Transparency of Salaries in a Company – Everything Worth Knowing
“How many times have you decided not to apply to a certain company solely due to a lack of information about salaries? Salary ranges in job postings and the actual compensation for individual employees within a company are still taboo topics in the Polish job market. Only a few companies choose to be transparent about employee salaries. Is this the right approach? Lately, we hear more and more about the importance of salary transparency. This is undoubtedly influenced by the European Commission’s announcements regarding new rules on salaries in EU countries. What are the benefits of salary transparency? How can it be implemented? We have decided to take a closer look at this issue.”
What is a transparent remuneration system?
A transparent salary system, in general terms, means one that is open and not hiding anything. Salary transparency involves making information about the salaries of individual employees publicly available without their consent. In other words, it is a system that involves disclosing the salaries of every employee in a company to the public. It’s important to note that in such a system, the salary figures are made public not only to other employees but also to third parties, including suppliers, business partners, or the company’s clients.
How does this work in practice? Information about salary levels can be included in the company’s work or salary regulations, displayed at the company’s premises, or posted on the company’s website.
Salaries Remain a Taboo Topic
Despite greater openness in today’s society, the issue of salaries still remains a taboo for many. According to research, only 4% of Polish companies openly discuss the salaries of their employees. In nearly 20% of companies, employees only know the average salary ranges for different positions.
Almost 70% of employees surveyed by pracuj.pl stated that their companies do not have salary transparency. At the same time, almost 45% of Poles claim that discussions about salary levels at their workplaces are held only in private circles.
In most Polish companies, the amount of salary is considered something that should remain strictly between the employer and the employee. It’s not uncommon for employees to be required to sign confidentiality clauses prohibiting them from disclosing their earnings.
Discussing money is often seen as impolite, which can even be reflected during job interviews, despite the fact that salary is one of the most important factors influencing an employee’s decision to work for a company.
Transparency of salaries and Polish law
What does Polish law say about salaries? The legal code does not require the employer to disclose the average salary of employees in a particular position to other employees. Salary is treated as an employee’s personal property, subject to legal protection. The only individuals with access to salary information are the employer, the employee, and the accountant who processes payments on the supervisor’s orders. Salary confidentiality covers both fixed rates and all additional payments, including bonuses and overtime pay.
The situation is different when it comes to an employee’s consent to disclose their salary information publicly. According to a decision by the Supreme Court in 2011, employees can share salary information among themselves if it serves to combat wage discrimination. An employee can use their personal property, in this case, their salary, as a means to explain unjustified wage disparities. However, the law does not grant the privilege of disseminating salary information outside the company. Such actions by an employee may be perceived as detrimental to the employer.
Revolution in the Salary Market – New EU Directive
In December 2022, the European Commission announced that an agreement had been reached regarding the long-anticipated directive on salary transparency. One of the main reasons for working on this law was wage discrimination in the workplace and the slow progress in narrowing the wage gap between women and men. Lack of transparency is considered by experts to be the biggest obstacle to achieving pay equality.
What can we expect? While we still have to wait for the final shape of the directive, some initial details about the direction of the changes have emerged. It appears that a significant revolution is on the horizon in the European job market. Candidates will finally receive information about salaries for specific positions in job postings. It will become the employer’s obligation to provide salary ranges in job offers. Every employee will be able to obtain information about the average salary for a specific position within the company. Employers will no longer have the right to inquire about a candidate’s previous salary at their previous workplace or require them to sign confidentiality clauses regarding their salary.
What about pay equality between women and men? According to the directive, it will be the employer’s responsibility to establish objective and gender-neutral criteria for salary and promotion decisions. Gender pay gaps will not be allowed to exceed 2.5%.
Salary Transparency – Benefits
Implementing a salary transparency system can bring several benefits to a company. First and foremost, salary transparency improves the relationship between employees and employers. Employees know how much they earn and what they need to do to advance to higher positions, thereby increasing their earnings. Salary transparency and clear payment rules strengthen the employee-employer relationship, which can lead to increased employee engagement in their professional duties.
This claim is supported by an experiment conducted by HBR on 2060 employees at all levels of an Asian commercial bank. Half of the respondents received information about the salaries of their managers, while the other half remained unaware. Researchers analyzed the behavior of both groups. What conclusions did they reach? Employees who were aware of their managers’ salaries worked harder than those who did not know their salaries. According to the report, the first group spent more time in the office, sent more emails, and achieved better sales results. Awareness of salaries at higher levels acted as a motivational factor, giving them the drive to aim for promotions in the future.
A transparent salary system protects against gender-based wage discrimination. Although there has been a lot of talk about gender pay equality for women and men working in the same positions recently, discrimination is still quite common. Unfortunately, such practices can tarnish the employer’s reputation. Good salary ethics and transparency help promote the idea of gender equality in the job market.
A clear compensation strategy can be used in recruitment processes. Implementing a salary transparency system makes it easier to find outstanding employees who can contribute significantly to the company. Including salary information in job postings allows a company to stand out from the competition. It is also a way to streamline and make recruitment more efficient – only those who are satisfied with the offered salary will respond to the job offer.
Salary Transparency – Drawbacks
Among the major drawbacks of salary transparency, one can mention the risk of conflicts arising between employees and dissatisfaction among those who earn less. In companies that practice salary transparency, there may also be a problem with employees being poached by competitors.
However, are these disadvantages really significant? By introducing a salary transparency system, we promote fair treatment of employees and enhance the company’s positive image in the job market. The benefits definitely outweigh the drawbacks, both from the perspective of employees and employers.
Implementing transparency in a company is not that simple
Implementing a salary transparency system in a company is a complex process that requires commitment and time. First and foremost, it is necessary to carefully analyze the existing salary norms and bonus allocation practices. Considerations should include salary structure, variation in earnings by position, and the effectiveness of compensation.
Next, it’s essential to examine the competition, which means checking how salary systems are structured in competing businesses. Awareness of rival rates and adapting your own system to market realities can help maintain high employee retention.
Another step in implementing transparency should be the valuation of salaries. The key to success is achieving balance and providing employees with fair guidelines for setting rates, bonuses, and promotions.
The EU project on equality and salary transparency is the first step toward significant changes in the European job market. Although the road ahead is long, it is worth examining the potential benefits of the new law today and gradually preparing the company for these changes.