Employee attitudes around the world towards what is 'taboo' in the workplace are changing, including how openly they talk with others about their compensation and benefits. Today's younger generations of workers count pay transparency as a mark of progressive thinking, yet many employers still find this concept baffling.

Over 60% of Asia Pacific organisations claim to have processes in place to ensure fairness in compensation distribution. However, only half of employees in the region believe that their pay is fair. So, either employees are overstating their self-worth or employers are not clear on what they mean by 'fair'. A finding in our 2016 Global Workforce Study might hold the answer: only around half of employees in Asia Pacific truly understand how their pay is determined.1 This demonstrates that many organisations in the region still do not have a transparent pay policy.

During a recent Willis Towers Watson webinar on Achieving Pay Equity, 97% of participants admitted to only partially, or not at all, having a working understanding of pay transparency. If we continue to overlook this crucial gap, the longer it will take to reap the many business gains of committing to a pay transparency programme:

Increases productivity and self-improvement

We know that a science goes into determining compensation plans, but employees cannot be expected to figure this out on their own without your guidance. Understandably, many employers are concerned that openly discussing pay might create tension and negative competition among employees, which might in turn lead to higher dissatisfaction and attrition risks. We have found that this scenario is less likely to happen if – in being 'transparent' – the primary focus of your communication plan is to educate your employees on how pay is determined and how the salary budget is distributed across the entire organisation. This includes being honest and open about why it is designed that way.

This is completely different from just allowing employees to freely access pay information, which would certainly cause them to scrutinize their own pay against others in the same company or industry. Moreover, it would be a missed opportunity to clarify how compensation extends beyond cash. The mere availability of information without proper context will inevitably influence employee behaviour. And it is exactly why you need to have a well thought-out plan about how, what and why you are communicating about pay with employees.

Ultimately, you want employees to clearly understand their value and how their individual performance and success fit into the bigger picture for the long term. Otherwise, they won't really have a sufficient, substantive reason to want to succeed or stay in your organisation – that is, apart from simply earning more money. At present, only 52% of Asia Pacific employees see a clear link between their job performance and pay.1

A majority of workers today crave mentoring and career advancement – it's a great climate for you to put your message of transparency into practice. Some people will inevitably realise that they could be earning more. This is actually a good 'problem' to have as it gives you an opportunity to clearly map out for employees how they can level up in both their career and salary within your organisation. In today's tight labour market, it can be a game changer to have employees ready to adapt to business needs and eager to upskill. You could potentially close skills and pay gaps within your organisation, and at the same time stimulate fresh productivity into the workforce, which will surely have positive effects for your bottom-line.

Decreases concerns related to gender and diversity gaps

Pro-diversity organisations are 15% to 35% more likely to outperform companies that are less diverse.2 The key factor that helps set them apart in the diversity conversation is not their openness to it, rather it is simple logic. Competing in today's global economy amid rapid technological and cultural changes will require larger talent pools, thus it makes better business sense to embrace diversity. Absorbing many new perspectives and experiences can significantly widen your organisation's spectrum for creativity and innovation.

In Asia Pacific, less than 60% of employees are in environments that are supportive of diversity and free of discrimination and harassment.1 A crucial starting point towards becoming truly diverse is acknowledging that unfair practices and narrow performance measures may exist within the organisation. Laying these cards on the table can greatly assist decision makers with taking the necessary steps to appropriately address the problem – including tackling the pay discrepancies that could be found.

The urgent move towards improving diversity within organisations is also triggered by legislative requirements around pay disclosure, which could differ by country or industry. Thus also why pay transparency does not have a 'one size fits all' approach, and is best determined on a case-to-case basis. Nevertheless, the common end goal must be to achieve pay equity. The transition can be better managed with legal counsel guiding the creation of policies and identifying the most impactful areas for change.3

Increases trust, which decreases attrition risk

Employees need to see for themselves that their leaders are serious about fulfilling their rhetoric through meaningful changes and open dialogues. Otherwise, speculations and gossip will spread and poison the well. This is why some organisations include pay transparency in their employee value proposition (EVP) programme as it has an observable influence over talent retention.3

A crucial point of success in this approach will be the readiness of managers to capably represent your transparency agenda. As the employees' first line of contact, managers should be ready at any time to listen empathically and to provide objective explanations clearly and simply. Adding this role onto a manager's already-full plate of responsibilities may incite some groans, but many employees will be keenly observant of how leaders respond to an uncomfortable conversation. It can hugely affect their level of confidence in you as a fair and trustworthy employer, which would in turn affect their level of productivity and desire to stay or to leave.

Consider the flip side of this scenario – employees can instead choose to trust any of the many other sources of salary information online4. Putting in the time and effort now to earn your employees' trust will greatly benefit your reputation and give you an advantage in the war on talent.

Sources:
1 2016 Talent Management and Rewards and Global Workforce Studies
2 Why does workplace diversity matter
3 Willis Towers Watson’s Achieving Pay Equity Webinar: Moving Beyond Compliance to Pay Transparency
4 A fresh perspective on crowdsourced pay data


About the Authors

Willis Towers Watson Media

Sambhav Rakyan

Willis Towers Watson


Sambhav Rakyan is the Data Services Practice Leader in Asia Pacific. To connect with Sam, please email wtwapdata@willistowerswatson.com.