Salary transparency has long been seen as a key way to reduce pay gaps in the workplace. New regulations have experts talking about being more transparent around salaries, but some employers have been resistant. Here’s why salary transparency can also help employers secure top talent.
For years, Argentus has followed the gender pay gap in our core recruitment vertical of supply chain management. Just as in many economic sectors, women on average earn less than their male counterparts. Last year, an ASCM salary survey showed that women under 40 were earning the same, on average, as their male counterparts in supply chain, showing some real progress. However, gaps have been persistent as candidates rise into leadership roles.
These gaps are also correlated with a leadership gap, where women are much less likely to be promoted into VP, CPO, CSCO and other leadership roles in the field. As the survey showed, women represent 41% of the supply chain workforce, yet only hold 15% of executive positions—which declined from the previous year. Of course, there are other salary gaps as well, for people of colour and other historically marginalized groups.
In this environment, diversity, equity & inclusion (DEI) have been a key strategic driver for companies in their hiring. Leaders recognize that closing these gaps and increasing opportunities for diverse groups isn’t just the right thing to do. It’s also good for business, by bringing in diverse viewpoints, and attracting more talent in a very tight labour market.
Companies are getting more creative about how to close these gaps, and pay transparency has been gaining steam as one potential solution. New government regulations are going into effect around companies reporting their salaries, to help close these gaps. And, in this market, candidates have more leverage around pay equity than they had before. It’s leading many labour market experts to revisit a question that’s been building for the past few years:
Is it time to become radically transparent around salaries?
In other words, should companies be completely open about their compensation? Should they list salaries on job descriptions—either voluntarily, or via a legal requirement—and open up internal salaries to prospective candidates? If everyone knows everyone’s salaries—the thinking goes—companies are more likely to close persistent pay gaps. But many companies also view pay transparency as a headache, lowering their leverage at the bargaining table with prospective candidates.
More governments are moving towards mandating pay transparency. Should private companies get ahead of it?
In the Public Sector, the so-called “Sunshine List” has long been a transparent way to see, and compare, relative compensation. Any individual in Ontario’s public sector earning over $100,000 a year is part of a full, searchable database, as part of the Public Sector Salary Disclosure Act.
Recently, the federal government began mandating pay transparency in some sectors, as part of their Legislated Employee Equity Program. Regulated industries (including transportation companies, banks and telecommunications) now have to report their pay gaps, with a goal of improving equity for a variety of groups. At the provincial level, Ontario passed a pay transparency law in 2018, but it has remained on the back burner. However, since 2019, employers in the province have been forbidden from punishing employees from disclosing their salary information to each-other. In the spring, news came out that British Columbia is joining other provinces in moving towards legislated transparency.
Clearly, governments believe that pay transparency can be a key lever for improving pay equity. And more candidates are demanding it. A survey during the pandemic showed that more than half of employees would consider switching jobs for more pay transparency, and a previous report from the same organization found that 16% of employees have less intent to stay in their jobs if they perceive a pay gap, even if no gap actually exists.
So what are the benefits for employers?
There are also well-studied benefits to a more equitable workplace, from higher performance to greater innovation and employee engagement. But there are also a host of practical reasons why pay transparency makes sense from an employer standpoint. As we mentioned, pay transparency makes your organization more appealing to candidates, which is crucial during a period of historically-low unemployment. It also just makes things much more practical from a hiring standpoint.
In our own recruitment practice, we often hear from companies who identify great candidates, get to the point of job offer, and fail to secure the talent. Often this revolves around salary discrepancies at the finish line. The company, trying to get leverage, waits until the last possible moment to negotiate a salary with a candidate, only to find out that the candidate’s expectations aren’t in line with their range. In this job market, candidates are in higher demand than ever before—especially in our core verticals of supply chain management and procurement—and salaries have experienced big upward momentum during the pandemic. So it’s not surprising that candidates are asking for more money than companies expect.
What is surprising is when companies spend considerable time and resources interviewing, without being transparent about salaries, only to find that their budgets aren’t aligned with expectations.
From a hiring perspective, pay transparency just makes sense.
Contrary to what you might assume, when placements in our recruitment practice don’t work out at the offer stage, it’s rarely because of salary reasons. More commonly, it’s because the candidate is fielding another offer, or the company reset their requirements. Almost always, when it comes to salary, we can find alignment.
Why? Because working with a recruiter provides transparency early in the process. The company provides us a salary range, and our first conversation with candidates always includes a discussion around salaries to make sure it aligns. This is for the simple reason that we don’t want to waste anyone’s time. We only get paid when we place a candidate, so we want to place people as efficiently as possible. That’s a benefit to our clients, who know that every candidate we submit is within their salary range. When it comes to a job offer, there are no surprises.
Yet many companies keep salaries until the end when they’re hiring on their own, out of a desire to negotiate when they believe they have leverage. Many companies believe that they can wow a candidate with their great workplace culture and opportunities for advancement, so much so that the candidate will just accept the salary that they drop on the table at the offer stage. But if you aren’t transparent with salaries upfront, many of those candidates will just walk away. This wastes money, and also leads to roles sitting unfilled for months. Money talks, and candidates don’t want to feel that their time has been wasted—especially in a tight labour market.
It seems the winds are changing in terms of pay transparency, with more governments moving towards legislation, viewing it as a crucial tool to close pay gaps. But for companies, adopting it now, rather than later, can also be a tool to improve their hiring.