Pay transparency comes in many forms. It can be internal, meaning only employees are privy to salary information, or external, meaning compensation data is available to the public. It can apply to a certain tier of roles, one department, or the entire company, and it can also support many different organizational goals.
The most important thing, according to multiple leaders at companies that have implemented some form of pay transparency, is that the strategy aligns with company culture and is not a one-off initiative.
"It's a cornerstone of many parts of our culture," Alex Haimann, partner and head of business development at Less Annoying CRM, a startup software company based in St. Louis, told HR Dive. "I would go so far as saying that if an organization wants to implement pay transparency… they critically need to also have an air towards transparency in other parts of how the culture is set, how rules are made, how decisions are made."
At Buffer, a social media software company that has one of the most extreme public-facing pay transparency policies, head of finance Caryn Hubbard told HR Dive that it is just one piece of a very trusting culture, something that attracted her to apply to the company four years ago.
"I've talked to friends that are in leadership positions, and other companies just through networking and stuff, and they all think it's fairly wild," Hubbard said. "I think it does feel radical."
"Default to Transparency" is the second value listed in Buffer's culture deck, and one way the company lives that culture is that every employee's compensation information is listed on a publicly-available spreadsheet. It's not just salaries, but raises, equity, internal emails and company finances and performance that are open for all to see.
"It's super important to align it to the bigger picture," Mari Hegyi, director of the people team at Limeade told HR Dive. "Not looking at comp as the separate other thing, but how you're looking at it in totality with the employee experience, connecting it with your culture, connecting it with your values."
Hegyi said that because Limeade is a company whose mission is "to improve wellbeing in the world," they wanted to reflect that mission with their own employees, and that included financial wellbeing.
Planning and implementation
For Haimann at Less Annoying CRM, the company was just beginning to start making lots of hires. He and other members of the leadership team wanted to create a compelling offer for two key functional roles: engineers and customer support managers, where they were hiring handfuls of early-career professionals.
"We started thinking, 'What's the value in different people starting at different levels?'" Haimann said.
Ultimately, they landed on competitive base salaries for the two roles, listed openly on the company's careers page, and the promise of a $10,000 annual raise in each employee's first seven years.
"We were trying to basically go to get the best big pool of candidates we could," Haimann said, noting that their hiring needs were not huge numerically, but that a lot of companies were going after similar talent profiles. "We also thought it would be a way of creating a bit more of a cohesive work environment," he said, "where everyone knows where everyone else is in terms of compensation."
At Limeade, things went a bit differently, because the company had a sizeable existing workforce and was looking for ways to regulate a compensation model that was built organically.
"At one point, we looked at our titles at the company and compensation and found there were people in the same job with totally different titles, and we didn't have a clear structure or strategy around our compensation program and plan," Hegyi said. "We had also been getting feedback from employees around career development and things like that."
The planning process at Limeade was intense, starting about six months before rollout in early-2019. They hired external consultants and collected data from a variety of sources, with the goal of having all roles and levels within 5% of each other salary-wise. But with so much variance in job titles, it wasn't as straightforward as they thought it would be.
"It was surprising to me how difficult it was sometimes to actually map to jobs that these compensation surveys use," Hegyi said.
Ultimately, they decided to implement pay transparency internally. With every job offer, Limeade reports a pay range that includes company averages and external data for comparison. Their database refreshes every six months, and the company completes an analysis every year to update all pay grades and salary ranges.
"We wanted to have more clear salary ranges to better prepare managers to discuss compensation with their employees, and to also empower employees by essentially showing them that we are doing our due diligence with market data to remain competitive," Hegyi told SHRM in a recent interview.
To that end, Limeade held training for frontline managers to prepare for the inevitable questions that would arise from implementing this strategy. When they first made the announcement regarding the new information employees would be receiving, it was not met with the enthusiasm Hegyi was expecting. But in the next review cycle, the level of appreciation was far greater.
"It was really interesting to see the adoption of it, for people of their own understanding of it," Hegyi said. "And then how they wanted to use it and what they wanted to do with it."
Haimann outlined some of the key benefits of his company's approach in an article on the Glassdoor blog: a cohesive workforce, minimized distractions and a reduction in leadership politics. For Less Annoying CRM, pay transparency also served as a valuable recruiting and retention tool. The company has only had to let one person go and only four people have left voluntarily in the past seven years.
"It was a way initially of sort of simplifying [the] combination of our communication to new hires, the marketing of our positions, [and] logistics on HR and tracking," Haimann said, adding that this form of pay transparency also made financial planning easier, because annual raises were not subject to any negotiation or performance review process.
Less Annoying CRM also saw a benefit in customer relationships and the public perception of the company. "Let's imagine one of our customers sees this, they're gonna go, 'Oh, they pay their people really well. And they provide really great service. And maybe that's the reason why,'" Haimann said. "We felt [pay transparency] could be a competitive advantage for us in our market."
Pay transparency also cut negotiations from the hiring and promotion processes. "When someone comes in [and] wants to negotiate...it is helpful to be able to say, 'That's great, but here's what we offer, and here's why we offer it. And everyone in this starting role in this group, this is what they make,' ... it actually makes it easier for us because we don't negotiate as a result," Haimann said.
Less Annoying CRM does not employ this practice for every single job opening, but it has reported great value from using this strategy with those core roles.
"If you're an organization that's hiring a lot of three different types of positions, I think there's an advantage in being very transparent. And it's both from a marketing perspective, [and] team cohesion perspective, but also you can systematize that position quite a bit," Haimann said.
For Buffer, being a leader in this area has served as a recruiting boon as well. The fully remote company has earned a reputation for its pay transparency efforts and continues to tinker to find the best way to do it.
"We've evolved our salary formula, and we've introduced a salary calculator," Hubbard said, "so I think if anything, it's evolved as being more of a kind of a model for other companies."
Hubbard agreed that recruiting, retention and lack of negotiation are visible benefits to this level of transparency, but also notes the improved nature of conversations around performance and career goals.
"I think what that does is culturally it makes conversations around career growth and opportunities at the company really more about experience and value and ambition," she said. "So the pay transparency lends to deeper, richer conversations, rather than just focusing on dollars."
Coming to Buffer from the worlds of finance and consulting, Hubbard understands the extent to which salary conversations are taboo, and a level like Buffer's is hard for many to fathom. But the benefits are plentiful, if it fits within your company's culture, she noted.
"Every culture is so unique that it would be a good idea to get the buy-in from the team. And be comfortable knowing that not everyone is going to be up for it," Hubbard said, thinking about how she would advise others to implement similar strategies. "I would like to survey the team, get a sense for what kind of disruption it may bring to operations and productivity first and then work to obtain the buy-in and explain the why and explain the long-term benefits and how it can really help them."
Hegyi and Hubbard both pointed out that pay transparency allowed their companies to identify and address pay gaps, and empower groups who may otherwise not speak up to advocate for themselves.
"I think it's really a neat opportunity to identify [and then] root out gender issues or other forms of the discrimination that might exist in a workplace," Hubbard said. "There's a lot of unconscious bias and things that people don't really talk about, but it's all underlying and all there."
Hegyi added that pay transparency has improved relationships between HR and other parts of the company as well.
"This armed us with information and knowledge to get additional budget from finance, and our CEO, for market adjustments," she said. "So it's allowed us to be much more strategic and thoughtful around market trends, internal equity adjustments, promotion increases… because we have this robust structure and plan in place."
But her favorite benefit of their pay transparency efforts is the empowerment of people across the organization. Often employees who are unhappy with their compensation stay quiet about it, she said. Having pay transparency allows them to bring that sentiment out.
"My favorite impact of this has been employees advocating for themselves," she said. "From a diversity and inclusion and equity standpoint, this has been a really cool impact of this, just enabling our women and others to ask about their compensation and to come to that table informed."