How can pay transparency manage employees’ expectations around salary?

Employers are in no doubt as to how soaring inflation and a cost-of-living crisis are impacting their employees’ finances, health and wellbeing. Thousands of public sector workers have already taken industrial action to make their case for pay rises to counter the financial pressures they are facing.

Yet organisations are also facing rising overheads, supply chain disruptions, and the highest level of interest rates in almost 15 years. In helping to manage employees’ expectations around pay rises, a sound move for employers is to be transparent about the pay that their employees receive.

Alan Price, chief executive officer (CEO) of HR software provider BrightHR, says: “If employers provide details about the roles and salaries within their organisation, and have a clear structure in place for pay and pay rises, employees can understand how they fit within the wider organisation and realistically manage their expectations around pay rises.

“With much focus on the gender pay gap, removing the secrecy around pay enables employees to understand why they are paid their salary and compare this to other employees, which may alleviate any concerns that they may otherwise have had.”

Pay negotiations

Nevertheless, the ongoing cost-of-living crisis has left a significant portion of the working population struggling financially, which, in turn, has created a greater demand for salary negotiations. However, negotiations can be complicated from an employee perspective, due largely to the fear of asking for one, even if they feel they deserve one.

Yves Schneuwly, group chief commercial officer at digital staffing agency Coople, says: “Those who do steel themselves to ask for a raise are often going in blind as to what they should ask for, which can lead to disappointment if they have set their hopes too high. This is where having pay transparency can be beneficial. Knowing what those in a position above them are earning, can help employees to create more realistic expectations for what they should be asking for in terms of pay rise negotiations.”

Pay data

Salary ranges in job postings are often the first time that employees see real-world pay data for their role, but they need to understand the reasons why their compensation falls where it does within that range. Organisations can help by giving more information on how pay is determined and potentially using a narrower pay range as defined by role. This is especially important during the cost-of-living crisis because many employees have been seeing stagnant wages and rising inflation, explains Tony Guadagni, senior principal in Gartner’s HR practice.

“Providing employees with more information about their compensation gives them a more complete insight into how pay strategy operates,” he says. “Around half (52%) of respondents to the July 2023 Gartner’s Voice of a candidate survey said that [organisations] that tell candidates how pay is determined appear more trustworthy than those which do not. It is this trust and shared insight that will ultimately help manage employees’ expectations around pay.”

Talent attraction

Being an early adopter of pay transparency helps when it comes to attracting and retaining top talent and can deliver a competitive advantage. And, employers need to consider being proactive on pay transparency because soon they will not have any other option. Virgile Raingeard, co-founder and CEO of compensation benchmarking platform Figures, says: “The EU Pay Transparency Directive will come into effect in 2024 and [organisations] like AirBNB are now publishing salary data as standard,” he says. “Being ahead of the curve and taking action now will help [an employer] stand out from the competition and build trust.”

The cost-of-living crisis has caused many to experience financial stress. One way to support employees through these uncertain and challenging times is to foster trust in the workplace and to reassure employees about their financial security. By being open about pay levels and salary capabilities, employers can avoid frustrations, misunderstandings and uncertainty, and instead give employees clarity and reassurance.

Chris Andrew, head of employee communication agency Caburn Hope, says. “It’s also important to remember that salary and compensation are only part of the total reward story. In difficult times such as this where organisations are struggling to keep up with the cost of living, many are looking to build out their offer through a more holistic approach, including discounts and more emphasis on providing financial wellbeing education and support.”