The EU wants to make all salaries transparent — here are 3 pros and cons
A deeper look into the potential impact on employees and employers
Pro: The gender pay gap will get smaller
This one’s a bit of a no-brainer. It’s no surprise that these measures will help reduce the gender pay gap. After all, if you can research the average salary of a role, and find out exactly what you’ll be earning before you even apply, men and women are much more likely to be paid the same amount.
During a study byHEC Paris Business School, the salaries of 100,000 academics were posted online and were made easily accessible to the public. As a result, the gender pay gap of professionals in this field was reduced by up to 50%.
Con: Productivity might suffer
However, astudyconducted at the University of Michigan found that when taking on a task that involved counting dots, participants performed worse when they knew they were being paid less than others. So what does that actually mean?
Well, if the income gap between excellent employees and mediocre ones is small, it will be hard to motivate staff members. The knock-on effect of this is that the quality of work could eventually start to suffer and we might see a decline in workplace morale.
Pro: Fewer salary negotiations
Let’s face it, no one likes salary negotiations. You’ve crafted a killer CV, aced your interviews and maybe even completed assessments or tasks. The company finally decides to make you a job offer, then you’re faced with the dreaded stand-off when it comes to salary.
Under the proposed regulations, candidates would know exactly what they could be earning from the get-go. It also means that you won’t waste time interviewing for a job that is beneath your pay grade ever again.
Con: Companies might lose their top performers
Companies might be reluctant to make their salaries transparent because it could potentially make it harder for them to hire new staffers.
For example, a developer is interviewing at two different companies, let’s call them company A and company B. The developer really likes company A and is close to signing the contract. To stop this, company B can swoop in and offer them £10,000 more (because they know exactly what company A is paying).
It can also make it more difficult for employers to retain staff, which during the aftermath of ‘The Great Resignation’ is more important than ever.
Pro: Clear career development
Research by UCLAeconomist Ricardo Perez-Truglia challenges the common-held assumption that wage transparency is good for employees but bad for businesses. In his research, when employees found out their managers were paid more than they thought originally, they were not mad at the company. In fact, they actually worked harder.
The staff members were able to use this salary average as motivation and something that they could work towards. Rather than demoralizing employees, it actually gave them a boost. This, in turn, could lead to employees having a clearer career path and goal.
Con: Not everyone will be open to sharing
Did you know that since 2001, Norway has had complete pay transparency? This means any citizen can go online and see another citizen’s salary (based on the amount of tax they pay). The phenomenon is so popular that it’s been dubbed ‘tax porn’. However, not everyone will be happy about their salary being available online.
In fact, astudyby Loyola University in Chicago found that younger employees are more willing to share their pay information than their older counterparts. So while Gen Z are happy to shout their salary from the rooftops, baby boomers might not be so enthused.
If the new proposal is adopted, member states will have two years to implement the legislation in national law. Will we see pay transparency in 2024? Time will tell.
If all this talk of wage transparency is inspiring a change of role, find some inspiration via theHouse of Talent job boardtoday.
Story byRebecca OKeeffe
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