by Dawn Mott, Elizabeth Stock

How pay transparency can help close the wage gap and advance DEI

May 05, 20216 mins
Diversity and InclusionHiringSalaries

Without transparency, organizations will struggle to close gender and racial pay gaps and attract the talent they need.

At the start of the pandemic, software engineer and aspiring CIO Kerry Fields was laid off. In an already challenging time, she unexpectedly had to begin searching for work during one of the biggest job crises of the past several decades. She poured over job boards, networked virtually, worked with mentors, and took every opportunity to continue building her portfolio and professional skills. She also applied for upwards of 100 jobs.

She estimates that fewer than 25% of the jobs she applied for showed the salary in the job listing—an issue that both made her job search inequitable and negatively impacted prospective employers. Kerry is also a Black woman, so she already faces significant intersectional salary inequities. According to recent reports, Black women earn 38% less than white men and 21% less than white women for the same job.

Without salary information being disclosed in the job listing, Kerry had no way to know if the salary available would support her, resulting in a lot of wasted time on both Kerry’s part and the employer’s. Even at the interview phase, potential employers often didn’t disclose the salary, prolonging the process.

Sadly, Kerry’s story is not unique.

Closing the gender and race pay gap begins with salary transparency. Salaries are often shrouded in mystery, not just from the outside for job seekers but also inside the company for current employees. The lack of information and transparency around pay exacerbates gender- and race-based disparities. While companies may believe it serves their bottom line to keep this information secret, that assumption is misguided. And not disclosing salary details certainly does not advance goals for diversity, equity, and inclusion.

What is pay transparency?

There is not one conclusive definition of pay transparency because it exists on a continuum, but the concept is simple: Don’t keep pay information a secret from current or prospective employees. How companies achieve this ranges from conservative to moderate to radical.

On the conservative side, pay transparency can be as simple as including a salary range in a job listing. While it may seem simple, most companies have not adopted this step yet; only about 17% of companies practice this level of transparency.

Moving along the pay transparency continuum, we see companies providing internal clarity on what employees are being paid. Publishing salary data enables employees to see what their colleagues in their department and across the company make. This internal understanding drives organizations to address and correct gender and race-based disparities, and positions companies to increase equity going forward.

And in a more radical approach, some companies make everyone’s exact salaries public.

There is no prescriptive approach, and what works best will depend on a variety of factors unique to each company.

How pay transparency impacts organizations—and how CIOs can enable it

When salaries are transparent:

  • Companies save time by only interviewing candidates who will accept the offered salary
  • Employee retention is increased
  • Morale improves
  • Companies stand out in a highly competitive hiring market

Without pay transparency, it is often up to the prospective employee to negotiate a certain level of pay. This keeps power in the hands of the employer and gives an edge to the candidates and employees in historically advantaged groups and those who have been socialized to self-advocate. For example, if Kerry were to interview for the same position as a man who is a better self-promoter, that man would likely be offered more money for the same role. Pay transparency helps candidates know that they’re in a fair situation, and companies know that their system is equitable.

Pay transparency also benefits employers by encouraging organizations to develop an approach to compensation that is strategic, data-driven, and fair. Developing a systematic approach to establishing initial salaries, pay bands, and formulas for pay increases removes bias from the hiring and compensation process. It empowers organizations to address disparities and ultimately enables CIOs (and other leaders in their organizations) to make more effective and equitable hires.

One example of pay transparency in action is the SaaS social media platform Buffer. The company has made an extensive effort to implement, iterate upon, and publish its journey toward radical pay transparency. As a result, it more than doubled the number of applicants for its open positions and has started taking steps to close the gender pay gap.

CIOs can lead in developing these approaches given their role leveraging technology to support internal and external initiatives and because of the unique challenges around hiring tech talent, particularly diverse tech talent, but they should not approach pay transparency in a vacuum. It is critical that all departments, including the C-suite, human resources, and operations, are invested in salary transparency and are prepared to address internal inequities that may surface.

While the business case for pay transparency is strong, equity and empathy are equally important motivatorsit comes down to how companies live out their core values. Building trust between employees and leaders improves retention and team morale and signals a tangible commitment to reducing gender and race-based pay inequities.

CIOs who want to bring pay transparency to their companies can begin by:

  • Starting the conversation: Bring the topic up to peers and leaders to see whether others have considered it.
  • Adding salary information to job postings: It is worth experimenting with this approach even if your company is not ready to commit to full transparency.
  • Getting feedback from your employees: It’s likely they have great company-specific insight to offer.

Our organization, PDXWIT, is like most in the U.S. in that it has only just begun to adopt pay transparency. We still have a long way to go and need to sort out what makes sense for our team. For us, listing salary information in jobs we post has been a step in the right direction. Technology leaders who take similar actions will be able to attract more highly qualified talent like Kerry Fields, increase equity in their organizations, and uncover and close gaps that negatively impact DEI.