Trend 5: Pay transparency is coming

Note: This post is part of our Special Report: Top 10 people & culture trends for 2024.

Last November, the Ontario government announced plans to require pay transparency in job ads, with the goal of reducing the gender pay gap and offering greater clarity about compensation to jobseekers, particularly those unfamiliar with the job market such as newcomers and those early in their career.

Benefits and drawbacks

Research has shown that while pay transparency narrows the gender pay gap, it also lowers the average pay for everyone (including men) and sparks turnover, as employees leave for higher pay elsewhere.  

Many jobseekers feel pay transparency is long overdue, showing them what to expect before deciding to apply for a job. In a national survey last year, 84% of Canadians said they're in favour of pay transparency.

For employers, however, it poses some challenges. A salary range doesn’t reflect the less tangible human factors that may not be captured on a resume. For example, a highly qualified person may lack the right communication skills, or a less qualified person could turn out to be a dedicated go-getter who learns fast and is highly adaptable. Sometimes (in a non-unionized environment) employers use the hiring stage to determine what they need to pay. For example, when interviewing a particularly stellar candidate, they might decide to increase the rate.

Here are some of the benefits for employers:

• Transparency attracts more applicants: Indeed Canada says companies that post pay data receive up to 90% more applicants.

• Transparency can help attract Gen Z candidates: 85% of recent grads surveyed by Adobe said they’re less likely to apply for a job if the company doesn’t disclose the salary range in the job posting.

• Young people, who are more open to talking about money, will be more inclined to apply: Approximately 40% of millennial and Gen Z employees have told coworkers what they make vs. 31% of Gen-Xers and only 19% of Baby Boomers. (BankRate, 2022).

Tips for 2024

Until pay transparency becomes law, lean in as an employer.

With BC, PEI, Newfoundland and soon Ontario adopting varying forms of this legislation, and with similar legislation already in place across the EU and some American states, it will likely come into effect across Canada in 2024-2025. Here is some preparation you can do this year to get ready:

• Do a salary review of your entire organization: Be prepared to increase compensation for those in similar roles to those you’re hiring for this year and pay special attention to gender pay gaps.

• Adjust your strategy based on whether you are a merit-/results-based org or if team members are compensated based on seniority, tenure or job title. It’s challenging to have transparency if you base compensation on a variable like performance.  

• Address privacy and morale concerns: Some employees might not want their salaries broadcasted widely, while others will be keen to share; be prepared to address morale issues of team members who might feel less valued.  

• Address cultural considerations: Different cultures might have different attitudes toward discussing pay openly.  

• Train leaders to have difficult conversations: Whether it’s conversations with employees who feel uncomfortable disclosing their salary or employees who feel they deserve higher pay, leaders will need to be trained properly to address concerns in a thoughtful way.

• Strengthen your retention strategy: Be prepared for some team members, including your top performers, to consider leaving for competitors that pay more.  

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Read our next trend to watch in 2024: Trend 6: Where we work: Zoom in on hybrid in 2024