Dive Brief:
- Twenty percent of U.S. employees said they would quit their job for better pay, while only 6% of HR leaders think competitive pay is the reason workers leave, Mercer's 2019 Global Talent Trends Study has found. Employers can no longer afford to be opaque about pay without risking higher turnover rates, further Mercer analysis showed.
- Pay disparity hinders employers' ability to achieve diversity, a necessity in today’s economy, Mercer said; only 19% of U.S. workers gave their employers an "A" on pay and promotions, and fewer employees (52%) think compensation is fair today than they did five years ago (57%), based on employee satisfaction data. But employers, too, have lost some control of compensation and career data with the rise of the internet and public sharing of experiences and pay rates, Mercer noted. Employees then develop their own perceptions about pay rates and employers' compensation practices.
- According to the analysis, employers' decisions regarding compensation transparency are further complicated by state laws entitling employees and candidates to have pay information, websites that make pay data public and a tight labor market that puts the spotlight on employee value proposition and an employer's handling of pay issues.
Dive Insight:
Traditionally, wages have been a taboo topic — but today's workers have fewer inhibitions about discussing pay openly. In fact, many workers, especially those in creative jobs, want and expect employers to be upfront about their pay practices. For instance, 70% of respondents in a survey by The Creative Group said they were at least "somewhat comfortable" sharing their earnings with colleagues on the same level, if asked, and a similar number said they felt the same way about sharing their salary information with outside personal and professional contacts. Companies have followed suit, at least in some industries; 77% of ad and marketing hiring managers said their companies offer some degree of pay transparency.
This rule doesn't necessarily hold true across every industry or study. According to a survey of 750 workers by researchers at UCLA and Harvard Business School, 80% of respondents would pay to keep their coworkers from learning about their salaries. But in response to changing norms — due in part to increased accessibility to salary data — more employers are revamping their compensation programs to be more transparent. According to a study by Willis Towers Watson, nearly two-thirds of respondents said they've established formal processes, including around salary and base pay decisions, in order to combat bias in the process as well.
As Mercer points out, pay transparency can be an effective recruiting and retention tool that can raise an organization's competition for talent. Transparency is also associated with increasing an organization's return on equity. Mercer recommends that employers start a "pay transparency journey" that starts with reviewing how much information they currently share with employees about pay and why employees receive the pay they do.
