How does “salary transparency” affect your hiring efforts and employee productivity? These are just some of the questions Glassdoor Chief Economist Dr. Andrew Chamberlain set out to explore in the latest Glassdoor Research report “Is Salary Transparency More Than a Trend?. The report explores lessons from various economic literature on how workplace transparency affects labor markets.
We dug into this report to understand just how workplace transparency impacts and benefits employers. Below are three ways workplace transparency affects your company:
1. More Effective Recruiting Process
Most economists agree that the main factor driving job transparency today is the growing amount of company and job information available on sites like Glassdoor. The anonymity of the web has made it possible to safely and easily share workplace information at a scale than was ever before possible. But how is this influx in transparency benefitting employers?
Studies find that better access to job information can encourage smarter job searching, which in turn helps improve the quality of job matches. In other words, when candidates have clear expectations about a job and company, they can self-vet themselves for open positions. For employers this means having to go through fewer resumes to find quality candidates.
So here’s the skinny: salary transparency has led to candidates making more informed decisions and therefore provides more efficiency in the job market. If you’re looking for a lower cost-per-hire and more quality candidates, be transparent and encourage your employees to do the same.
2. Improves Concerns Over Gender Wage Gaps
This Glassdoor Research report highlights that salary transparency helps expose pay gaps between otherwise similar workers, encouraging underpaid employees to renegotiate or move to better-fitting jobs, again improving overall efficiency in labor markets. If your company stands strong for equal pay for equal work (and we hope it does) salary transparency can help employees feel confident that they are being paid fairly. So not only does salary transparency equalize negotiations, but it can also help reduce job uncertainty and increase the push for transparency in pay gaps.
So here’s the skinny: If you want a more satisfied workforce, try salary transparency. Don’t have employees feeling underpaid, especially your top performers, otherwise they may start to get curious if your competitor will pay better.
3. Boosts Employee Productivity
Most studies find that workplace transparency has an overall positive impact on company productivity, but there are some mixed results. So what do we know?
Transparency affects on-the-job performance in the following ways. First, when employees don’t know what others are earning, they tend to overestimate their coworkers’ pay, leading to higher levels of job dissatisfaction. Secondly, workers under a more transparent pay structure provide significantly more labor effort on average than those with no information about peer earnings.” Lastly, giving workers information about relative pay led to “a large and long-lasting increase in productivity that is costless to the firm.”
So here’s the skinny: The more transparent you are about wages, the more productive your employees will be. Instead of allowing your employees to make assumptions about what others earn, be upfront! This information should be shared freely in order to do away with distractions and encourage employee productivity.
Does salary transparency matter?
Interest in workplace transparency – both among companies and job seekers – has surged in recent years, due to the rise of sites like Glassdoor. From this brief report, several lessons from economic research and the impact of workplace transparency are clear.
More and better information in job markets leads to smarter job searching, improved fairness in pay settings, more diverse applicant pools, potentially shorter unemployment spells, smarter relocation decisions, and – at least according to the majority of published research – a more engaged and productive workforce.
Learn more in the full report, Is Salary Transparency More Than a Trend?.