By: Tanya Jansen, Co-founder of Beqom. Read this article and more in our Global Payroll Magazine.
Once considered a taboo subject, pay is now more openly discussed among coworkers than ever before. In fact, our survey of 1,200 people in the U.S, found nearly half of respondents confessing they knew how much their colleagues earn. Pay transparency among employees is likely to increase in the future.
Our results show that younger workers are more than twice as likely to share salary information than older workers. Among Millennials (ages 23-38), 56% would share or discuss their salary with their colleagues. This compares to only one in four Baby Boomers (ages 55-72). The gap widens with coming-of-age Generation Z, where 61% reported they would share salary with colleagues.
The next decade, one which sees Baby Boomers retire and Generation Z fully enter the workforce, will be pivotal for companies. This is especially the case for those wanting to evolve their corporate culture to keep up with employees’ changing expectations. With salary secrecy disappearing, organizations are wise not to underestimate the power of transparency.
A survey by Glassdoor reveals that 70% of employees globally believe salary transparency is good for employee satisfaction. Almost the same amount (69%) wish they had a better understanding of what fair pay is for their position, skill set at their company and in their local market.
Pay transparency directly from company management, rather than whispered among coworkers, offers a win-win scenario. It strengthens trust between employees and the organization. Employee motivation and performance can be improved as well as reducing the risk of losing top talent who do not feel they are being fairly compensated. Transparency can also help reduce the high costs of recruitment. Hiring new staff can cost as much as one-third of the former worker’s salary to replace them.
For companies wanting to commit to more transparent practices around pay and management must create visibility. This means employees being able to see how their pay is calculated. Investing in digital tools can show employees how their performance contributes to their pay and what their financial growth trajectory looks like long-term.
Consequently, employees who understand how their compensation aligns with overall corporate goals are more likely to remain with a company in the long run. As our survey shows, the coming of age Generation Z (and future generations!) will not only want pay transparency but are going to create it with or without management’s input.
Pay transparency is here to stay. Organizations that embrace this will be rewarded with a workforce that is more motivated, high performing, and loyal.