Wage transparency, what it means for gender equality, and how legal teams can influence the corporate approach

Wage transparency is an increasingly topical issue in global business and, among other things, is key to closing the gender pay gap.

Transparency can be interpreted in different ways. For instance, in some cultures it can mean better communication of pay practices and how pay brackets are determined. At the other end of the spectrum, it means full transparency of salaries and salary ranges for all roles. In addition to this, legislation can stipulate whether this information should be publicly reported.

The aim of wage transparency is to promote fairness and equality in the workplace and reduce the gender pay gap.

Despite advances in gender equality in recent decades, on average, female employees still earn less than males. There are a number of factors that can play into this including discrimination and unconscious bias. For example, many studies have shown that people tend to favor those similar to themselves, resulting in pay disparities.

When salaries are kept secret, it is easy for biases to creep in and for women to be paid less for the same work. Transparency makes it easier for women to negotiate their salary and employers are likely to offer fair salaries if they know they will be held accountable for any disparities.

What this means for your business

There is a great opportunity for companies to improve their reputation by embracing wage transparency.

Corporates should be aware of the benefits of wage transparency and the risks of not implementing it. In addition to promoting fairness and pay equity, wage transparency can improve employee morale and productivity. If employees feel fairly treated, they are more likely to feel engaged and motivated.

Those companies that do not embrace wage transparency risk damaging their reputation and losing out on the best talent.

A 2022 study by Visier (globally recognized leader in people analytics and on-demand answers for people-powered business), which surveyed 1,000 full-time US-based employees, found 79% of all survey respondents wanted some form of pay transparency and 32% wanted total transparency, in which all employee salaries are publicized. Visier's survey also found that 68% of employees would switch employers for greater pay transparency, even if compensation was the same.

How legal teams can positively impact their corporate’s approach to wage transparency

Legal professionals can play an important role in helping companies prepare for and implement wage transparency. They can help companies navigate the legal and regulatory requirements around pay equity and develop policies to ensure salaries remain fair and transparent.

Five steps the legalcteam can take to help the company improve wage transparency include:

1. Conduct a pay equity audit
   A pay equity audit would involve analyzing employee salaries and identifying disparities. The legal team can then help the company develop strategies to address any disparities identified.
2. Develop a wage transparency policy
   The policy can include how salaries will be shared with employees and what information should be made public.
3. Train managers on fair pay practices
   The management of a company can play a key role in ensuring salaries remain fair and transparent. The legal team can help the company develop training programs to educate managers on fair pay and how to avoid biases in salary negotiations.
4. Implement pay bands and salary ranges in line with the competition
   Implementing pay bands and salary ranges can help ensure salaries are fair and consistent across different positions and levels of seniority. Legal teams can influence this process by ensuring the bands and ranges are consistent with industry standards and legal requirements. Understanding what your competitors are doing, and trying to be the front runners, is key to securing top talent.
5. Stay up-to-date on legal requirements
   This includes monitoring changes to laws and regulations in all countries of operation and ensuring company policies and practices remain compliant.

There’s no good reason not to

It’s worth pointing out that wage transparency is only part of the wider fight towards closing the pay gap. Wage transparency can only take a company so far in achieving true gender pay equality. Recruitment, and the path to promotion, along with thepolicies and strategies linked to this, also deserves attention, but are not covered in this article. If the social biases against women related childcare – or care in general – are not addressed in the path to corporate promotion, it will be difficult for women to close the gap, despite wage transparency. This is because the wage gap can be an indication of unequal distribution of genders in an organization, with the top positions dominated by men. A company can therefore still have a large gender pay gap despite resolving its wage equity issues.

The tendency towards wage transparency may only be forced to speed up, however. The World Economic Forum expects it to take 132 years to reach full parity on the global pay gap, according to its 2022 research. This is down from 136 years in 2021. “We hope that this report will serve as a call to action to leaders to embed gender parity as a central goal of their policies and practices to build a sustained and robust recovery. The future of our economies, societies and communities depends on it.”

When put like that, there’s no good reason not to move forwards – with wage equity, transparency and addressing the gender pay gap – in the name of progress.

Author: Klaus Heeke - partner, Deloitte Legal Germany