The Unintended Consequences of Pay Transparency | Harvard Business Review

Talent Management

Pay transparency—the degree to which an organization openly and proactively shares information about salaries—continues to be a workplace topic of interest. I have shared several resources on this topic, such as this PayScale paper showing how pay transparency can be viewed on a spectrum spanning five stagesranging from “Here’s what you get paid” to “Here’s everything you want to know about everyone’s pay” (see pages 10 and 13 of the PaysScale paper). Many organizations are voluntarily moving toward greater pay transparency to foster trust and narrow the gender pay gap. As Compensation leaders and their teams help organizational leaders determine the level of pay transparency for their organizations, this HBR article points out three unintended consequences of pay transparency: 1) Pay transparency compresses pay. 2) Pay transparency prompts employees to negotiate personalized rewards. 3) Supervisors are likely to fulfill personalized requests. The authors provide suggestions on how leaders can avoid these unintended consequences of pay transparency. As a bonus, here is a previously shared article (December 2021), How to Make Pay Transparency Part of HR Strategy: Featuring Starbucks, BBC, Whole Foods, Etc, which looks at how five organizations are approaching pay transparency.