“We have an innate desire to get along with others and to be seen positively by our peers,” he says. “Sharing pay information, however, can threaten these goals.” Smit explains that, as an employee, if you know you’re getting paid less than a peer, you might feel uncomfortable and regretful. But if you know you’re getting paid more, that’s not necessarily positive either. He explains that under those circumstances you might be fearful of drawing criticism and “perhaps even sabotage from less successful peers”.
In short, there is a risk that exposed discrepancies will create hard feelings on both sides of the equation, and this is a reasoning that resonates with Matt, the Wall Street trader. “Privacy around pay is so ingrained in the culture of banking, and I can’t imagine that ever changing,” he says. “If everyone knew what the person next to them was making, half the bank would probably quit.”
No sign of broader legislation
So far, there’s no sign of any real legislative effort to broaden the scope of pay transparency laws in the US. To comply with laws requiring salary ranges to be published in job advertisements, employers in Colorado and Washington must include a description of other perks and benefits, which include stipends, bonuses, retirement programs and insurance offerings. But the exact size of those components does not have to be stipulated.
In the UK, gender pay gap reporting legislation does require companies with 250 or more employees to publish their mean and median bonus gender pay gaps as well as the proportion of men and women receiving a bonus as part of their overall pay. But there are no requirements in the UK for publishing compensation ranges alongside job advertisements, and mechanisms for checking the accuracy of either salary or bonus pay gaps are imperfect. In 2018, a year after the UK introduced gender pay gap reporting mandates, an investigation by the Financial Times showed that one in 20 gender pay gap reports were statistically improbable and therefore likely to be inaccurate.
As such, EY’s Coleman says companies wanting to address and remedy pay gaps should instead concentrate on embedding controls within their performance management frameworks “to help limit the effects of unconscious bias in the determination of discretionary compensation outcomes”. They should, for example, review performance ratings and bonus outcomes as part of the year-end process “to identify any concerning patterns in relation to minority populations”, she says.
“Companies’ HR departments should be regularly benchmarking compensation to assess whether adjustments need to be made,” agrees Julia Lamm, a partner in the workforce transformation team at PwC.
And that’s something that Matt can support, too. “I personally don’t want to talk about how big or small my bonus is, but that doesn’t mean I want my company to discriminate,” he explains. “Companies should do the right thing, treat people fairly, know their numbers and pay their employees what they deserve. It really is the very least we can expect from our boss.”