The Growing Necessity of Pay Transparency in Successful Recruitment and Employee Experience

How much someone earns is a sensitive subject for both employers and employees, in fact even as recently as a decade ago, compensation was shrouded in secrecy. ‘Competitive salary’ and ‘Dependent on experience’ were coverall terms which, for many job seekers, made guessing remuneration akin to putting a finger into the air.

Fast forward to current recruitment practices, and the shift towards openness in salaries is part of the overall ‘upgraded’ employee experience demanded by a workforce that wants transparency across all areas of the organisations they choose to work for. In fact, a survey by Glassdoor found that 70% of job seekers now want salary information included in job ads.

While it is not currently the law to disclose salaries, research by  The Society for Human Resource Management (SHRM) found that over two in three (67%) HR leaders say their organisation voluntarily lists start pay in their job postings sometimes, often, or always. What’s more, 32% began including this information within the past year, suggesting that the trend for pay transparency has gained traction.  

What is pay transparency?

Pay transparency refers to the practice of openly sharing salary information with employees and job seekers. This includes disclosing pay ranges in job postings, communicating how compensation is determined, and being open about pay policies within the organisation. 

Generational pay trends

In the past, employers typically refrained from disclosing pay ranges during the recruitment process, and employees seldom discussed their earnings with colleagues. This unfortunately compounded the gender pay gap and allowed pay disparities based on race and physical disabilities. 

Generation Z, the current working population in the 12-27 years age bracket, and to some extent, Millennials (28-44 years), are now entering employment with certain expectations around pay transparency, believing that have been shaped by an era of instant information at their fingertips, and a strong focus on equity, sustainability and ethical business practices. 

Despite the move towards openness, people are still reluctant to disclose their salary to others, with just 1 in 4 workers in the Glassdoor study saying that they feel able to talk to their boss about their compensation, and only a quarter (25%) has shared their salary with a coworker.

Why is pay transparency important?

Transparency can only be a good thing for employees, and according to a study by the National Association of Colleges and Employers (NACE), 83% of Gen Z candidates consider an organisation’s commitment to diversity and inclusion when making employment decisions. Being open about business areas including pay policies, is a measure of a commitment to improving the employee experience and highlights an employer’s attitude towards equity.

For Generation Z, seeking employment with companies whose values align with their own, whether that means a commitment to diversity and inclusion, environmental sustainability, or a collaborative work environment is a fundamental requirement.

 Pay transparency is right at the top of the list of expectations and plays a pivotal role in whether they apply for a position or not – and an organisation’s pay practices speak volumes about the culture and its approach to fairness and inclusivity, which will ultimately influence employee experience. 

That said, meeting the expectations of the upcoming workforce is not the only reason that pay transparency is a practice that modern businesses should seek to undertake. It can save time for recruiters, weeding out the tyre kickers, and streamline the applicant list.

A study by the Society for Human Resource Management (SHRM) found that roles with disclosed salary ranges received 30% more applications, suggesting that transparency may also broaden the pool of interested candidates.

Creating a stronger ‘Employer Brand’

Companies that are open about their compensation practices are more likely to attract applicants and build more trust in prospective and current workforces. They are viewed as trustworthy and ethical. A recent LinkedIn survey revealed that 61% of professionals consider a company’s transparency about its pay practices to be a critical factor in deciding whether to accept a job offer.

This openness extends to retention practices too, and building an employer brand that attracts and retains talent reduces attrition and builds engagement and a sense of belonging. According to a report by PayScale, companies with high levels of pay transparency saw a 30% lower voluntary turnover rate compared to those with low transparency levels.

Recruitment and Onboarding Software

One effective way to enhance transparency and improve the overall recruitment process is by leveraging advanced recruitment and onboarding software. Companies like xcd provide comprehensive solutions that streamline recruitment and onboarding, ensuring a seamless and transparent experience for both employers and new hires. This type of software helps HR departments manage job postings, applicant tracking, and employee onboarding in a more organized and efficient manner.

With xcd’s recruitment and onboarding software, businesses can easily disclose salary ranges, communicate clear expectations, and foster a transparent hiring process. This not only attracts top talent but also builds trust and engagement from the very beginning of the employee lifecycle. Incorporating such technology into HR practices is a significant step towards meeting the modern workforce’s expectations and maintaining a competitive edge in talent acquisition.

Practical steps for recruiters

Transparent pay policies require HR to take a two-fold approach. Internally, the leadership team needs to see the potential benefits of being open about salary. HR can use employee data from satisfaction surveys and recruitment figures to link transparency to improved retention, employee experience, and a stronger employee brand. 

If stakeholders and clients are more reluctant to disclose pay rates, highlighting the competitive advantage of transparency will help build the case that being upfront about pay can strengthen job posts and attract a better calibre of applicants. Externally, clear communication to convey the facts about a role is paramount. 

Job postings should include salary ranges as well as explanations of how that compensation is determined. This not only sets clear expectations for the applicant but also signals to potential candidates that the organisation values fairness and openness and is a desirable place to work.

Pay transparency is fast becoming a moot argument. Clarity and openness are required by the vast majority of job seekers in the modern workplace, and this in turn is helping companies to build better employer brands. Those who fail to see the benefits of transparency in remuneration are likely to find themselves struggling to fill roles and, worse still, risk reputational damage. The move towards openness across all business areas is a trend that is not going anywhere.

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