Although pay secrecy remains the informal norm or formal policy for roughly half of all U.S. employees, companies are facing a crescendo of calls for greater pay transparency. Local, regional, and national governments across the globe are enacting laws designed to increase the visibility of pay practices.
Research: The Complicated Effects of Pay Transparency
A wave of recent studies looks at the impact of new laws on equity, productivity, turnover, and more.
February 08, 2023
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Summary.
Companies are facing a crescendo of calls for greater pay transparency as local, regional, and national governments across the globe are enacting laws designed to increase the visibility of pay practices. These changes are already forcing companies to abandon unfair, discriminatory compensation policies, but beyond this important and clearly desirable result, pay transparency’s influence is more difficult to assess. Empirical studies suggest that pay transparency may lower compensation overall, even as it removes inequities. It may also in some circumstances compromise employee productivity and affect companies’ ability to attract and retain high performers. Perhaps more dangerously, it skews employees to favor a specific aspect of performance over others, weakening the organization’s performance overall. How transparency is enacted, therefore, is critical to ensuring that the organization and its employees all benefit from it.