Salary transparency or how to eradicate the gender pay gap

Tech companies such as Buffer and Verve had implemented transparent salary. A realistic strategy to end with the Gender Pay Gap #genderpaygap #womenintech

Two weeks ago I attended the Ada’s List Conference 2018. The Ada’s List is an email-based community of more than 6,000 subscribers (me among them) “for women (and those who identify as) who are committed to changing the tech industry”.

The Conference was structured as a blend of presentations and concurrent workshops covering a vast array of topics related to women in tech. Inclusive design (‘Leaving No One Behind: Building Apps for The Next Billion Users’ by Aygul Zagidullina), new technologies (‘How can we use advanced imaging technology to build a better food system?’ by Abi Ramanan), self-care (‘Discover your self-care non-negotiables” by Babs Ofori-Acquah), and UX (‘Personalising the user experience and the playlist consumption on Spotify‘ by Mounia Lalmas-Roelleke) are some examples.

If there was a talk that both challenged my preconceptions and fuelled my optimism that a diverse and inclusive workplace is achievable was that of Åsa Nyström, Director of Customer Advocacy at Buffer, a company included among the Inc. 5000 Best Workplaces 2018. Nyström discussed Buffer’s value of “Default to Transparency”; more precisely, their policy of transparent salaries. This means that they share via their website all their employees’ salaries as well as the formula used to calculate them. You can even calculate what you would earn working at Buffer here!

Why is Buffer so keen on salary transparency? Because it promotes trust, which in turn is correlated with economic growth. And they can prove it! A study on the impact of trust in organizations based on a nationally representative sample of 1,095 working adults in the U.S in 2016 showcased that

compared with people at low-trust companies, people at high-trust companies report: 74% less stress, 106% more energy at work, 50% higher productivity, 13% fewer sick days, 76% more engagement, 29% more satisfaction with their lives, 40% less burnout.

Nyström pointed out that whilst disclosing salaries has great advantages  – attracting great people and motivating employees – there are some challenges as well. Among them, she pointed out to scalability – ensuring the salary matrix remains consistent as your workforce grows – and becoming publicly accountable. For example, she shared how they were challenged by a customer for paying their marketing team less than the Product and R&D teams.

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The paradox is that salary transparency is not an alien idea after all. All publicly traded companies in the U.S. must disclose the compensation paid to  CEOs, CFOs, and certain other high-ranking executive officers. However, the salary disclosures don’t permeate through all levels. Even more, most companies have a non-disclosure policy regarding salaries.

Interestingly, recently published research indicates that when employees know their direct manager’s salary – and it is substantially higher to theirs – it increases their productivity and commitment. The authors hypothesize that learning that their manager’s salary is notably higher boosts employees’ motivation as they can see themselves filling their shoes in a few years time. On the flip side, knowing that your peers receive a higher salary has the opposite effect: decreases effort, output, and retention. This would suggest that salary transparency is not enough; it needs to be supported by a “transparent” salary formula linked to market conditions, company budgets, individual employees’ performance, and turnover risk.

The reality is that most of us ignore how our salaries compare to the market and, as the graphic below suggests, this rarely leads to bliss

My take is that salary transparency is a powerful approach to making unjustified pay gaps – such as those linked to gender or race bias – disappear. Will you work for a company offering you a salary obviously smaller than that of somebody less experienced and with fewer responsibilities? As a customer, would you purchase services and products that pay Jane Doe less than Bill Smith without a clear justification? Finally, adopting a salary transparency policy also provides very clear pointers regarding what kind of skills and experience are most valued in a company and in the industry, paving the road for those employees that want to progress in the career ladder.

Unconvinced still? Read here about Verve’s successful transition to pay transparency. Verve is a U.K.-based tech firm that maintains an impressive almost 50% female workforce.

Will you be happy to disclose your salary publicly? Do you think pay transparency has more pros or more cons?

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