Why Salary Transparency Is Important — Especially for Women and Diversity

By Joanna Fragopoulos

Michele Paccione/Shutterstock.com

Salary transparency is on everyone's radar, whether it's marketers hiring new talent, new talent looking for jobs, or people outside of the marketing field altogether trying to advocate for themselves. While wage gaps can be the result of many factors, they often occur between women and men, as well as between marginalized groups and white‑identifying people. Equalizing the field is crucial for any industry to pay competitive wages — and to promote fairness.

By being honest and transparent, companies gain the trust of their current and prospective employees. Compensation varies according to experience levels, of course; when this information is divulged properly, pay increases are clearly defined and explained, which in turn makes it easier for employees to work toward specific goals and aspirations. Not insignificantly, pay transparency also facilitates compliance with legal guidelines.

When it comes to gender, transparency can be a key tool for closing the gap. According to Time, "white women in the U.S. on average earn 79 percent of what white men make, black women earn 63 percent of what white men make, Native American women bring in 57 percent, and Hispanic women bring in 54 percent, according to a 2018 report from the American Association of University Women."

In addition, a 2016 study published in the Journal of Business and Psychology reported that employees were more likely to ask for help from the right people when they knew what their colleagues earned. One of the authors of the study, Elena Belogolovsky, stated, "If I don't know my co-worker's pay, I assume that I might not be getting paid as much, and I decrease my performance. When people don't know each other's pay, they assume they are underpaid."

To diminish the wage gap for women and people of color, companies like Whole Foods, social media startup Buffer, and Verve, a U.K.-based tech firm, have made strides to improve policies. Buffer, for instance, made its compensation data public, making it easier for prospective employees to understand the company's culture. While sites like Glassdoor and PayScale allow employees to share salaries anonymously (which helps control the market), the onus shouldn't be put on employees to act ethically, but should start with the companies first.

Meanwhile, Verve's approach to the wage gap has been quite interesting: The company has allowed their employees access to the salary information of everyone at the company. CEO Callum Negus-Fancey explained to Forbes that "pay transparency helps attract a more diverse workforce. People join organizations based on what they do, not what they say. They want to see tangible proof that your company encourages diversity. People have a lot more clarity about how they can move up in the organization, horizontally or vertically, and that is going to help them think more intelligently about their career, and gives them power they haven't had before."

Apparently, after the pay transparency approach was enacted, no employees left the company, and the company can currently boast that nearly 50 percent of its employees are women. Such a strategy offers an additional advantage: it can be easier for prospective and current employees to negotiate starting salaries and subsequent raises if they know the rationale behind a company's pay scale.

Adding one more voice to this chorus, the ANA released an infographic breaking down the gender wage gap, reporting that "a study released by the Institute for Women's Policy Research reported that the accurate gender pay gap for the last 15 years in the U.S. is 49 percent, so every $1 made by a white male worker, a women would receive $0.49 for their work." Moreover, "gender pay gaps shrink when companies are required to disclose them. Harvard Business Review reported on a new study that focused on Danish companies before and after the introduction of the country's 2006 Act on Gender Specific Pay Statistics." Essentially, the infographic illustrates that transparency helps women make more educated choices.

The Creative Group also just published data supporting the importance of wage transparency. According to its research, 37 percent of managers want companies to be fully transparent about employee salary; 34 percent of companies are transparent, while 23 percent of companies are near full transparency, 20 percent are partially transparent, and 11 percent have zero transparency. Out of the 400 marketing leaders surveyed in this study, 23 percent believe transparency helps close the wage gap, 21 percent believe it creates more trust, 20 percent think it boosts recruitment and retention, 19 percent believe it increases productivity — and 16 percent believe it has no benefits.

Generally, about 60 percent of people felt very comfortable sharing their salaries — and less than 40 percent of people felt they wouldn't be comfortable. These numbers indicate that more people are willing to foster transparency, but many are hesitant or uneasy changing the current work climate and culture. This could suggest people are afraid to either know what others make out of fear they make less than their peers — or that the people they manage will feel frustrated. Either scenario, of course, only strengthens the case to make pay transparency and equality a priority, so employees feel valued and fairly compensated.