Research: The Unintended Consequences of Pay Transparency

Pay transparency refers to a pay communications policy in which a company voluntarily provides pay-related information to employees — for example, about the process of the pay system (process transparency) and actual pay levels or ranges (outcome transparency), or even an open policy for employees to freely share information about their pay (communications transparency). Companies around the world have been increasingly adopting pay transparency policies and practices as a means of narrowing the gender pay gap and fostering an engaged and positive working environment that builds trust. Pay transparency can help companies achieve these goals — but it can also have unintended consequences. The authors present three pitfalls to watch out for, plus ways to avoid them.