive and grow within the organization.”
With California’s Equal Pay Act implementation in 2018, the state became the first to put forth such a regulation. While the details of similar laws vary, six states have since put disclosure laws on their books. While New York and Massachusetts are considering pay disclosure mandates, Rhode Island is set to roll out its salary disclosure laws in 2023. Acting outside of the state, New York City will institute its salary disclosure law on November 1.
Defining Salary Disclosure
“Organizational decision-makers need to think carefully about the costs and benefits of disclosing salaries, considering the potential unintended consequences,” Christos Makridis, an adjunct associate research scholar at Columbia Business School, told CFO. As a CTO of a web-3-based startup and adjunct professor of blockchain at The University of Nicosia, Makridis focuses on digital assets, remote work, and corporate culture.
The challenge for managers is what to disclose. Information on pay is one piece of the puzzle, but what about the set of responsibilities, workload, and other soft information that remains unobserved?" — Christos Makridis, adjunct associate research scholar at Columbia Business School
“Admittedly, there is a broadly defined trend around 'disclosure,' but there is also the potential for employee backlash whereby [employees] start talking negatively about others, who they perceive as getting paid too much, or vice versa,” said Makridis.
Makridis believes it’s more than the dollars and cents that go into the value of a salary. Disclosing just a number might create a potential to overlook an employee's workload and intangibles when assessing their salary. “The challenge for managers is what to disclose,” Makridis said. “Information on pay is one piece of the puzzle, but what about the set of responsibilities, workload, and other soft information that remains unobserved?”
Regardless of what direction executives lean in weighing the positives and negatives of salary disclosure, the Columbia Research Scholar believes the root of the desire comes from a place that resonates with any employee.
“One theme is undoubtedly true amid these discussions, and it's not rocket science; employees need to feel appreciated and recognized by their peers and managers to have a healthy corporate culture,” said Makridis.
'Administrative Complexity' Holds Companies Back
Out of the companies not taking steps toward transparency, 40% of those surveyed by WTW cited “administrative complexity,” while another 25% cited lack of “clear job architecture” as reasons to keep employee salaries under wraps. Nearly half (46%) of organizations also said possible employee reactions as their reason for not making the shift.
When referencing the data, Lindsay Wiggins, North America Fair Pay co-lead of WTW, also identified the trend of increased demand for salary disclosure by employees. “We’re seeing a clear trend among employers around the globe publicly committing to fair pay,” she said. “In North America, companies are beginning to disclose their adjusted pay gaps, while in Europe more organizations are sharing their fair pay ambitions as well as their plans to monitor, track, and communicate progress toward their commitments.”
Wiggins and company expect the trends taking place in Europe of tracking and sharing data surrounding compensation to make their way over to North American economies. “We expect that level of transparency will likely become the norm,” she said. “External stakeholders demand more clarity and visibility into companies’ pay management practices.”
WTW’s 2022 Pay Clarity Survey, North America was conducted between June 27 and July 8, 2022. In North America, a total of 388 respondents were included.