Salary Transparency Is the Bright Future of Workplace Wellness
Like many people I know, I've always believed that going public with my salary isn't a good idea, not just out of fear of retribution from my employer, but also out of concern that my colleagues might resent me if it turns out I'm making more money than they are (or that I might resent them—and my managers—if the reverse were to be true). But a growing number of experts agree that salary transparency initiatives like the spreadsheet are important, particularly in an era in which women earn 80 cents to every dollar a man makes. The gap widens even further for women of color. Black women earn 61 cents for every dollar brought home by a white man, while Native American and Hispanic women earn 58 cents and 53 cents, respectively.
"We can’t know what we’re worth if we’re earning in a silo. Salary transparency is so important when it comes to earning." —Farnoosh Torabi, personal finance expert
If these statistics make you angry, and yet you still cringe at the thought of asking your colleagues to share their salary information, you're not alone. "As women, we don't give ourselves permission to investigate and speak out," career development specialist Minda Harts proclaimed at the most recent Well+Good TALK. But personal finance expert Farnoosh Torabi argues that it's impossible to achieve equal pay without having these tough yet illuminating conversations. "We can’t know what we’re worth if we’re earning in a silo," she says. "Salary transparency is so important when it comes to earning."
Clearly, chronic underearning is bad news for your financial well-being. "Many people either don’t know—or aren’t sure—how they are being compensated compared to their peers," says Megan McRobert, an organizer for the Writers Guild of America East, who advocates on behalf of the union's members in salary negotiations. "If someone is significantly underpaid and they don’t know it, they may not negotiate for higher compensation. Making less than your peers can negatively impact people their entire careers—not just at one job—because promotions, raises, and future salary negotiations may be based, in part, on that rate of compensation."
Unfounded wage discrepancy also has implications for our mental and physical health. "The idea that some work and people are inherently more valuable is deeply ingrained by our society and has serious health impacts, including stress and anxiety," says McRobert. "When the employer negotiates piecemeal and in the private with each employee, it can set people up to mistrust each other as well as their employer." On the other hand, she says, transparency around salary information can create a culture of inclusivity and openness, which is beneficial for employers and employees alike.
Why salary transparency is a win for both workers and companies
Salary transparency is still fairly rare in non-government jobs. According to a 2017 study from the Institute for Women's Policy Research, only 17 percent of private-sector employers make salary information public, while 66 percent consider salary discussion among employees to be either frowned upon or downright prohibited. But Torabi argues that this is an outdated POV for companies looking to attract the best talent. "Not a lot of companies make conscious moves to hold themselves accountable to their workers," she says. "If you can deliver salary transparency, it says a lot about your culture and your values, and employees are more likely to flock to you."
That's what happened at Buffer, a social media management software company, when it began posting every one of its employees' salaries online—including their first names–in late 2013. "The first year we published salaries, we were hiring for a couple of positions and we saw the number of applicants increase by a lot," says Hailley Griffis, head of public relations at Buffer. "Suddenly, we had 2,000 applications [for a given role] and that was not something we were getting before, [when we'd] maybe [receive] a couple hundred." Part of the reason why Buffer is able to be so transparent is that the company has developed a salary formula that calculates exactly what an employee should be paid based on role, cost of living in the applicant's city, and experience level. This eliminates any need for negotiation during the hiring process and allows employees to know exactly why their coworkers earn what they do. Buffer product engineer Colleen Ricker says this straightforward approach has been massively beneficial to her well-being since starting at the company a year ago. "I've not had to stress over my salary, and I haven't been plagued with doubts that I'm not being paid as much as my peers," she says. "That's just so liberating."
"I haven't been plagued with doubts that I'm not being paid as much as my peers. That's just so liberating." —Colleen Ricker, product engineer
One of the biggest criticisms of salary transparency is that some experts believe it could breed resentment among employees if they feel they're being paid unfairly. McRobert agrees that this can be true, especially if a company hasn't yet achieved pay equity, and some research backs up this theory. One study conducted in 2011 showed that workers who learned they were being paid less than the median for their position reported lower job and pay satisfaction. Another study from 2013 showed that while employees with access to salary information put forth more effort than those without that information, the higher productivity was driven by those with high relative earnings. And when Norway made its citizens' tax records public in 2001, low earners reported decreased happiness and satisfaction with their lives. "It’s true that these conversations can be emotional because they threaten people’s very sense of self-worth, regardless of where they fall in relation to [other] employees," she says. "But the long-term benefits to the individual employees and the workplace as a whole can outweigh short-term discomfort when people work together to support each other and honor that all labor has value and everyone deserves an equitable wage."
In fact, taking steps toward salary transparency could actually help companies become more equitable in the first place, as the salary information often shines a glaringly bright light onto existing wage gaps. For instance, Buffer found a gap between men's and women's average salaries company-wide—not because men were being paid more than women in comparable roles, but because there were more men than women holding higher-paying engineering positions. This revelation led them to make changes to their hiring funnel and work with outside experts to help balance out the team.
A similar story played out when Molly Moon's Homemade Ice Cream first started making moves toward salary transparency. "Pay equity in general is very important to the founder of our company, Molly Moon—she's been active in the fight for raising minimum wage, for paid family medical leave, and a number of other causes locally and nationwide," says Denise Brown, director of finance and human resources at the Seattle-based company. "She had done some research and heard form a variety of sources that one of the most effective ways a company can make a difference around pay equity is to go 100 percent pay transparent. So that’s why we decided to make this move."
Before opening salary information up to employees, the Molly Moon's management team spent a year analyzing the pay inequities that existed at the company and how to eliminate them. They found that tipping accounted for most of the discrepancies between employees in its ice-cream shops, so the company decided to increase its prices, eliminate tipping in its shops, and raise wages so that all employees could be on a fair, equal playing field. Now, each of the company's 100 or so employees has access to an internal spreadsheet detailing everyone's name, position, tenure with the company, and rate of pay. "The more detail you can share, the more empowered your employees are," says Brown, who notes that the staff response to pay transparency has been overwhelmingly positive. "Its been great for employees to feel like they have all of the information they’d need to formulate a clear argument about why they should be paid something different than what they are. I would encourage every company to do it." Molly Moon's isn't the only employer that made strides toward wage equality after deciding to be transparent with pay. The gender pay gap at Canadian universities decreased by 30 percent when a law was passed allowing public access to faculty salary information; unlike Molly Moon's, however, average salaries for all employees decreased overall in this case.
How to use salary information to your advantage
So let's say you've had some honest conversations with your coworkers—or you work for a salary-transparent employer—and you've learned that you're making less money for doing the same job. Now what?
First, says Torabi, it'd be wise to go to your human resources department and ask for the salary range for your job at your specific company. "It can be very helpful to you as you craft your strategy around asking for a raise," she says, adding that it will give you an indication of what your company typically budgets for someone with your skills and experience.
If you decide to make a case for a raise, Torabi says it's important not to compare your salary to that of a specific coworker while negotiating. "Approach [the conversation] from a place of curiosity rather than a demand," she says. "You [can] say, ‘Looking at what people are making in my role across the company with my same degree, my same experience, my same number of years in the work force, I'm wondering why I'm making 20 percent less.' That shows you want to have a conversation about this, rather than you assumed they’ve done wrong by you and now they have to pay for it."
"We want to do this for the next generation of women. They’re counting on us to lean into our courage and advocate for ourselves and ask for more." —Minda Harts, career development specialist
From there, ask them what you can do to bump your salary up to a level that you think is fair. "Say, 'What do I need to do to show you that I’m valuable at this range?'" financial expert Paco de Leon said at the recent Well+Good TALK. "Sometimes they’ll give you deliverables [they] expect from you, and you can follow it up in writing."
Finally, McRobert says you can take legal action if you feel that deliberate discrimination is at play. "If a person or group of people know that they are systemically underpaid as compared to peers in a comparable role, they may choose to contact the Equal Employment Opportunity Commission (EEOC) and an investigation may find that there was discrimination and compel a settlement or other remedy," she says. As for those who realize they're making more money than their colleagues? "They can stand in solidarity with their peers by advocating for them privately to their employer or publicly signing on to petitions and speaking out to the press, should employees choose to actively organize around the issue," says McRobert.
Ultimately, says Harts, salary transparency isn't just about making more money on an individual level. "We want to do this for the next generation of women. They’re counting on us to lean into our courage and advocate for ourselves and ask for more," she says. "If we don’t talk about these things, we’ll never know that some of us are getting the short end of the stick." And if no one else is talking about money at your company, Torabi encourages you to start the dialogue. "It’s almost like an ice breaker. Once someone shares their experience it opens up a floodgate. If you can be that brave friend or colleague or accountability partner, you’re doing society a favor—and it’s starting with the person on the receiving end of that conversation."
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