Dive Brief:
- Improvements in a company’s pay transparency policies affect retention prospects differently — with variations depending on worker age and industry — but on average are associated with a 30% decrease in the odds employees will seek to jump ship, according to the findings of a report released Thursday from Payscale, a Seattle, Washington-based compensation data and software firm.
- More clearly defined practices of how pay is determined and compensation transparency resulted in a 32% drop in the likelihood that millennials (those born between 1982 and 1994) would seek a new job, a 28% drop for Generation X (1965-1981) and a 21% decline for baby boomers (1946-1964) while it increased the odds by 3% that Generation Z (1997-2013) workers would look for another job, according to the findings that were based on data from over 578,000 workers who took an online salary survey between March 2018 and March 2023.
- “To have a positive impact on retention as well, pay transparency must be combined with compensation strategy and pay communications, and ideally pay equity. This is especially true for younger workers who are more anxious about their pay, less knowledgeable about how pay is determined, and more apt to seek alternative employment if they are not being proactively shown that they are valued,” the report states.
Dive Insight:
The study results come as new laws requiring companies to disclose salaries when hiring job candidates have been enacted across many states. As of Jan. 1, California and Washington became the latest to require pay ranges to be disclosed with job postings, CFO Dive previously reported. The new regulations and the resulting corporate policies are part of a broader push for pay equity and it is also shifting the balance of power in salary negotiations.
Despite the correlation between pay transparency and retention, the report also states that a perception of fair pay policies, the company’s future outlook, and workplace culture have a greater impact on retention. Ruth Thomas, a pay equity strategist at Payscale, also stated in a release that corporate fair and transparent compensation programs entail more than just posting salary ranges when bringing new talent on.
“To build transparent pay practices you need a compensation strategy that makes sense for your business, robust internal and external pay equity analysis, committed manager training, and meaningful pay communications with employees,” Thomas stated. “The objective should be for every employee to know their pay is fair and why it’s fair.”
