The role of salary transparency in reducing workplace inequality

The conversation around pay in the workplace has shifted significantly, with salary transparency becoming a central topic in Australia’s job market. What was once considered off-limits or even taboo is now seen as a step toward building fairness and equity in the workplace.

This isn’t a passing trend. Employers and employees increasingly recognise that open conversations about salary can help address inequalities and create a level playing field for everyone.

The legal landscape in Australia is evolving to support this shift. While unequal pay for equal work has long been illegal, recent legislation pushes for greater transparency.

The Workplace Gender Equality Amendment Bill 2023 marks a significant step forward, requiring private sector companies with 100 or more employees to report their aggregate gender pay gap data to the Workplace Gender Equality Agency (WGEA) starting from 27 February 2024.

This new requirement underscores the growing importance of pay transparency in Australian workplaces and sets the stage for more open conversations about compensation.

What is salary transparency?

Salary transparency refers to the practice of openly sharing information about pay. This can range from listing salary ranges in job ads to providing detailed pay scales across an organisation. It encompasses various levels of openness, from sharing basic salary ranges in job postings to full transparency where all employees' compensation details are accessible internally. This approach represents a significant shift from traditional practices where compensation discussions were often considered taboo.

Benefits of salary transparency

Against this backdrop of changing attitudes, salary transparency offers several key benefits while working toward crucial workplace goals:

1. Enables organisations to craft competitive compensation packages that attract top talent
2. Helps build a positive employer reputation
3. Fosters a sense of trust and open communication among employees
4. Saves time and resources for both job seekers and employers
5. Leads to more effective candidate filtering
6. Empowers employees to negotiate fair wages
7. Helps reduce pay disparities based on gender, race, or other factors
8. Increases employee satisfaction and retention
9. Streamlines the hiring process
10. Leads to more focused and productive salary discussions

Goals and impact

The goal is to ensure that compensation practices are fair and open, helping to eliminate the secrecy that often allows pay disparities to thrive.

Lack of transparency can perpetuate pay gaps based on gender, race, and other factors. Transparency in pay exposes these inequities by bringing compensation details into the open, allowing employers to address them more effectively.

Salary transparency promotes fairness and aligns with broader efforts in advancing diversity, equity, and inclusion, and building trust in the workplace.

Addressing gender pay gaps

The gender pay gap is the difference in average earnings between men and women in the workforce. It is typically expressed as a percentage of men’s earnings and can be influenced by several factors, including occupational segregation, caregiving responsibilities, and educational background.

The current state of gender pay equity

According to the Australia Talent Trends 2024 Report, many employees have mixed feelings about their employer’s efforts to address pay equity, highlighting the need for ongoing attention.

Some 36% of women are satisfied with their employers’ efforts to close the gender pay gap; 33% are dissatisfied, and 31% feel uninterested. The survey also revealed a significant disparity in DE&I priorities between men and women.

‘Closing the gender pay gap’ was ranked as women’s most important DE&I initiative but only of third priority by men. It’s crucial to understand that the gender pay gap is not a simple matter of unequal pay for equal work, which is illegal in many countries.

How pay transparency tackles pay disparities

The gender pay gap is a complex issue, deeply intertwined with broader structural inequalities in the labour market. These include bias in hiring, promotion, and compensation decisions, and the underrepresentation of women in senior, higher-paying positions.

Promoting salary transparency helps level the playing field by:

• Empowering women and other underrepresented groups to negotiate fair wages
• Providing clear pay structures, enabling employees to advocate for themselves
• Reducing the likelihood of accepting less than deserved due to lack of information

Related: Career advice for women from female CEOs

Empowering employees through transparent pay

Access to salary information empowers employees, particularly those who have historically been paid less for equivalent work. With knowledge of pay ranges and company compensation strategies, individuals can negotiate more confidently and ensure they receive fair market rates.

This approach benefits employees and helps firms build a more loyal and motivated workforce. Furthermore, transparency fosters a culture of trust and open communication within organisations.

Building a loyal and motivated workforce

When employees understand how pay decisions are made, they are more likely to feel valued and fairly treated, leading to:

• Higher job satisfaction
• Improved retention rates
• A culture of trust and open communication within organisations

From a recruitment perspective, including salary details in job ads can streamline hiring by helping candidates self-select based on their salary expectations.

Implementing salary transparency: Challenges and best practices

While the benefits of salary transparency are clear, implementing it can pose challenges. Concerns about potential conflicts among employees or fears that competitors might use the information to lure talent are common. However, these issues can often be managed with thoughtful strategies.

Steps for successful implementation

To successfully adopt salary transparency, organisations should:

1. Start with a clear compensation framework
2. Conduct regular pay audits to identify and address disparities
3. Train managers on how to discuss pay openly
4. Create channels for employees to ask questions or raise concerns
5. Support transparency with inclusive hiring and promotion practices
6. Continue efforts to address workplace biases

It’s also important to remember that transparency is just one part of a broader commitment to equity – it must be supported by inclusive hiring, promotion practices, and ongoing efforts to address workplace biases.

Industry Insights on salary transparency

To understand the practical benefits and considerations of implementing salary transparency in job postings, Joshua Wrafter, Business Transformation Change Lead at Michael Page Australia, shares valuable insights into current trends and best practices in salary transparency:

Increasing trend in salary disclosure

There has been a noticeable uptick in companies including salary or salary ranges in their job ads over the past one to two years. Wrafter notes, “This may be driven by the fact that application rates for job ads are significantly higher when a salary is published.”
However, he cautions that it can be a sensitive issue when job advertisements with salaries published are branded with company logos, as current employees might not have access to salary information for all roles within the organisation.

Best practices for salary disclosure

1. Confidence in salary structures: Organisations with clear and consistently applied salary bands demonstrate a commitment to internal pay equity and a culture of transparency. This approach not only fosters trust and job satisfaction among employees but also positions these companies to attract well-aligned job seekers, streamline recruitment processes, and readily adapt to increasing demands for pay transparency in the job market.
    
2. Recruitment agency practices: “At Michael Page, we would include salary information in job postings when the client's brand isn't disclosed,” Wrafter says. He explains: "We also do encourage all clients to consider including salary information on all job postings to increase the effectiveness of an ad posting."
    
3. Meeting expectations of job seekers: Wrafter emphasises, “The new world craves transparency, hence providing this piece of information can ensure all job seekers who apply have already had their expectations managed accordingly.”

Potential pitfalls

When advertising salary ranges, Wrafter also advises caution: “Beware of advertising a salary range, as often the only number that the candidate remembers is the upper end of that banding! They will refer to that in their salary negotiation process.”

The future of salary transparency in Australia

As Australia’s workforce continues evolving and aligning with global standards, the push for pay transparency will likely grow. This shift addresses pay equity and positions companies as progressive and employee-focused, which is increasingly important in today’s competitive job market.

Emerging trends on salary transparency

As the landscape of work continues to evolve, we can anticipate several key trends in salary transparency:

AI-driven fairness: The increased use of generative AI and data analytics will play a pivotal role in identifying and addressing pay disparities, ensuring fairer compensation practices.

Transparency as a competitive edge: More companies will recognise the benefits of transparent pay practices as a means to attract and retain top talent, fostering a positive employer brand.

Regulatory push: There is a growing likelihood of stricter legislation mandating greater pay transparency, particularly for larger corporations, reflecting a societal shift towards greater fairness in the workplace.

Action steps for employers and employees

Embracing salary transparency isn’t just about compliance – it is about fostering trust, fairness, and engagement in your organisation. Here's how both employers and employees can take meaningful steps towards greater pay transparency:

For Employers

1. Conduct a pay equity audit:

• Use data analytics to identify and address unexplained pay gaps.

2. Develop a clear compensation philosophy and structure:

• Clearly define how pay is determined, including factors like skills, experience, and performance.
• Communicate this structure to all employees to ensure understanding and buy-in.

3. Train managers on discussing pay transparently:

• Equip leaders with the skills to have open, constructive conversations about compensation.
• Include training on handling difficult questions and addressing pay discrepancies.

4. Gradually increase transparency:

• Start by including salary ranges in job postings.
• Progress to sharing pay bands for internal roles and eventually consider full pay transparency.
• Case study: Buffer’s full pay transparency policy has led to increased trust and an increase in job applications.

For Employees

1. Research industry standards:

• Use resources like Glassdoor and salary guides to understand market rates for your role and experience level.

According to our 2024 Candidate Pulse survey, job applicants in Australia primarily rely on these top three sources for the latest salary information, in order of preference: first, salary reports; second, job advertisements; and third, recruitment agencies.

2. Initiate conversations about pay transparency:

• Respectfully ask your HR department or manager about the company’s stance on pay transparency.
• Suggest anonymous salary surveys or the creation of pay bands as initial steps.

3. Advocate for clear communication:

• Request regular updates on the company’s compensation philosophy and practices.
• Encourage leadership to share how pay decisions are made, even if specific numbers aren’t disclosed.

4. Support colleagues in discussions about fair pay:

• Share industry salary information with peers (where legally and ethically appropriate).
• Advocate for equal pay for equal work across all demographics.
• Commit to taking at least one step towards greater salary transparency in the next 30 days. Whether you’re an employer or an employee, your actions can contribute to a more equitable and transparent workplace.

Related: How to have employee salary discussions during a downturn

Moving towards a fairer workplace

Salary transparency is a powerful tool in the quest for workplace equality. By embracing this approach as part of retention strategies, organisations can promote accountability, build trust, and empower employees to advocate for fair pay.

As recruitment professionals, we have a unique opportunity to champion these changes, supporting employers and employees in creating more equitable workplaces.

Explore our job listings and the annual salary guides to stay informed about current salary trends and benchmarks. By fostering transparency in pay information, we can contribute to Australia’s fairer and more inclusive job market.

Explore salary insights

To get a comprehensive view of salaries and market benchmarks across various industries and roles in Australia, download the full 2024 Salary Guide, which features the average salary of roles in Australia’s dynamic job market, or use our Salary Comparison Tool to see how your compensation compares to industry standards.

Read more:
How to structure effective job interviews
How leaders can gain better engagement with their teams
Workplace ageism: A top concern despite lower incidence rates in Australia