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Avoiding Pay Transparency Is No Longer an Option for Employers

Thanks to technological advancements, employees know what they can expect to earn at a job. And, thanks to some legislative reform, candidates are entitled by law to know the pay range for a job during recruitment. Thus, it’s no longer an option for employers to lack transparency when it comes to pay.

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According to Mercer’s “2019 Global Talent Trends Study,” 20% of employees in the United States said they would leave their current company because of competitive compensation, yet only 6% of HR leaders said competitive pay is why employees leave.

“Being transparent about pay enables employees to understand how their pay and pay opportunities over time compares to public information in the market and allows employers to strengthen their relationship with their employees,” said Tauseef Rahman, principal with Mercer.

According to Mercer, several factors can complicate organizations’ decisions about being transparent about pay, including some state legislation that entitles candidates and employees to pay information, websites that make pay data publicly accessible and tight labor markets that put a spotlight on the employee value proposition, which encompasses pay.

Mercer has identified three key reasons why pay transparency matters:

  1. A lack of equitable pay hinders organizations from achieving the workforce diversity they need to thrive in today's economy. Pay transparency goes a long way to holding companies accountable to the pay decisions they make.
  1. It is important to employees. Mercer’s study found that only 19% of employees in the U.S. grade their company an “A” for equity in pay and promotion. Additionally, over the past five years employee perception of fair pay has declined to 52% from 57%, per an analysis of employee satisfaction data.
  1. Compensation is no longer information controlled by the company. The digitization and democratization of pay and career data have made it easy for employees to develop their own perceptions about pay for their jobs and an organization’s pay philosophy.

Adapting to pay transparency requires companies and their leaders to let go of traditional views and long-held beliefs of what employees need to know and what employers can control in terms of compensation information. It can have more upsides than downsides for employers, particularly by helping them attract and retain top talent and enhancing their brand.

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