Pay transparency is the talk of the town.
Not only are an increasing number of companies adopting pay transparency, but in the US, across Europe and even in Asia, pay transparency laws are coming into effect, pushing even more companies to disclose salary ranges.
In the US, many states have brought in pay transparency laws which require organisations to publish salary ranges when they advertise roles. While in Europe, the EU pay transparency directive is coming in at the end of this quarter – this will give member states up to three years to comply.
Singapore is the latest country to introduce a law, mandating that all Singapore-listed companies will need to disclose the exact amount and breakdown of salaries and other payments made to their directors and CEOs in their annual reports.
But in the Middle East, there are no such laws, and the picture is less clear.
“The [Middle East] region is lagging in transparency law regulations,” Rameez Kaleem, founder and CEO of independent reward consultancy 3R Strategy tells Business Chief.
That said, a recent PwC Workforce study found that 71% of respondents in the Middle East (compared to 58% globally) stressed the importance of transparency by employers. The report highlighted a few specific actions for companies in the Middle East which included a commitment to pay transparency.
So, while there are no laws in the Middle East, there is still just as much if not more importance being placed by employees in this region on pay transparency.
Employee engagement – why pay transparency matters
Rameez argues that transparency is about giving people context and pay transparency means being clear and open about how and why we make pay decisions.
“If we want to build trust in the workplace, then why not start with possibly the most important aspect of a job and often the first thing that people see when they are applying for a new role – what they will get paid?”
“If we can’t be fair and transparent with this, then we’re already off to a bad start in our working relationship with colleagues.”
What makes a lot of leaders nervous about pay transparency is the worry that people will find out what everyone earns, says Rameez, but the fact is, most people are not that concerned with what everyone else is getting paid.
“What they are concerned with is whether they’re being treated fairly – and we can demonstrate fairness by communicating clearly and honestly with our employees.”
A Payscale survey found one of the top predictors of employee engagement is an organisation’s ability to communicate clearly and honestly about pay. And a recent study by Adobe found that 85% of Gen Z employees were less likely to even apply for a job if it didn’t have a salary range.
Which is why in the US, many states have brought in pay transparency laws which require organisations to publish salary ranges when they advertise roles.
Pay transparency – Gen Z and female participation in the workforce
A Gen Z appetite for fair pay is especially significant in the Middle East region, given that it is home to one of the largest growing young populations, with Gen Zers and Millennials set to comprise 75% of the Middle East workforce by 2030.
Not giving future employees what they are looking for will likely seriously impact an employer’s ability to attract and retain talent.
Already in the UAE, for example, employers are concerned about attracting and retaining expat talent. Three-quarters of UAE workers have said they will quit if they don’t get a pay rise, new research from recruitment consultancy Robert Half finds.
So, while there are no pay transparency laws in the Middle East, there will certainly be some organisations that will voluntarily adopt them to help them attract the new talent that is “increasingly seeking transparency from their employers”.
It matters too, because pay transparency ensures pay equity, and delivering on gender pay equity especially means attraction and retention of female talent – something that is a particular focus for governments and organisations regionally, and especially the UAE and Saudi.
For example, Saudi is focused on raising the share of women in the workforce from 22% to 30% in the next seven years, as part of its Vision 2030 economic diversification plan.
But many women feel their experiences of employers in the region fall short of expectations, research from PwC Middle East’s MENA Women in Work Survey reveals.
Norma Taki, PwC Middle East diversity leader tells Business Chief that many women feel they are not treated the same as their male colleagues and not given equal training, development, and career opportunities, nor equal pay.
“Many of our Women in Work MENA survey respondents feared that they would return to lower-paid roles after maternity leave, a phenomenon referred to as the ‘Motherhood penalty’,” says Norma says.
Measures such as gender pay gap analysis can help to diagnose this and help guide targeted interventions to achieve pay parity, while pay transparency is critical in ensuring we have pay equity and equal pay for equal work.
Challenges and opportunities regionally
Rameez points to two steps in the process of delivering on pay transparency. Step one is to understand the level of skills and responsibilities required to carry out a role and based on our ability to pay (for example, market median or upper quartile) we assign a salary range for the role.
Step two is to look at the individual in the role and decide, based on their contribution, whether they should be at the bottom, middle or the top end of that range.
“This ensures a fair and consistent approach, and we pay people based on job requirement and contribution, not on their personal circumstances, expectations or ability to negotiate a good salary.
Rameez says that while many organisations will shift towards pay transparency to build a culture of trust and openness, others may be reluctant to go down this route.
“While the research tells that pay transparency can lead to a significant increase in employee engagement even without making any increases, many leaders fear that pay transparency and open dialogue will lead to employees constantly seeking higher pay or feeling underpaid,” he says.
“In the absence of pay transparency regulations these leaders and organisations who do not see this as a priority may not make this shift.”
This is even more complicated in the GCC countries, where the worker population is made up of multiple nationalities and pay is not always equitable.
“The culture mix can make it more difficult for organisations because introducing pay transparency is a big culture change and managing change in such a diverse environment can be challenging,” Rameez tells Business Chief.
Though, Rameez argues that from a philosophical perspective, this shouldn’t make it more difficult because what we pay people should not be influenced by different salary expectations.