Pay transparency linked with better employee relations
Published on 16th July 2012 by Sarah Alexander
People Management reported on Friday 13th July of a new CIPD investigation into the effect of pay structures on productivity.
The CIPD claim that employers that are transparent about the pay levels their staff are receiving are more likely to have better employee relations, while maintaining secrecy over pay is linked with a poor atmosphere at work, CIPD research has suggested.
A new analysis of the findings of the CIPD/Benefex Reward Management Survey reveals that employers may be creating employee relations difficulties by keeping details of staff reward close to their chest. In the survey, HR respondents were asked to rate their employee relations climate as ‘very good’, ‘good’, ‘somewhat strained’ or ‘very strained’. While half of the 455 respondents described their relations as good, one in eight admitted it was strained and one in twenty very strained.
Meanwhile, employers were also asked to rate the extent to which they were open about pay, with the result being a ‘secrecy score’ between 0 and 5. The figures showed there was a direct correlation between the two, researchers said.
“Our results show a direct relationship between the extent of pay transparency and the quality of the employee relations climate,” the report reads. “The more secretive an organisation is about pay, the more strained the ER climate. This result has implications for organisations, not only in light of recent legislation to encourage more pay transparency, but also in terms of the potential positive effects of being more open about how reward decisions are made and implemented in organisations.”
However, it added: “We do need to be cautious about causality here. The results do not tell us whether the negative ER climate leads to the imposition of pay secrecy or whether the pay secrecy leads to a difficult ER climate.”
Interestingly, the research also suggested that workplaces that operate performance-related pay schemes and other individual incentive plans have a better employee relations climate. Again, the report stressed that it is unclear whether such schemes promote better relations, or whether better relations are required in order to implement such performance-related schemes.
“The debates around performance-related reward have been deep and long running, and we do not intend to reiterate them here,” the report concluded. “However, our results may offer some contribution, suggesting that the use of performance-related reward practices can have positive associations.”
The analysis also gave evidence for the benefits of tying pay rises to competencies: organisations which said they used skills and competency as pay progression criteria were more likely to report higher productivity – and less likely to report discontent over pay - than those that used pay spines, narrow grades and job family base pay structures.