The Emperor's New Payroll Policy: Is Transparency Right for Your Company?

The Emperor’s New Payroll Policy: Is Transparency Right for Your Company?

In the Hans Christian Andersen tale “The Emperor’s New Clothes,” weavers tell the emperor that they have crafted fabulous new garments, but that they are invisible to anyone who is stupid, incompetent, or unfit for their positions.

When the emperor cannot see the clothing, he keeps it to himself for fear of being perceived as stupid or unfit. Likewise, most of his kingdom conceals their notice of his lack of raiment for fear of being called out as incompetent – until one gutsy young boy speaks up.

In the working world, there are many things that can fall into the category of the emperor’s clothing, but pay is probably the single biggest issue that everyone thinks about and no one talks about. Keeping pay information secret has been a norm, but some companies have decided to emulate the young boy and uncover the issue.

Pay Transparency brings many pay woes into the light, however, which may have both benefits and drawbacks. Consider the following when assessing whether to adopt a new payroll policy and bare it all to your employees.

May Affect Employee Contentment

When employees are used to not knowing what everyone else gets paid, viewing the information can be a shock. Employees may feel more content if they are making the same or more than coworkers, but less content if they are making less. You may see shifts in satisfaction levels if you have recently decided to go transparent, which can be beneficial or harmful.

Addresses Fairness Issues

When employees don’t know what one another get paid, there are often unspoken questions of fairness. Going transparent addresses these issues, but may not always be what employees want to hear. Providing information about why pay differs between employees in the same or similar positions may help to tackle fairness woes that can arise.

Can Assist with Candidate Fit

Being transparent right from the start by including pay information in position postings through applicant tracking software can assist with finding better matched candidates. Letting candidates know what they can expect to make helps candidates better assess whether your company is right for them. You may also see your quality of hires improve, since talented candidates generally don’t want to gamble with their salary.

Shows Employees Development Potential

Sharing pay information in charts that detail potential merit increases and promotion opportunities through HRIS software can motivate and engage employees – or deter employees if it seems that too much is required. In either case, being open and honest about what it will take for an employee to see a raise or promotion will help you to weed out under performers while inspiring high performers. You may also use it as a built-in, employee-driven succession planning tool.

Could Impact Turnover

After sharing salaries, you may see your turnover increase or decrease. Some employees will likely feel that they aren’t making enough when they see other employee salaries, and they may feel that their privacy has been breached due to the sharing of their salary. Other employees are likely to be happy about the new transparency policy, however, and you will likely see turnover rates decrease in the long run.

Deciding upon payroll transparency is a big decision that can impact your company in many ways. For best results, consider these factors and talk to your employees about their concerns before making salaries public.

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