How pay transparency can help lessen gender pay gap

Study finds Ontario's 'sunshine list' for salary disclosure has unexpected results

How pay transparency can help lessen gender pay gap

Back in 1996, public sector organizations in Ontario were required by new legislation to post the names of employees who earned more than $100,000 per year of taxpayer money, along with their salaries.

It was known as the “sunshine list,” and it forced government-funded organizations to think about how much employees are paid and whether or not the public is being served well by them.

But in one sector, the practice brought on an unexpected bonus: better gender pay equality.

Unexpected results

That’s according to a study from the University of California San Diego’s School of Global Policy and Strategy that found salary disclosure in Ontario not only improved accountability but it also improved gender pay equality.

That’s because many top-ranked institutions “anticipate higher scrutiny” and “respond more aggressively to improve gender pay equality, both in terms of the magnitude and type of response,” says the authors of the study published in Strategic Management.

The research looked at publicly available data on the compensation of 32,000 university employees working at 1,400 academic departments over a 24-year timeline, and showed a four-per-cent increase in salaries for females versus those in other provinces.

By using academic job categories to measure the result of the transparency, it was relatively easy because most roles in post-secondary institutions are similar and this makes it easy to calculate, says one of the researchers, Elizabeth Lyons, associate professor at UC San Diego in La Jolla, Calif.

“In some organizations, you might see someone’s salary but you might think, ‘I don’t know what that means for me because their job is just so totally different than what I would do,’ but within academia, jobs are pretty comparable.”

But the results were surprising, she says.

“What was interesting about the Ontario initiative is it really wasn’t targeted towards promoting gender equality at all, it was just holding public officials accountable, essentially.”

A software engineer recently made his salary and compensation public via LinkedIn to spark conversation around the sometimes taboo topic.

‘Powerful tool’

These results show that by making salaries and compensation more transparent, pay equity might be achieved more quickly, according to another expert.

“Clearly, there’s something to pay transparency as a powerful tool to promote a reduction and hopefully an end to any gender pay gap,” says Andrea Gunraj, vice-president of public engagement at The Canadian Women’s Foundation (CWF) in Toronto.

“The idea that pay transparency as a tool that an institution can put into place — a relatively straightforward tool, in some senses — it can powerfully reduce gender pay gaps in those circumstances, it does feel like something every organization should be doing in 2023.”

While the study results also show that positive changes are happening in universities, why it happened wasn’t quite what the researchers expected. They thought women who saw the salaries of male colleagues in the same department would negotiate for a salary increase, says Lyons.

But within departments that didn’t have any salaries greater than $100,000, salaries also became more equal — despite not being made public.

“This was being driven by university-wide changes to pay; the universities were responding to this salary disclosure by themselves [and] proactively reducing the gender gap in ways that we think are consistent with organizational reputation management. That was not something we expected [but] in hindsight, once we found it, it seems very clear that organizations would want to do that,” she says.

The province of Newfoundland and Labrador recently introduced legislation mandating employers to include salary information in all public job ads.

Leader buy-in, policies key to success

To find out whether or not an organization is compliant with the principles of pay equity, it’s about starting with an audit to see if people, generally, are doing the same work for the same pay, says Lyons.

“The first thing is an internal pay equity study, which organizations should all do, annually,” she says. “It’s good for morale, it’s good for performance, there’s all kinds of good reasons to do it.”

While these results might provide a blueprint for change, there is still much work for organizations who want to achieve pay equity, says Gunraj.

“Particularly HR professionals who are in charge of this stuff, they have to have the structures in place, the policies to say, ‘We put it in our postings, we talk about paying transparency in our interviews, we include not just pay but also other factors like parental leave, and vacation days and paid sick days.’

“It’s not just about pay transparency, it’s about compensation transparency.”

Almost half of women in tech roles believe they are paid less than their male colleagues, found another survey.

And for these efforts to succeed, there needs to be buy-in from the top.

“An HR professional needs to have leadership onboard to the strategic plans and goals to increase transparency, reduce pay gaps. If there’s some goals in place over a three- to five-year timeline, for instance, that will help the HR professionals being able to move it forward,” says Gunraj.

“And, of course, decision-makers need to understand and fully believe in why pay gaps are a problem to business, why it hurts the bottom line, why it hurts your talents, why it hinders the profit that you make, it hinders the ability for you to run a good business.”

If the problem continues to plague some employers, the market should take care of those reluctant leaders who refuse to address inequity, she says.

“The most successful businesses, the businesses that have that longevity, are the ones who put an end to gender pay gaps and have pay transparency as at least part of their plan… Organizations that don’t get onboard with this, they will naturally fall away because they’re not doing the good business decision making that they need to do.”

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