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Companies that refuse to be transparent about pay will be 'under fire,' says salary expert

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Just 1 in 4 workers say their employer is transparent about salaries, according to a new report from compensation management company Salary.com.

The December 2021 survey of 561 workers, ranging from executives to individual contributors, found that due to a lack of pay transparency, nearly half don't think they're paid fairly compared to people in the same role at other companies. Roughly 1 in 3 don't even think they're paid fairly compared to their co-workers.

The findings aren't shocking but are nevertheless disappointing, says Salary.com's vice president of consulting David Turetsky. With a growing number of online databases, networking groups and pay transparency laws going into effect nationwide, there's never been as much pay information out there for people who want to find it. But employers have a long way to go.

The recovering pandemic labor market will be a turning point, Turetsky tells CNBC Make It, as in-demand employees push leaders to be more equitable and inclusive.

"We spent a long time saying work couldn't be done remotely," Turetsky says, "and workers are now seeing, 'Hey, this institution fell. What's the next thing to fall?'" Companies that hold too tightly to inflexible systems, like one-sided pay data, "are going to be under fire."

Why companies are reluctant to be transparent about pay

Just 35% of HR professionals say their company has a transparent pay policy, according to a separate Salary.com survey from fall 2021.

Experts like Andrea Johnson, director of state policy at the National Women's Law Center, say the aftermath of the 2008 financial crisis played a big role in employer salary secrecy: "The economic power dynamics in hiring shifted. Applicants had less power, and employers could hold their cards close."

Employers could slash operating costs by hiring people willing to work for less money. Since then, Turetsky adds, some employers have said publicizing pay would lead competitors to poach their top candidates.

Open pay discussions, meanwhile, "give everyone the opportunity to criticize," he says. HR departments may not readily share salary data if they don't have a formalized compensation structure that can be explained and is free of bias.

Another problem: If someone sees that they're being paid at the maximum for their role, they'll probably want to know how to get to the next level. If the company can't answer how they're nurturing and regularly promoting employees, workers could be motivated to leave.

Transparent pay goes beyond publishing salary ranges

At least 10 states and cities have passed laws that require employers to affirmatively state their salary ranges, either in job descriptions or when an applicant requests it.

It's a big step, but workers expect more, according to the Salary.com survey. Workers say they want more transparency from their company about how they're paid compared with competitors, compared with their co-workers, based on their skill level and based on their abilities to collaborate, meet goals and solve problems. Only 15% of workers believe the way their company does performance reviews in a fair way to structure pay, raises and promotions.

"Transparency isn't just how is pay determined," Turetsky says, "but also: What is my career potential here? How are they grooming to grow? Can I trust my boss to tell me whether I'm line for the next opportunity or not?"

He says organizations should invest more time in training managers about how their pay structure is set, and how to communicate that to their reports. Managers should also be empowered to feel they're being paid equitably and have a path to promotion, too.

Workers want transparency to close the pay gap

Employees, for their part, have more power than ever to voice their support of more transparent pay practices. Turetsky suggests framing it as: "How do I learn about and help support transparent pay here?" and not just, "How do I get more money?"

Economists have long said that greater pay transparency could help close racial and gender wage gaps. Workers want this to happen. Roughly 2 in 3 workers say it's important to them that their company's pay practices support efforts to improve diversity, equity and inclusion. But only one in three believe their company's pay practices actually do this.

Meanwhile, legislation to promote pay equity has existed at federal and state levels for decades, but employer pay practices continue to create wage gaps that have barely budged in years.

Turetsky hopes companies consider the context of today's labor market and employee demands for equity to get more serious about pay transparency: "You don't have to be an expert to know that a wage gap exists. But there's a gap of people who think it's important versus organizations actually doing something about it."

Check out:

How much do others make for the same job? Here's where employers are required to share salary ranges

How to answer 'What are your salary expectations?' and other tips for talking pay in interviews

This work benefit is 12x more important than a promotion to keep someone from quitting

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