Can pay transparency be a route toward equal pay?

Pay transparency can be a route toward equal, fair pay for all, helping to bridge the serious gender gap that still exists in the creative industries

Illustration by Peepshow

The war for talent is at an all-time high. Job applicants can afford to be choosy and are casting a critical eye on employers’ Glassdoor rating and company websites, as well as sussing out rumours about culture. Candidates want to know: what do you stand for? Will you support their growth? Are you committed to respect, fairness, diversity, and inclusion?

Oh, and how much do you pay?

Pay shouldn’t be the only motivator, of course. But the reality is that pay is inherently tied to fairness, diversity, and inclusion, especially in regards to gender. Everyone’s heard that women only make 77.9 cents for every dollar men earn, leaving women to constantly wonder if they’re being paid fairly. And suspicion around pay equality can be insidious, leading to resentment between team members. Meanwhile, organisations are naturally concerned about the effect on their bottom line, as well as its impact on employee engagement.

Of course, people in the creative industries face their own challenges. Just entering the field often means taking on an unpaid internship, or providing free work in an effort to win a bid. Even when firmly established, competition and the unpredictable nature of work creates insecurity, leading some to underbid for fear of losing the job entirely.

In an effort to signal a commitment to equal, fair pay, companies are increasingly considering pay transparency. People often assume this means making salary information open and public – catering startup Chewse, for instance, emailed a spreadsheet to their team listing every employee’s salary. It’s the most extreme version of pay transparency, and it can make people understandably squeamish. Your salary is, in a very literal sense, what you’re worth, and having it out in the open can lead to feelings of envy or injustice. (At Chewse, fortunately, employees responded to it positively.) Others have taken a more conservative approach by creating anonymous databases, such as Contently’s Rates Database for writers, or Buffer’s Salary Calculator, which allows anyone to estimate what they would earn working for the company.

Total pay transparency can be a risky endeavour for the organisation.

Surprisingly, though, the research on the effect of pay transparency on pay equality is limited. A study of Danish firms found that pay transparency did reduce the pay gap – but only because men were paid less, not because women were paid more. Furthermore, total pay transparency can be a risky endeavour for the organisation: a University of California study found that employees who found out they were being paid less had lower engagement, and that it increased payroll costs in the short term.

Fortunately, total pay transparency isn’t the only option – and it’s arguably not even the most effective. Take another look at that 77.9 cents figure – that’s the average of all women and men, working all jobs. When you look at women and men performing similar jobs, the gap practically disappears, with women earning 98 cents for every dollar men earned. Many factors contribute to this discrepancy, but a critical one is the fact that men move into leadership roles – and therefore, higher pay ranges – at higher rates than women. Men are 70% more likely than women to reach an executive position by mid-career, and 142% more likely by their late career. To truly reduce the gap, we need more women in leadership positions – and one of the ways companies can do that is to make explicit what’s needed to get promoted to those positions.

True pay transparency, therefore, isn’t just about what you pay people, but why you pay what you do. Do you pay more for advanced degrees, or is tenure more important? Is a position salaried, or do individuals make commission? By providing more context, people can better understand their job expectations and development opportunities. Not only that, you can make sure your company is being consistent in how it manages raises – an important consideration given that women ask for raises just as often as men, but only receive one 15% of the time, as opposed to 20% for men.

A simple way to address these trade-offs within your organisation is by using a tool called an ‘even over statement’– one positive value ‘even over’ another positive value. To do this, first define the work entailed for a given role, and the market and geographical value of the associated tasks or responsibilities. Then, think about your organisation’s historic approach to qualifications like experience, potential, and education, and determine what values are more important. For instance, Jennie and Julie perform the same role. Jennie has prior experience, which may mean she is more effective at her role or has more connections. Julie, though, may be a quick learner with the potential to grow into a leadership role. Both of these things – experience and future potential – are positive, winning values. But given limited resources, what is your company willing to pay more for?

Your company might value ‘experience even over potential’– in which case, Jennie will be paid more. As you’re creating these ‘even overs’, keep in mind they must be choices between two positive values: no one’s ever struggled to choose between ‘hard worker and lazy worker’. Once you’ve established some clear ‘even overs’ on advancement and pay, share them with your people. Give them a peek behind the curtain so they understand the context behind your pay strategies. This will help Julie understand that she’ll need to put in time before being considered for a raise – or help her realise that this isn’t the right organisation at this stage in her career!

Realistically, discussions about pay equality have already occurred at your organisation, whether formally or in the hallways.

Realistically, discussions about pay equality have already occurred at your organisation, whether formally or in the hallways. And if they haven’t yet, get ready – regulation around pay transparency is coming. Starting in 2019, for instance, all employers in Ontario, Canada, will have to disclose pay rates on job postings. If you’re reviewing salaries (as you should at least once a year), this is the ideal time to conduct a pre-mortem – a thought experiment to tackle the most pressing issues in pay. If you were to make your salaries transparent today, what could go wrong? Identify the more likely and most critical issues, and develop simple fixes to start addressing them.

Next, set expectations around transparency by making the company’s guiding principles explicit. In existing organisations with established norms around salary secrecy, you can introduce the idea of pay transparency by sharing your ‘even over’ statements with the team. This will help them better understand how they can progress without forcing them to reveal numbers. To push the organisation further, consider including salary ranges in every job posting, or even banning salary negotiations, as Reddit did in an effort to equalise pay. If you’re feeling particularly bold, you can even let employees set their own salaries like at online service provider Incentro. This requires giving all employees a comprehensive view not just of salaries, but of the finances of the entire organisation, so that they can make informed choices about appropriate pay.

Finally, reduce the taboo around salary. It can be extremely uncomfortable to go from an environment in which no-one talks about salary to an environment where everyone talks about salary. In fact, not all employees may buy into the prospect of having their salaries shared across the company. Instead, start by explicitly encouraging your employees to talk to one another about their pay journeys and how they’ve prepared for salary negotiations with one another. If you’re a freelancer, seek out others in your industry to compare rates – anonymously if needed. In some industries, this has even evolved into an annual report: the Strategist Survey, for instance, was a volunteer effort that compiled data on salaries for the planner role in agencies.

Ultimately, pay transparency is a spectrum, not a switch to flip. By sharing how the company makes decisions around pay and promotions, and by inviting teams to openly discuss their salary history, you can create an environment in which everyone, regardless of gender, feels they are fairly compensated for their contributions.

Lauren Currie OBE is Managing Director of NOBL UK and Europe, a company founded in 2014 to help lead organisations and creative leaders through change. Jane Garza is Organisational Designer at NOBL;