How to take pay transparency beyond job ads

In early March, Lisa Pasquin, founder and president of PR firm Craft, decided to do something “a bit uncomfortable.”

In a LinkedIn post, she shared the six salary bands used by the Toronto company, ranging from $45,000 - $55,000 for an account coordinator to $125,000+ for a vice president.

“We’ve been talking about salary transparency internally for a while. We shared salary bands with our internal team in 2021 and we already include them in all of our job postings.
 
But today, we’re posting this fulsome summary in an effort to help fuel these discussions in a bigger way,” she said.

Why? Talking openly about salary can help to close the pay gap, and hopefully encourage others to do the same to “build a better, more equitable industry,” said Pasquin.

Within days, many supporters chimed in on LinkedIn, praising the 32-employee company’s move as “radical,” “bold” and “amazing.”

For a couple of years now, the focus on pay transparency has been ramping up, particularly around job ads and executive compensation. But the PR firm’s move to showcase its pay levels takes the movement a step further — and experts say it’s the right move, despite potential downsides.

“Imagine what kind of impact a bigger company doing this kind of thing could have?” says Pasquin. “It's well worth it, even if it may be more complex.”

Why this kind of pay transparency makes sense

A recent survey from Payscale found that the most common obstruction to pay transparency is not having organised pay structures. Another big reason? Leadership is unconvinced of the merits of pay transparency (27 per cent) or they don't want to be transparent (19 per cent).

Pasquin admits it can take awhile “to wrap your head around why this is beneficial.”

“We spent a lot of time educating ourselves and learning about that,” she says. “We told ourselves, ‘Well, we are organized, we do follow the pay band, why does it matter? Why do we need to tell people what they are if we know that we're paying people fairly across the organization?’

“I started learning more about the role that salary transparency can play in actually reducing gender inequality in pay and it became something that really excited me, and that led to our recent post on LinkedIn.”

Younger employees are less conditioned to treat salary as this huge secret, says Pasquin, “and I think that's definitely true for women.”

“We've all worked at places where the pay structure is not organized, and two people doing the same role are paid vastly different amounts of money.”

But research has shown that increased transparency does tend to reduce inequity and narrow the wage gap, says Rosanna Stofberg, a master reward specialist and social scientist based in Toronto.

“It's not a perfect science, it's not that automatically it will reduce your gap by X percentage. But there is quite a bit of research which indicates that it can improve pay equity.”

Attraction and retention

In addition, pay transparency can play a bigger role in building a strong and vibrant culture, says Pasquin — and that also helps with employee attraction and retention.

“There's no question that this has attracted interest from people in working here. That's always our goal, is to attract a wide range of interest from a wide variety of people… so I don't I don't see any downside to it.”

There is definitely an advantage of differentiating yourself as an employer “by making quite a public stance on your pay approach,” says Stofberg.

Of course, in a very complex organization, with potentially hundreds of different types of jobs, this may be “much less effective,” she says, because it gets much more complicated.

There’s a clear benefit to the external publication of salary bands, particularly in job postings, says Alex Warshick, lawyer at McInnes Cooper, citing the push for change seen in legislative changes in P.E.I., Manitoba, Newfoundland and Labrador and Ontario, along with changes to the Employment Equity Regulations in 2021.

“It’s a good practice for attracting good candidates — certainly job searchers are increasingly mobile, and the job search process can be very demanding of a candidate's time. And [this transparency] starts the relationship off on the right foot, by having those expectations clear from the start.”

Risks and potential downsides of pay transparency

Despite the benefits, there are a few risks or considerations for employers looking to boost pay transparency.

For one, difficulties can arise when it comes to compensating truly exceptional employees, says Warshick.

“If you have a set pay scale and set formulas for bonuses or incentives, the employee who goes above and beyond and really contributes to the company, it becomes difficult to differentiate that employee from the other employees, which is typically something you want to do in order to retain that person.”

That can lead to “side deals” where employees are paid in non-transparent ways, he says, “and if that leaks out to other employees, that'll lead to morale issues.”

Warshick also cites studies that suggest pay transparency can result in decreases to raises and “compressed compensation growth,” he says.

“Because it's so transparent, an individual employee is less able to negotiate or advocate for themselves at the end of the year to get a more significant increase.”

Plus, there's more of a tendency for employee-wide increases, which would be more incremental than usual, says Warshick.

“So everybody gets one per cent, everybody gets two per cent — rather than necessarily having the ability to negotiate with those employees who are exceeding expectations.”

Another challenge for this kind of transparency? It can be difficult to report on compensation for jobs that rely on commissions or bonuses, particularly around “the context of the data,” he says.

“You might get into a practice of misrepresenting the compensation structure or compensation expectations, and certainly, that can lead to negative effects on morale [and] potentially constructive dismissal claims. It’s a fairly remote risk, but if somebody understood and expected to receive a certain bonus, and there was a practice for some years of them receiving that bonus, and then that stops, that could be a constructive dismissal claim.”

Best practices for pay transparency

Taking into account the various challenges, there are a few best practices for HR to embrace when it comes to boosting pay transparency.

At Craft, for example, the leadership team made a point to communicate its pay band internally a year-and-a-half earlier.

“We definitely ensured that our internal team had full visibility and was well aware,” says Pasquin. “And I think communicating those bands, and helping people understand where they fall within a band, also really can help with performance discussions.”

“It gave people a clear indication of where they were within a certain role and how much development they needed to move to the next level,” she says.

Of course, for loyal employees, it could be really upsetting to see a job post for the same position with higher pay, says Warshick, so “it’s important to keep on track of how you're paying people who are already in your organization.”

Recently, for example, poet and UX writer Kimberly Nguyen, voiced her frustration on Twitter:

“My company just listed on LinkedIn a job posting for what I’m currently doing… and now thanks to salary transparency laws, I see that they intend to pay this person $32k-$90k more than they currently pay me, so I applied.”

It’s also necessary to present a realistic range for each role, to show how people can grow within a role both and be rewarded, says Pasquin.

“We did, I would say, try and keep the pay ranges fairly tight to help with that issue of transparency, but it is important to have a range to allow people to grow.”

However, Craft didn’t present the salary bands for upper leadership because it’s a small company, she says, so they didn’t want to single out people who could be easily identified.

There is the privacy concern around making that information publicly known when it comes to executive compensation, says Warshick.

“It's also significantly higher… than the compensation for other employees. And that creates a real conversation to have with employees — maybe one that that's merited… and could be significantly negative on morale, if employees are seeing their executives or direct reports earning magnitudes more than them.”

Realistic ranges important

There is a pressure for job candidates to see a realistic salary range for a position, according to Stofberg.

“If company is approaching it as a very broad, general thing, it's not very useful to potential candidates and doesn't necessarily make you stand out as an employer.”

If an organization does publish a wide range, it needs to be ready to answer questions — both internally and externally — about how they determine where employees fit in that range, she says.

“Is it based on years of experience? Is it based on my education? Is it based on some other factors I wouldn't be aware of? Is it even possible for somebody to be paid right at the top of the range?”

“You need to have an answer that will make sense to your employees, otherwise, you risk those employees saying, ‘I'm not being treated fairly, and I'm potentially want to look at working somewhere else where I will be treated fairly.’”

As for posting your salary range in a job ad versus a list of your salary bands, as done by Craft, the former is probably the safer option to start, says Stofberg, “because it's a one-time thing, it doesn't commit you for evermore, you’re just saying for this particular position that ‘I'm hiring for this range.”

And finally, in making public a list like this, larger organizations would certainly want to think about it as part of a broader communication strategy, she says.

“So not just ‘Here are our salary ranges’ but more ‘This is a type of organization where we believe in equity and transparency, and this is how we demonstrate those values, here is our salary information.’”