The Pay Transparency Experiment

by Business Centric Technology (BCT) on July 15, 2022 in Ask a Recruiter, Business Trends, Dallas IT Recruiting, Uncategorized


A recent article by Dan Schwabel titled, Could Pay Transparency End the Great Reshuffle? mentions some of the pros and cons of sharing paystubs. Would this work in your business? Below are some notable pros and cons. Follow the above link for the full article.

Increase Retention

According to the article, Research from Payscale finds that 57% of employees who are paid at market (and 42% of those who are paid above market) believe they are paid below market. The report notes that companies shouldn’t take this matter lightly because “high engagement with everything except compensation doesn’t necessarily mean that employees won’t seek other opportunities.” Unintended consequences? Impressions count a lot. Adds the article, “In fact, the research discovered that among people who believe they are paid below market, 66% are seeking a new job, compared to just 34% of those who believe they are paid at or above market. That means that employees who think they’re paid below market — even if they aren’t — are nearly twice as likely to seek a new job in the next six months.”

Boosting Performance

What does a company get for its money? According to the article, they can experience a boost in employee performance. Schwabel adds, “Employees who have access to their coworkers’ pay information perform better than those who don’t. This makes sense — if you feel that you aren’t being paid enough, you’ll likely underperform at work. Whereas if you know you’re being compensated fairly, you might be willing to put in extra effort…One study identified that the increase in performance might be around 10%. The study’s author discussed why this might be the case: “We may work harder even if we don’t see a raise if we know that we’re doing well [compensation-wise] compared to our peers.”

The Downside

An unspoken upside to negotiating salaries without pay information is the ability to pay employees less. The article concludes, “There’s no getting around the fact that companies have something to lose here — the ability to pay people lower salaries. By being more transparent about wages, an employer may end up paying more to remain competitive in the job market, and that could mean they won’t be able to hire as many staff members…Just this month, New York City’s proposed salary transparency law stalled due to pushback from a business group composed of the city’s largest companies… During a labor shortage, or in the context of achieving diversity goals, the posted maximum [salaries] may be significantly higher than the historical salary ranges, creating dissatisfaction in the workforce and demands to adjust existing pay scales that the employer may be unable to afford,’ the group said.”

Time will tell how the pay transparency experiment will play out. History says that as higher salaries are absorbed in the workforce, dissatisfaction grows, building the search for more money. Whether the search means more asks for raises or finding new employment, businesses cannot afford either in the current labor market without adjusting spending, staffing, or profit margins.

Trent Lyons is a Technical Recruitment Lead at Business Centric Technology. If you are interested in learning more about how to get the best IT talent in the Dallas metroplex, contact Trent, who specializes in recruiting IT talent in Dallas, Ft. Worth, and North Texas. If you are looking for a rewarding career, contact us today.