Pay Transparency

Pimlico Plumbers

Channel four recently aired a programme which showed Plimlico Plumbers set up a transparent pay system.

It was a risky operation whereby they asked each employee to reveal to their colleagues how much they were paid. Some were shocked to see the gaps in pay and this was exacerbated by people who were doing the same job yet earning a different rate of pay. Whether or not this is a strategy that will be pursued by other firms is yet to be seen. The public sector, however, is very much in favour of pay transparency.

Pay transparency is generally regarded as a good thing. When employees understand fully what is expected of them in their particular role and what they would need to do in order to progress, morale is improved. Private firms are less likely to implement a transparent pay structure. This is due to years of practice that has led to sometimes very erratic seeming pay structures. Over time various situations arise that mean a higher pay is offered to ensure an employee does not leave to a competitor or to attract new talent, for example. When it comes to being able to explain these situations to staff it can create tension and have a negative effect on individuals and the workings of a team who now know that one of them is paid much more for the same work.

Another difficulty which arises out of a lack of coherent pay structure is that of managing expectations. Justification of differing levels of pay becomes more difficult. Those in support of more transparent pay, however, say that it is needed and that it can be used as a tool to encourage engagement. If an employer can create a pay structure that is clear and for which there are workable targets to reach then this can be a great motivating tool. It can also be used as a method by which to reward employees. Differing levels of pay does not have to be a bad thing so long as there are legitimate reasons everyone can understand. In fact a bonus has long been used to inspire people to achieve more in their work. Similarly, a bonus can be an effective tool and does not have to be a secret if everyone is aware of what a particular person achieved in order to be granted that bonus.

Not only is there benefit in creating a more transparent pay system for the employees but for the company as well. The cost of employees is often the largest overhead of a business. Having clear boundaries as to how much a person should only be paid up to and at what pay they should start a particular role, means businesses can plan their costs more effectively. If these reasons weren't enough it looks like there will soon be legislation forcing companies to implement such a practice anyway. It is usually a benefit to a company to implement such procedures before they are made to do so as a matter of law. The Equality Act 2010 has already prohibited employers being able to enforce a gagging order on their employees stopping them from discussing their salary.