Pay Transparency: Silver Bullet or Kryptonite?
In this new whitepaper, from Ivey Business School, the authors discuss the rationale behind pay transparency, the pros and cons and the implementation challenges. It follows an earlier article on the theme, Transparency vs Honesty: A Workplace Trade Off.
Does fairness improve morale and performance?
There are increasing expectations of pay transparency from governments and customers, with emerging legislation.
But the stakes are high and there is a lack of consensus over the impact. Some believe it enhances morale and performance, others that it breeds envy and discontent.
Much of the thinking behind transparency rests on the notion that people are ultimately motivated by fairness. Which places considerable pressure on organizations to ensure that pay is not only equitable, but proven to be equitable.
Written by Kun Huo, Ph.D, CPA, CA and Kate Patterson, Ph.D, CPA, CA
Highlights
A growing trend
Workers increasingly support pay transparency and legislators are demanding greater disclosure, with new legislation emerging.
Varying impacts
Not every impact of transparency is positive, especially if an employee perceives that a colleague is earning more yet contributing less. ‘Self-serving bias’ theory argues that people overestimate their own performance and underestimate others’.
Robust data is key
It’s vital to establish a shared understanding of good performance, accurately measure that performance and establish robust ratios between pay and performance.
Above all, know your people
Be aware of possible reactions to pay transparency and tailor your policies to suit the workforce.