Is wage transparency right for your company ?

In a digital age where transparency is the norm, there is, however, one big exception: discussing salary is still an office taboo. Yet, wage transparency is a mark of progressive thinking in the future of work. Let’s talk about a controversial topic in Luxembourg.

What if employees decided on their salary ?

Usually, when your pay increase is denied because of your company’s performance, you might be doubtful. Going for salary transparency provides everyone with the actual situation. That’s the case of some French companies where everyone sets their own salary. In practice, employees outline any change in compensation they’d like and why, and how it compares to the external market. If there’s a salary gap between them and their colleagues, or between them and the market, it’s down to them to reflect on why and, if they want an increase, to make their case for that. In other terms, self-setting salaries is not about asking permission; it’s about getting feedback. The goal isn’t to get others to approve a salary, but to get feedback on the impact it has had, and to understand how their work are perceived by their colleagues.

On top of dropping the salary taboo, employees’ demands are conscious and no fake news or rumours are circulating within teams. In addition, you also avoid large wage gaps between people with the same tasks and responsibilities. This approach contributes to creating progressive workplaces.

Discrepancies between median and average salary

In common discourse, wage transparency is one of the biggest office taboos in Luxembourg. Still, employees talk to each other and speak about their raise and bonus. Some companies seem to stand out by publishing their median and average salaries to their employees. But that’s not really progressive as the method is controversial. Indeed, with this method, you won’t be able to examine the gaps between low and high wages. Strongly influenced by the highest and the lowest values, the average wage alone does not tell much about income gaps. Employees who are given an average salary for a company can’t compare with their colleagues.

As for the median wage, it divides employees into two, with half of wages above this figure and half below it. In Luxembourg, the median salary stands at 47,624 EUR per year. However, when comparing the median and the average salary, which is around EUR 60 000, the difference shows significant discrepancies. Thus, the average salary which is way above the median salary gives us a hint of the highest salaries.

Wage transparency to eliminate inequalities

Employee salaries and diversity workforce numbers are available to the public at Buffer, the social media management platform. Everyone from the person writing Buffer’s tweets to its CEO knows what the other is making — and so does anyone else who cares, because all of those salaries are posted on Buffer’s public blog. On this dashboard, the company discloses its calculation method taking into consideration various standards, including  job, experience, family situation or standard of living. What’s more, embracing near total transparency has enabled the company to bridge the pay gender gap.

The study “Do firms respond to gender pay gap transparency”, published in the Harvard Business Review, shows that transparency reduces the wage gap between men and women. This analysis is based on wage developments in Denmark, before and after the entry into force of a 2006 law requiring the publication of wages, by gender, for companies with more than 35 employees.

Wage transparency: myth or reality?

Not all Luxembourg companies are ready to experiment this wage transparency. Before getting to it, it is necessary to make sure your salary policy is effective. To do this, it is necessary to take into account the skills and performance of each individual.

In Sweden, everything is public: on a simple online request, you can easily access your colleague’s salary, asset declarations, assets, or positions held in various companies. Recent executive pay transparency measures came into force in Great Britain. So, if wage transparency is efficient in foreign countries, when is Luxembourg going to introduce it?