You Ask, I Answer: Salary Transparency Pros and Cons?

In this episode, Tim asks, is salary transparency a good thing or a bad thing? I guess it depends on your culture. Um, salary transparency matters for two different areas. First is in job listings, right? So that people can get a sense of how much does a given position pay.

Now, transparency in job listings is good for the job seeker because it allows you to look at a position and say, okay, are they funding this position appropriately? It is less good for a company, obviously, because if everyone is publishing uh salaries on job listings, then the incentive is uh for job seekers, particularly for commodity jobs, to pick the highest paying company and apply there first, right? So the companies that pay the most uh will naturally attract the most candidates, um, all other things being equal. That obviously is a problem for companies where uh you don't have the budget to uh pay top dollar for position. Those folks who, you know, kind of like Google search listings, those folks who are in position three or position 10 or page two of a set of job listings for uh listing by salary, they're gonna have a harder time attracting talent.

And uh in general, for the commercial sector, that's not necessarily a bad thing. It certainly is good for workers. Uh, where it could cause issues uh would be for nonprofits, right? Because generally speaking, nonprofits can't afford to pay as much as regular private sector companies. Uh, they just don't have as much budget.

But on the whole, I think it's a good thing for job markets because it makes salary something that is competitive, that companies have to pay uh attention to and pay commensurate to the the need that they have for talent. Now, again, if you're running a company like I do, I co-own a company, uh, that is a challenge, right? And so we would have to do other things to highlight uh if we can't pay top dollar for a specific kind of talent, we'd have to do other things to say. Here's some parts of uh working at Zay Trust Insights that uh could make up for not having the the biggest uh salaries listed. For example, we might have a culture that's not toxic, right?

So uh you will not be asked uh to work 90 hours a week but only get paid for 40. We might advertise that we are uh minority and women-owned, right? If those are things that are important to you. We might advertise uh on our environmental practices if that's important to you. So just like price isn't the only uh factor when you're purchasing something, salary is not the only thing that people consider with job listings, but it is one of the first things.

And we are seeing trends now in the industry, particularly in places like California, where everybody has to list uh salaries. And again, that's not a bad thing. It also can create extra churn within an organization, right? If you are working, say as an account executive at an agency and you're getting paid $46,000 a year, and you see a new job listing on your company site for uh account executive, $49,000 a year, you can legitimately go to your manager and say, Hey, why are we hiring for my exact role? But the uh you know the new candidates getting paid $3,000 more.

So those salary listings will likely create churn for people in existing roles if a company does not step up the pay to match uh what is uh what is happening there. Now, the knock-on effects of this will be that companies will have to pay more, which again is not a bad thing, but then in turn will have to charge customers more. So there will be an inflationary aspect of that. But in terms of benefiting workers and benefiting uh job seekers, it's a net good thing. Now, the second angle where salary transparency can come into play is within an organization itself.

Should you be able to see what somebody else is getting paid? Again, right now that's a that's an internal policy. There are companies that publish their salaries that publish exactly what a person makes. I'm not a fan of that at the individual level only because of uh some privacy stuff, uh, right. A person uh disclosing their individual income, I I think can be problematic.

The intent is to highlight and and minimize or eliminate pay gaps. Um, where if you have, say, ten people in an organization who are vice presidents, um seven of them are male, three of them are female, and the the seven males earn X dollars more than the the three females who are in the exact same role. Or you have a case where you have you know seven people who are Caucasian and three people who are black, and again, you have a salary disparity. Publishing salary listings uh internally can help reduce or eliminate uh inequality within an organization. What I would prefer to see is that organizations move to a salary and pay system, much like the federal government does, where there are grades.

There's a grade based on the title, right? GS1, GS2, GS3, and an associated dollar amount, and then a seniority column, where if you've been a if you're a GS4 but you're five years into your role, there's an adjustment for being being that senior in that role. And then everybody gets paid the same essentially for that role. So if you are if you are a GS5 but you've been in them in the role for seven years, you get X dollars. And if somebody else is a GS5, but they've only been, you know, in the organization for two years, they get this amount of dollars.

And nobody has to guess am I getting paid more or less than somebody else, right? We all, if you're a GS5 at at year seven, you get X. If you're a GS5 at year eight, you get X. That is to me very, very fair. It eliminates the ability for you to discriminate against somebody based on protected class characteristics like age or gender or sexual orientation or uh ethnicity.

You are just in these roles, and then you get promoted based on those criteria. I think that probably is one of the most fair systems that you can come up with, all other things being equal. Now, are there exceptions to that rule? Of course there are. Um, but generally speaking, that's a good way of handling it.

So salary transparency, definitely a good thing for job listings, mostly a good thing for um inside companies for the purposes of reducing discrimination for the purposes of creating more equality and more compensation based on results. You know, uh that's the other part that uh can be tricky. So if you are a salesperson, everyone should have, you know, the same base, right? So your base is 20,000 or your draw is 20,000, and then your commissions are based on, you know, whatever uh whatever schedule you've got. So you could have a commission schedule for if you for your first $250,000 in sales, you get paid 6.7%.

For your next $250,000 in sales, you get paid 6.9%. So again, we're not let allowing an organization to discriminate based on characteristics immaterial to the job, but you are allowed to pay people differently based on performance. A high per performer, a high producer who makes $2 million in sales, yeah, they should get higher and higher commissions the bigger and the more they sell so that somebody has an incentive to sell ten million dollars worth of real estate or server appliances or private jets or whatever the thing is. You absolutely want to have pay and compensation be an incentive for performance, an incentive for doing good work, uh, and having again published set scales so that people know what to expect, um, can be that incentive. Somebody's like, ah, I want to make more money.

How do I make more money this year? You say, okay, well, you're in bracket two, 6.7%. You got to sell an extra quarter million dollars to get to bracket three. If you can do that, your put your commissions go up. So even in a case where you have commissions, having set numbers and set schedules increases fairness and still keeps that motivation for people who want to work extra hard, who want to get to that next level.

It's clear what the next level is, it's clear how they get to it, what performance metrics they need to get to. So good question. We could spend a whole bunch of time on uh on compensation stuff, but I think this is a good place to start. If you like this video, go ahead and hit that subscribe button.