Head of Research, Policy and Standards Institute of Leadership and Management
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Why firms would benefit from declaring salary gaps

8th Aug 2018
Head of Research, Policy and Standards Institute of Leadership and Management
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Whenever the Institute has researched the field of trust, we’ve consistently found that one of its greatest contributing factors is openness.

One area in which openness tends to be rather patchy is how much colleagues know – or are allowed to know – about each other’s salaries.

Some organisations absolutely put their cards on the table. Others are far more secretive, claiming that if they revealed too much, it would undermine their bargaining positions in salary talks.

Organisations in the latter category tend to assume that just because the relevant details aren’t published, they’re somehow not known.

But the finance function will be very close indeed to the precise figures. So, unless the information is treated as strictly top secret, there will be some awareness, however inaccurate or incomplete, of what people are paid.

If the details are only partly known, staff will join the dots themselves – all through the power of rumour and hearsay. The grapevine has flourished in many organisations, but some types of information require more careful management than others.

Seismic impact

The whole subject of openness around salaries was recently thrust into the spotlight with business secretary Greg Clark’s proposal that UK listed firms should be required to publish the salary gaps between their highest- and lowest-paid workers.

It’s a package of measures that might well have an even greater impact than the gender pay-gap reporting that’s already in action, because it affects everyone. 

Clark said: “Most of the UK’s largest companies get their business practices right – but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.”

In his view, requiring listed firms to publish their salary gaps will improve transparency and boost accountability “at the highest levels”.

Relative efforts

If the proposed measures go ahead and firms publish their salary details, they will automatically remove the issue from the realm of rumour – thereby extracting it from a destructive context and placing it in a constructive one.

Not only would that contribute to a climate of openness – it would provide a basis for honest conversations about the greatest wage disparities.

In turn, that ought to prompt leadership figures to reflect upon the figures and think, ‘Am I worth ‘X’ times more than my lowest-paid member of staff?’ And, more importantly: ‘What is the contribution I make that justifies my higher pay rate?’

Those thoughts will permeate the organisation, sparking discussions not just about lowest-versus-highest salaries – but about noticeable, and perhaps egregious, gaps between any two levels or departments.

Once the information is out there, it will also pave the way for franker conversations about the relative efforts that workers are putting into the broader performance of their organisations.

These proposals, if adopted, will encourage extremely interesting conversations about reward.

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