Salary Transparency – a Delicate Taboo Topic

July 11, 2022

What I don't know won't hurt me – an analysis

Randstad US carried out a comprehensive salary study in 2020 and found that, more than ever, employees do not want to talk about their salary and the trend - probably due to the pandemic - even increased from 76% in 2019 to 78% in 2020. Interestingly, there has been a trend on TikTok in Germany since the beginning of 2021, where young people hold their pay slips in front of the camera - accompanied by music with "This is Germany Baby", an adaptation of the Childish-Gambino hit "This is America". Brisant.de then followed up with a survey and, lo and behold, around 70% of those surveyed have so far refused to treat their pay slips in such a revealing way - the figures are consistent with the above mentioned most recent study from the USA.

Wooden blocks with money bag symbols on them are stacked to form a tower — A majority of respondents don't like to talk about salary. A trend that will change in the future? Photo © shutterstock - Andrii Yalanskyi

Afraid to Divulge the Forbidden?

Many employment contracts still have a salary confidentiality clause.

In Germany one is already a small step further: the employer is only allowed to oblige an employee to secrecy if they can justify a legitimate interest. It is understandable with employees working for HR or for the workers' council, who of course are not allowed to talk about individual salaries - an information available to them by nature of their jobs.

However, this law is becoming less and less important - in Austria as well, because on the one hand the minimum salary must be specified in job advertisements, on the other hand job platforms such as Kununu, Glassdoor, StepStone, Karriere.at, the government's salary calculator etc. offer salary overviews anyway.

What About the Competition?

An important reason to remain silent about salary was and still is the competition because you don't want to 'bid too high' for the most wanted candidates.

However, the opposite occurs: the more transparent the salaries, the more moderate they are in most cases.

What I Do not Know Will not Hurt Me

In a recent random survey we did in one of our programs, 65% - men and women alike - confirmed that they did not even want to know what the others were earning because it would only make them dissatisfied if someone at a comparable job level earned more. Let me ask a question in return: Isn't it much better to know what is possible and then prepare accordingly in order to take advantage of the same opportunities for yourself?

Stack of money — Do you want to know what others at the same level are earning, or would you rather not? Photo © shutterstock - Number 1411

Salary Transparency - Examples From Other Countries

In Austria there have been mandatory income reports for companies with more than 150 employees since 2011, but these reports are aggregated data and whoever sees these data is obliged to keep the information confidential. It is not possible to draw any conclusions regarding individual people’s remuneration - and since hardly anyone knows about these reports, they are rarely used.

In Germany, the employer must provide information regarding equal pay for comparable work: The Entgelttransparenzgesetz (ETG) stipulates that anyone who works in a company with more than 200 employees can request information about the criteria of one’s own remuneration as well as anonymous information about salaries of colleagues with comparable activities. However, the employer only has to provide an average value if there are at least six colleagues with a comparable job, which makes this law rather useless for employees in SMEs.

In Sweden, the salaries of all citizens are publicly traceable at the tax office and it is possible to see how much taxable income was reported by each person in the previous year.

In the USA, the Randstad study of 2020, which has already been cited, found that 54% of respondents said their company did not provide salary information for the respective jobs, but 58% would like them to do so.

Trend Towards More Openness in Big Corporations

More and more corporations are starting to show employee salary ranges at least to the managers and to introduce comprehensible rules according to which pay and salary increases should work. Why?

Comprehensible rules create comparable conditions for all employees and increase the feeling of fairness, which Gen Z in particular vehemently demands - in a nutshell a must-have for an attractive employer
Comprehensible rules prevent unnecessarily high salary increases and allow companies to have personnel costs under control. Sounds strange? Individual managers often push certain employees and want to keep them at all costs - regardless of whether the salary corresponds to the market value or not. If companies don't have clear policies, they will soon have a complete chaos with salaries and find it all the more difficult when it comes to issues such as equal pay and inclusion.
Comprehensible rules form the basis for professional growth of each employee: when can I be promoted, under what conditions and what does that mean financially? None of these should be secrets. The more transparent, the easier it is for everyone to contribute to the corporate success.

Learn more about Martina Ernst.

Read more in our "Salary Insights - Let's Talk About Money" series.