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Updated May 07, 2024

37% of Employees Work for Companies With Pay Transparency. How Does This Practice Impact Worker Retention and Equity?

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Chad Brooks, Managing Editor & Expert on Business Ownership
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The gender pay gap is currently at 16 percent, meaning full-time female employees earn 84 cents for every dollar their male counterparts receive. The gap is even wider among women of color. At the current rate of change, the gap won’t close until 2088, long after most of the current workforce has retired. 

Pay transparency, the act of openly sharing workers’ compensation details, is one strategy that could help narrow the gender pay gap. However, it can have unintended consequences on colleagues and their employers. 

To understand more about attitudes toward pay, Business.com researchers conducted a study of 1,000 full-time employees in for-profit organizations. Our timely data unravels what happens when companies publish salary data internally and externally and how it could impact worker retention

Key findings

  • More than 1 in 3 respondents work for companies that share employee salaries. In 24 percent of cases, employers share salaries internally, while 13 percent publish pay data publicly. 
  • Compared to other groups, non-white workers, Generation Zers, and women are more supportive of salary transparency due to its potential impact on equitable pay.
  • 70 percent of workers in the study believe that pay transparency reduces the gender and ethnic pay gap within companies. 
  • 58 percent of workers agree they would prefer working for a company that publishes salary information publicly. 
  • Companies with internal salary transparency have the lowest rates of employees planning to find new roles in the next 12 months. Workers at these companies also boast the highest levels of job satisfaction.

Why are some employers secretive about pay? 

Unless mandated by local law, not all companies are committed to openly proclaiming how much they pay their workers. Why? Creating fair compensation practices is a costly business practice that requires regular market benchmarking, job leveling (creating a hierarchy of job roles with associated salary ranges), and pay audits to ensure everyone is paid fairly. 

Transparency can also invite class-action suits if employees hold their employer accountable for historic pay decisions, such as the case of a group of female plaintiffs fighting a $11,000 per year gender pay gap suit against Nike. Additionally, companies may not relish the risk of competitors knowing how much compensation they offer their talent. 

For these reasons, pay secrecy is still a staple of many organizations. The Institute for Women’s Policy Research finds that women are more likely than men to work under a pay secrecy policy; interestingly, women are also more likely to break cover and violate these policies. 

How do employees feel about knowing their co-workers’ pay? 

Not all workers adhere to their companies’ pay secrecy policies. Our data reveals that 62 percent of workers in non-transparent company environments have shared their salary details, discovered their co-workers’ salaries, or both. Some respondents were unconcerned about their findings, believing everyone earns what they deserve. Workplace relationships remained unscathed for those employees, even after learning how much their colleagues receive. 

However, many other employees were emotionally impacted by discovering their peers’ pay. Our study revealed that frustration and unfairness are natural byproducts of uncovering pay discrepancies. These feelings are heightened when employees compare pay across people with similar roles, lengths of tenure, or perceived contribution levels. Understandably, feeling undervalued is a common sentiment that can impact employee morale and job satisfaction. It made me realize that I am a ‘bottom of the barrel’ employee and am getting paid much less than I feel I should,” said one Gen Z administrative professional.

On the other hand, some people use the data as a catalyst for professional growth by exploring what they need to do to earn more. Discovering a colleague’s higher compensation was initially jarring, prompting introspection about my value and contributions. It shifted my perspective on workplace equity, nudging me towards seeking clarity on performance and reward criteria,” noted an upper manager from St. Louis. 

Gen Zers, women, and people of color are most supportive of salary transparency policies.

Compared to other groups, non-white workers, Generation Z (ages 18-27) and Millennial (ages 28-41) workers, and women are more supportive of salary transparency policies. Since these workers are most likely to be impacted by gender and racial pay gaps, it makes sense they would be most interested in policies that could advance equal pay. 

Salary information graph

But is pay transparency a viable remedy for pay inequalities related to gender and ethnicity? Seventy percent of our survey respondents believe so. A study published in Nature Human Behavior confirms that gender pay gaps are reduced when public U.S. academic institutions consistently link pay to tangible productivity measures rather than factors that could invite bias. Other settings report similar pay gap narrowings in response to transparency. 

Pay transparency graph

Accordingly, 54 percent of workers feel that companies should be legally required to share salaries. According to 58 percent of our survey respondents, organizations unwilling to support pay transparency rouse suspicion that they’re hiding unfair compensation practices

Could pay transparency disadvantage some employees?

It’s challenging for employees to anticipate how they might react when faced with their co-workers’ compensation data. About half claimed this information doesn’t impact their motivation or satisfaction at work, while 43 percent disagreed that it would make them more competitive with their co-workers. 

Nevertheless, for some groups of employees, total pay transparency does have the disadvantage of lowering individual employees’ bargaining power. When companies commit to achieving pay equilibrium, this can lead to lower wages across the board. Simply put, when one employee strives to negotiate a higher salary for themselves, their employer is likely to deny it to avoid raising compensation for similar employees. Unfortunately, a study on “Debunking the “Women Don’t Negotiate” Pay-Gap Myth” also suggests that women motivated to negotiate their salaries are still paid less than men. 

Does pay transparency drive worker retention?

Employers may also be concerned about how their pay policies could impact talent retention decisions in the aftermath of the Great Resignation and the rising QuitTok movement, where employees resign from their positions on social media. 

How does your employer handle the disclosure of salary/compensation information?

Percentage of workers planning to leave company in the next year

Net job satisfaction among workers 

My company doesn’t disclose salaries and has policies against workers disclosing their salaries

20%

41%

My company doesn’t disclose salaries and discourages workers disclosing to each other

25%

25%

My company doesn’t disclose salaries, but also does not discourage workers from sharing

20%

46%

My company discloses salary info for certain roles

14%

55%

My company has full internal transparency of salary ranges for all roles

8%

71%

My company discloses salary information for all roles, both internally and publicly

22%

58%

Our research confirms a clear transparency-retention link: Only eight percent of employees working in companies with full internal transparency expect to quit the organization, compared with a respective 20 percent and 25 percent of employees who would leave a company with formal or informal secrecy. At the same time, employers with full internal transparency also boast exceptional job satisfaction with 71 percent of employees feeling satisfied compared to 25 percent working for employers with informal secrecy.

How do employees respond to job postings offering higher pay?

It’s interesting to explore how employees would react if they came across job postings for similar roles that offer higher compensation than their current rate. Our research found that compensation is a top motivator for workers planning to leave their current company, with more than 50 percent seeking higher pay. 

Many respondents claim they would use the advertised role as a point of reference to negotiate a higher salary, especially if they feel confident that they’re valued in their current position. I would approach my manager about the posting and see about getting a raise myself,” a skilled worker from Boston told us. 

A larger group of employees would consider leaving the organization when presented with a higher-paying opportunity. Some employees would feel betrayed by their current companies, prompting them to seek alternative roles offering better compensation. Others would be prompted to apply for the advertised position, viewing it as a means of financial and professional advancement. A female middle manager in our study confirmed they would have no qualms about moving on to a role with higher compensation: “I would consider taking this job if it fits my interests. I would apply and schedule an interview.”

However, a small group of respondents seemed indifferent to the prospect of more money, especially if they were satisfied in their current role or loved other aspects of their job, such as the company culture. “I know every other place that [pays] more money than my company has more strict rules and regulations and a different community of people. I can live off the money I make now at my current job,” explained one technical staff worker from Pennsylvania. 

Our data 

In March 2024, Business.com researchers conducted an online poll of 1,000 Americans employed full-time at for-profit enterprises. 499 were female, 498 were male, and three elected not to say. In terms of ethnicity, 70 percent of respondents were white, 11 percent Asian, 10 percent Black, eight percent mixed race, and one percent chose not to say. The median age of respondents was 37. We also gained the perspectives of employees across a spectrum of ranks and responsibilities; one percent of respondents were executive leaders, eight percent were upper management, 36 were percent middle management, 25 percent were technical staff, 17 percent were administrative or support staff, 10 percent were skilled laborers, and two percent worked in other roles. 

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Chad Brooks, Managing Editor & Expert on Business Ownership
Chad Brooks is the author of "How to Start a Home-Based App Development Business," drawing from over a decade of experience to mentor aspiring entrepreneurs in launching, scaling, and sustaining profitable ventures. With a focused dedication to entrepreneurship, he shares his passion for equipping small business owners with effective communication tools, such as unified communications systems, video conferencing solutions and conference call services. A graduate of Indiana University with a degree in journalism, Brooks has become a respected figure in the business landscape. His insightful contributions have been featured in publications like Huffington Post, CNBC, Fox Business, and Laptop Mag. Continuously staying abreast of evolving trends, Brooks collaborates closely with B2B firms, offering strategic counsel to navigate the dynamic terrain of modern business technology in an increasingly digital era.
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