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In today's corporate landscape, where discussions around pay disparities, gender wage gaps, and unfair compensation practices dominate headlines, the concept of full pay transparency has emerged as a potential solution and, in some cases, as law.

At Compt, an organization I founded back in 2018, we’ve witnessed firsthand the positive impacts of embracing full pay transparency.

Here I aim to shed light on what pay transparency looks like at Compt, explain its mechanics and influence on the overall compensation structure, present real-world examples of its benefits, and provide practical considerations for organizations contemplating this approach.

What pay transparency looks like at Compt

At Compt, pay transparency goes beyond simply publishing salary ranges in job descriptions. It involves openly sharing the process by which we determine salaries with the entire organization.

Compt employees are equipped with a comprehensive understanding of how their compensation is determined, including the factors, criteria, and processes involved. 

We make our salary information accessible across the team should anyone be interested, and one look at the job descriptions sent out to new hires will reveal what range we’re offering for those roles.

We use transparent communication channels like: 

  • Regular company-wide meetings
  • Open lines of communication with direct managers
  • Access to the leadership team through email, Slack, or Zoom.

These channels allow employees to engage in discussions and ask questions about compensation matters. 

When compensation is openly discussed like this, people understand the factors that drive salary decisions—such as experience, qualifications, and skills.

This transparency helps people to align their efforts and skills with organizational goals, fostering a more collaborative and inclusive work environment.

Pay transparency is something we start our employee experience with during the interview process.

We make it clear that we don’t negotiate and we offer a clear salary range for the role. We then explain our data and approach in one of the first interviews so we don’t waste anyone’s time. 

And we do the same thing with the whole team every year. If someone’s salary needs to move significantly, we do big bumps. During our annual salary review, we walk each employee through their compensation and what market research tells us about current rates for their role within organizations similar to ours. 

When employees have access to information about their salaries and total compensation (benefits packages like health insurance, stipends, PTO, and more), they gain a clearer understanding of how their own compensation aligns with the market and the organization's internal benchmarks.

This knowledge empowers them to make informed decisions about their career trajectory and negotiate from a position of knowledge and awareness.

In best-case scenarios, pay transparency mitigates the need for negotiation, which can be particularly beneficial to historically marginalized employee groups.

The benefits of pay transparency

Compt's journey toward full pay transparency has been an enlightening one.

Through our commitment to openness, we have witnessed firsthand the positive impact on our culture and bottom line. 

For us, the advantages of pay transparency extend beyond initial expectations. 

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Shifting the Focus to Value and Contributions

When employees have access to information about salaries and understand the organization's compensation philosophy, they can confidently engage in conversations about their own worth and contributions. 

They can leverage this knowledge to request appropriate compensation adjustments, promotions, or career development opportunities. People become empowered to assertively discuss their compensation, ultimately helping dismantle systemic barriers and supporting professional growth.

Early on, one of our engineers expressed his displeasure with the salary increase we were offering during his annual review. 

He had evolved his role and increased his skills, and those adjustments hadn’t been factored into the new salary. He pushed back and gave us the number he had in mind, and we’re glad he did because he was right.

We reviewed his progress, matched it to what we were seeing in the market, and made changes accordingly. He’s one of our most senior engineers now.

As a result of transparency, he and others on our team are more engaged in their work and committed to their long-term success within the organization.

Encouraging Fair and Equitable Compensation

When salary information is openly shared, organizations are compelled to address any existing pay disparities and ensure that employees are compensated appropriately for their roles and responsibilities. 

It provides an opportunity to identify and rectify systemic inequities that may disproportionately affect marginalized employees.

With transparent compensation structures and clear evaluation criteria, organizations can foster an environment where compensation is determined by objective factors rather than subjective biases or negotiations.

Higher Job Satisfaction and Reduced Turnover

Transparency in compensation has been found to positively impact employee morale and engagement

When employees trust that compensation decisions are made fairly and openly, they feel more connected to the organization's goals and are motivated to perform at their best. 

By removing the veil of secrecy surrounding pay, organizations can foster a culture of collaboration and teamwork, as employees understand that their success is tied to the collective success of the organization.

Employees feel valued, motivated, and appreciated, resulting in higher retention rates and a competitive advantage in attracting top talent. 

In the past five-and-a-half years, we’ve been able to achieve a 92% retention rate vs the industry standard of 80-85%. When you consider the time and resources used to replace talent, this has certainly saved us time and money vs our competitors.

We also have a 100% close rate for candidates who originally tried to negotiate for higher salaries. Once we explained to them our process they understood and accepted the offer. 

Job satisfaction at Compt is also measured by our quarterly culture survey. We ask questions about key areas of our business (along with examples as to what these areas mean) and have everyone rank each one on a scale of 1 to 10 (1 is lowest or worst, 10 is highest or best) for how you feel Compt is performing at the time of the survey as well as how we are trending when looking out the next three months. 

Across the board, we see scores of 8 and above for topics like values, accountability, communication, accessibility, transparency, speed, and structure.

Taking a phased approach to full pay transparency

While full pay transparency holds tremendous potential, organizations must approach its implementation thoughtfully. 

While I want to encourage you to dive in, it’s essential to evaluate the unique context and readiness of your company before embarking, especially since it will mean a lot of work for your HR and finance teams.

A phased approach may be beneficial, allowing time for adjustments, addressing concerns, and building a strong foundation of trust and communication.

By gradually introducing elements of transparency, organizations can gauge the reception and make necessary adjustments before fully embracing it.

By actively involving employees in the development and evaluation of the compensation structure, organizations can promote transparency and ensure buy-in from all stakeholders.

Early Steps to Implementation

Prior to implementing full pay transparency, organizations should establish robust compensation structures that are fair, consistent, and aligned with market standards.

Clear evaluation metrics and performance indicators should be defined, ensuring that compensation decisions are based on objective criteria rather than subjective biases. 

Organizations should also have effective mechanisms in place for addressing employee concerns or grievances related to compensation. 

I cannot overstate the importance of one-on-one meetings with your employees. These conversations are the perfect opportunity to open a dialogue between employees and employers regarding salary data and a revision if the data set is off.

It’s important to it make clear to your team that salary requests cannot be anecdotal and one-off. You’ll always be able to find a company somewhere that will pay your more. 

The data you need to bring to the table to make your case in your organization needs to come from a macro data set or from a recruiter who is telling you what the new range is for your role in other companies of the same size and stage.

By actively involving employees in the development and evaluation of the compensation structure, organizations can promote transparency and ensure buy-in from all stakeholders.

Additionally, providing resources and training to both employees and managers on how to navigate conversations about compensation is crucial.

Open and honest communication should be encouraged, emphasizing the importance of respectful dialogue and confidentiality when discussing salaries. 

This will help create a culture where employees feel comfortable discussing compensation matters openly and constructively.

Careful consideration: Hurdles to overcome

Pay transparency, while bringing numerous benefits, also presents certain risks and challenges that organizations must acknowledge and address. 

One potential risk is the disruption and dissatisfaction that can arise when salary information is openly shared. Employees may discover disparities in pay, leading to discontent and disruptions in the workplace. 

To mitigate this risk, it’s crucial to establish clear and transparent compensation structures and processes based on objective criteria. Regularly reviewing and updating these structures ensures fairness and alignment with market standards (at Compt, we do this annually).

Communicating the rationale behind compensation decisions, and providing avenues for employees to express concerns or seek clarification, can also help address dissatisfaction. This piece is continuous.

Another risk is the potential for pay compression. A study found that when California made city managers’ pay transparent in 2010, average compensation decreased by about 7% just two years later. 

This drop occurred mainly for senior positions, which is evidence of pay compression. To avoid this, it’s important not to reduce salaries based on benchmarking data but rather bring up lower salaries to close the gap. This will also help avoid resentment across seniority levels.

Additionally, the potential for unfair comparisons is another risk of pay transparency. Employees may make unfair comparisons based solely on salary figures without considering variations in experience, qualifications, or performance. 

To mitigate this risk, organizations should accompany salary information with context and relevant factors that contribute to compensation decisions. 

At Compt, we do not tie salary to performance, which mitigates the chance for subjectivity and bias as well as the creation of unrealistic expectations and burnout, which is so prevalent in startup culture.

Lastly, organizations must consider the potential impact on market competition and external perception. Full pay transparency may reveal compensation information to competitors, potentially putting the organization at a disadvantage during negotiations or talent acquisition efforts. 

But, if you offer a quality work environment and company culture, then this shouldn’t be a worry. Emphasizing the organization's commitment to fair compensation practices and growth opportunities in external communications helps attract and retain the talent you want.

Final Thoughts

Embracing full pay transparency can revolutionize organizations, fostering a culture of trust, fairness, and collaboration. 

Compt's experience, as well as the experiences of other founders I talk to, demonstrates that, when employees are empowered with knowledge about compensation, they become more engaged, productive, and satisfied.

The path to pay transparency may be challenging, but the rewards are worth it—greater employee satisfaction, reduced pay disparities, improved retention rates, and a strengthened employer brand. 

Organizations have the opportunity to reshape their workplaces into thriving cultures of equity, transparency, and success. As leaders, it is our responsibility to create environments where every employee feels valued, respected, and fairly compensated for their contributions. 

What are your experiences regarding pay transparency? Leave something in the comments are join the conversation over in the People Managing People Community, a supportive community of HR and business leaders building organizations of the future.

Some further resources to help you with compensation management:

By Amy Spurling

Amy Spurling is the founder and CEO of Compt, the first all-in-one employee reimbursement platform. A 3-time former CFO and 2-time COO, Amy's 20+ years of leadership experience drives her belief that companies can achieve so much more when employees are fully supported.