... Now, for the companies that have taken steps toward policies of pay transparency, a new wrinkle appears. As researchers Leon Lam, Bonnie Hayden Cheng, Peter Bamberger and Man-Nok Wong write at HBR, pay transparency tends to compress payment across the entire company.
That means when two employees are at the same pay level, managers tend not to invest the time and energy into justifying a bonus or pay raise for one person over the other, even if one employee has outperformed the other.
The employees then become aware of this trend and start looking for new ways to get compensated for performance. That’s when individual employees start to negotiate personalized rewards for their good work. Usually, those conversations happen behind closed doors between the employee and their manager.
And so once again employee pay moves into an opaque zone. It’s an ironic and unintended consequence of transparency. Pay transparency itself becomes a moving target, the researchers write, as dynamic reward moves out of what is observable and into closed-door discussions.
"This is particularly concerning because recent evidence suggests that this shift toward differential remuneration in the form of less-visible benefits may come at the cost of gender pay equity," they write.