Disclosing Salary Data is the First Step in Reducing or Eliminating the Pay Gap

The pay gap exists. We know about it, hear about it, read about it all the time. Everyone acknowledges the existence of a pay gap. Acknowledging a problem is the first step to fixing it. But are companies acknowledging their own pay gaps or are they just admitting there is a problem… somewhere in the world?

With all of the EEO regulations and reporting that needs to be done in the US, there is little transparency about actual salaries. There was a revision to the EEO-1 form, which would have required reporting on pay data in regards to race, ethnicity and gender, but it was indefinitely suspended.

Would it have helped? At this point, we don’t and won’t know. And whether or not this regulation should have been suspended is not the point. The actual point is fair compensation shouldn’t be mandated by the government, it should come willingly from the hiring companies. Don’t get me wrong, government oversight may help, but wouldn’t most people prefer to work for a company that, as a practice, treats all of its employees fairly?

The Solution is Transparency

Whether a company’s salary history is fair or not, each company should be sharing salary data trends. The data exists. The effort to gather and report on data is very possible. Even if a company sees a pay gap, it would be wise to acknowledge it publicly and share the company’s goals to reduce the gap and then following through to make the necessary corrections. Then, once the issue has been corrected, by sharing the changes made, the company will not only create more trust from within its own employee community, it will also become better able to attract talent from the outside.

There are many benefits to disclosing salary information. One of the most important is the increase in trust. Some employees may not be initially happy with the results, but knowing that their company is working to make things fairer will create a level of trust that didn’t exist prior. Following through on improvements and compensating employees who have been historically underpaid will increase that initial trust even more.

The Company View on Disclosing Pay Data

There are many views on both sides of the aisle regarding transparency of pay data.

Many companies take this to the extreme by publishing every person’s salary in the company. This has some benefits but it can have many negative consequences to culture and productivity as well. Knowing the person next to you earns significantly more money for the same work and same level of experience and or education can result in resentment. This resentment can impact both individual motivation and collaboration as well as overall team effectiveness.

Instead of reporting on the individual level, reports on compensation trends, based on a number of factors (age, race, gender, etc.) could be very effective in not only addressing the pay gap but also in attracting and retaining talent.

Some companies believe there is little to no value in tracking and reporting this information. To them, it is difficult, time consuming and/or expensive with little benefit. Is that entirely true? Perhaps for some companies it is, for some there may be a cost in the first year, and for many others, the data exists in one form or another and can be easily extracted and used.

No matter how any company views this, there is little chance this issue will go away completely on its own and there will most likely be a pay data transparency requirement to fulfill in the future. It is in a company’s best interest to, at the very least, start working toward pay data transparency now. Companies which are willing to be transparent about pay data will be seen more positively by both their employees and job candidates and will be better able to attract and retain talent. This is especially true if pay gaps are uncovered and the company is willing to acknowledge and work toward reducing those gaps.

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