Using Pay Transparency to Increase Diversity in Hiring

Feb 22, 2023

By Rachel Morgan

When it comes to pay transparency, there’s a disconnect between vision and reality. Although one recent study found that two-thirds of organizations surveyed “view pay transparency as increasingly important,”1 only a little over 23 percent of workers surveyed answered yes to the question “Do you feel your employer is transparent about how people are paid in your organization and that it is okay to ask questions about salary?”2

This lack of transparency stems from organizations’ fear of negative effects on morale, increased turnover, and decreased offer-acceptance rates. What if someone sees that their salary is much lower than others and complains about it without knowing the relevant context (such as other people’s skills and experience)? What if a top employee leaves because their company won’t take other companies’ salaries into consideration when negotiating that employee’s pay? What if an external candidate turns down an offer after finding out its compensation rate?

Contrary to many business leaders’ fears about pay transparency, though, it can actually help reduce turnover and encourage employees to expand their careers at their current organizations (rather than somewhere else). In one recent employee survey, 79 percent of the respondents indicated a desire for “some form of transparency”3; another found that 60 percent of employees would switch to an organization that offered “more pay transparency than their employer currently provides.”4

It’s also possible that salary data would open conversations about what skills and experience employees need in order to move to the next level in their careers. Before having those conversations, however, employers must address any pay inequity issues (such as those highlighted by data indicated that women earn only 82.3 percent of what men do, “and the gap is even wider for many women of color”5). It’s unethical for a company to use salary information as a dangling carrot to get people to improve their performance if it hasn’t evaluated how it compensates employees from historically excluded or disadvantaged groups. The first step toward pay transparency is to address such areas of improvement and work to attract more diverse applicants.

Many candidates get to know a company’s brand through its career site. Therefore, it’s important that the site reflects how much the organization values diversity, equity, and inclusion. Because “about 1 in 3 employees and job seekers (32 percent) would not apply to a job at a company where there is a lack of diversity among its workforce,”6 talent-acquisition teams may be unknowingly deterring diverse talent if they aren’t mindful of diversity concerns.

To create pipelines that help an organization meet its goals in diversity, equity, and inclusion (DEI), talent-acquisition teams should be sure to craft job descriptions with language that doesn’t exclude applicants of any races, ethnicities, or genders; veterans; or individuals with disabilities. Including salary information in a job listing can boost the conversion of career site visitors from diverse backgrounds. Organizations that list salary ranges for each role tend to be more likely to use inclusive language in the job description, perhaps because companies with a culture of transparency often have a more inclusive approach across the hiring process generally. Adding pay information to job descriptions might deter some candidates, but that isn’t necessarily a negative, because this can enable recruiters to reduce the time, they spend on candidates whose salary expectations don’t align with what the company is willing to pay.

Rather than let the “what ifs” stop them, organizations should embrace pay transparency as a crucial tool for building, retaining, and sustaining a workforce that lives the company’s values. Although it may take time to shift a leadership team’s perspective on building diversity, pay transparency practices can lead to a higher performing, more inclusive workforce in the long run. 

Rachel Morgan is a senior product marketing manager at iCIMS, where she works on the product strategy and narrative around AI, analytics, and diversity, equity, and inclusion. She can be reached at XYZ.

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