What Can the Public Sector Teach the Private Sector About Pay Transparency?

A recent study revealed that about 1 in 4 employees feel like their employers are transparent about pay. This same study showed that 57% of employees are seeking fair and equitable pay. As organizations consider how they will support their employees, it's become apparent that pay matters. Pay equity in public sector work can teach private sector employers about creating an inclusive work environment.

What is pay transparency?

Pay transparency is your organization's strategy for openly discussing and handling pay at work.

Many organizations prohibit or strongly discourage pay transparency, but others embrace it. For example, private organizations like Buffer have built their employer brand around pay transparency at work, but most private organizations have stayed away from it.

Why does pay transparency matter?

As an organization, you may be wondering why pay equity in public sector work is so significant. Most employees in the private sector are dissuaded from learning about pay at work or talking about it with colleagues. Being forbidden or discouraged from talking about pay often sets private workers up to be taken advantage of by getting paid less than their counterparts.

By contrast, public sector work typically has a very public pay scale. Some organizations may be required to report the salaries of each of their employees.

Here are some ways that pay transparency helps employers and employees alike:

How Pay Transparency Helps Employers

One of the greatest motivating factors for employers to be transparent about pay is the emerging trend of salary transparency legislation. Various cities and states have enacted some version of salary transparency or pay equity law in recent years. Some require job descriptions to list the salary range, while others make it illegal to ask about prior wages.

Another reason you may want to invest in pay transparency is to protect yourself against discrimination lawsuits. Being open about pay and ensuring all employees receive the same pay for the same work will ensure you are not liable for paying employees based on race or gender.

Lastly, pay equity will help you keep your best employees long-term and reduce any turnover you might be facing.

How Pay Transparency Helps Employees

It's clear how pay transparency helps employees. Employees can go to work knowing that they receive the best pay for their jobs. In addition, pay transparency helps employees feel secure and like they are being taken care of by their employer.

In a world where employees leave for different organizations every day, organizations need to support team members. Businesses can start that support by being open about what is and isn't possible with pay.

How is the Public Sector Leading in Pay Transparency?

Some private-sector employers like Buffer, Whole Foods and Starbucks are making waves based on the rules they've enacted to ensure transparency at work. But the majority of private-sector employers avoid pay transparency. For example, some private sector employers have avoided recruiting in Colorado due to the pay transparency laws the state has enacted.

On the flip side, public sector organizations have been leading the way in pay transparency. Public sector work has been transparent for over a decade. A survey of public sector workers in 2010 revealed that 70% of government agencies had general wage and salary information publically available. Only 17% of private organizations could say the same during that time frame.

It's clear that pay transparency is and continues to be essential for public sector employers. This focus on pay equity has made it easier for public sector employees to understand their wages and what they need to get to the next level in their careers. Unfortunately, private sector employees cannot say the same about their experiences because often, they are discouraged from talking about these topics at work.

Key Takeaways

Private-sector employers should understand the value of pay equity at work. Employees want to know where their salary is in comparison to their colleagues. In a world where new, better-paying opportunities are popping up every day, employees need to feel appreciated and fairly compensated. Organizations that fail to provide salary transparency may suffer higher rates of staff turnover, as employees seek fair and equitable pay elsewhere.

Private sector organizations can take a page from the private sector playbook to make pay more equitable. Public sector employers should:

  • Standardize their pay scales.
  • Avoid giving out extra compensation to a select few employees.
  • Make it easy for employees to understand how to legitimately raise their income.
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CPS HR Consulting is a self-supporting public agency providing a full range of integrated HR solutions to government and nonprofit clients across the country.  Our strategic approach to increasing the effectiveness of human resources results in improved organizational performance for our clients.  We have a deep expertise and unmatched perspective in guiding our clients in the areas of organizational strategy, recruitment and selection, classification and compensation, and training and development.