Peeking at Peers’ Salaries: Finland’s Radical Approach to Pay Transparency
Workspan Daily
January 14, 2022
Key Takeaways

  • Finland proposes radical pay transparency law. The proposed law would allow Finnish workers to find out what their colleagues are earning if they suspect they are being discriminated against. 
  • Passage appears likely. Finnish officials expect the bill to be passed in parliament before the April 2023 elections.
  • Lagging behind European neighbors. Finland ranks 37th globally in terms of pay equity — well behind neighboring countries Norway, Denmark and Sweden, which held the eighth, ninth and twelve spots on the list, respectively.
  • Unlikely to set a trend. Compensation experts don't foresee this approach to pay transparency becoming common in other parts of the world.

The Finnish government has proposed a new law that would allow the country’s workers to find out what their colleagues are earning if they suspect they are being discriminated against, Reuters recently reported.

Introduced as an effort to help narrow the gender pay gap in the Northern European nation, the bill has been met with criticism from workers’ unions seeking even more pay transparency, and Finland’s largest employers’ organization, which says such a law would actually create more conflicts in the workplace, according to Reuters.

A coalition led by Finnish Prime Minister Sanna Martin is pushing ahead with the legislation, however.

“What is central to the government’s program is the elimination of unjustified pay gaps,” Equality Minister Thomas Blomqvist told Reuters. “They will now be addressed more rigorously.”

Blomqvist expects the bill to be passed in parliament before the April 2023 elections in Finland, where women earned 17.2% less than men in 2020, according to a pay equality ranking by the Organisation for Economic Cooperation and Development.

That disparity helped Finland place 37th globally in terms of pay equity — well behind neighboring countries Norway, Denmark and Sweden, which held the eighth, ninth and twelve spots on the list, respectively.

A 2018 report from the Finnish Equality Ombudsman finds the factors contributing to the gender pay gap in Finland are similar to those in other Western European nations — segregation of the job market into male- and female-dominated professions, new fathers receiving less parental leave than mothers and women being promoted less frequently than their male counterparts, for example.

The measure the Finnish government is planning may be meant to promote pay equity. But compensation experts don’t foresee this approach to pay transparency becoming common in other parts of the world.

James Reda, managing director and leader of the executive compensation practice at Gallagher, doesn’t believe that a proposed law like this would ever gain traction elsewhere. And he advises against making peer group comparisons an integral part of compensation strategies.

“At some companies, employees are more concerned with how their pay stacks up against others within the organization, while at other companies there is more concern with how pay stacks up against other organizations,” said Reda.

“In general, a company should not rely primarily on peer group comparisons in setting pay,” he added. “At best, base salary levels should be compared against a broad-based peer group but should only be used as a general guide for short- and long-term incentive opportunity amounts.”

Tauseef Rahman, a principal and career business leader at Mercer, agrees that allowing workers access to information on their peers’ compensation probably won’t catch on as a common practice in other countries.  

“It’s unlikely that companies would willingly create a situation where workers ask what other colleagues’ are earning, as it would not result in a uniform sharing of information,” said Rahman. “Rather, I suspect that companies would openly publish what each person is paid, or share the specific pay range for all jobs, as some already do.”

Taking an approach that puts the onus on employees to ensure pay is fair within the organization is “unlikely to support a strong employee experience,” he added.

“Rather, we counsel organizations to make progress on their pay transparency journey to enable a better employee experience. Ultimately, the goal is to have an environment where candidates and employees do not need to ask for other colleagues’ pay, because the information they need to believe that they are paid fairly is proactively provided by the employer.”

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