States like California are increasingly implementing “right-to-know” laws, requiring organizations to disclose employee pay, sparking a broader conversation on salary transparency.
A University of California, Riverside study finds that salary transparency combined with performance rankings can influence employees’ sense of entitlement and worth.
As more states implement “right-to-know” laws requiring organizations to disclose employee pay, the conversation around salary transparency is gaining momentum. While disclosing salaries can address hidden biases, it can also affect employee motivation, retention, and overall culture–for better and worse.
Sector by sector: A new study from the University of California, Riverside, examines how combining compensation transparency with performance rankings influences employees’ sense of entitlement and worth. In some highly competitive sectors like investment banking and consulting, openly disclosing an individual’s rank is a longstanding practice. But mandatory disclosure laws and a nationwide push to codify these policies might not translate to other industries that lack the same cultural norms.
Delta between high and low performers: The research is said to be the first to investigate how learning about coworkers’ salaries can prompt employees to feel they deserve more or less, depending on their rank. For high-performing employees, the study’s findings showed a pronounced surge in what the researchers call “standard-based entitlement,” prompting these workers to demand significantly higher raises.
Motivational gaps: By contrast, lower-ranked employees often felt discouraged and reluctant to negotiate, with some even concluding they did not deserve a raise. As a result, salary information tied to explicit performance rankings appeared to widen the motivational gap between top performers and everyone else. The introduction of rank-based pay data can also undermine teamwork by intensifying social comparisons, especially for individuals who find themselves below the top tier.
Slow to adopt: Industry data from a Mercer survey says that just under 20% of U.S. companies have a formal pay transparency policy, and three quarters of employers feel unprepared for evolving regulations. That means the vast majority of employers are still designing a viable pay transparency strategy while also weighing compliance and cultural impacts.
States like California are increasingly implementing “right-to-know” laws, requiring organizations to disclose employee pay, sparking a broader conversation on salary transparency.
A University of California, Riverside study finds that salary transparency combined with performance rankings can influence employees’ sense of entitlement and worth.
As more states implement “right-to-know” laws requiring organizations to disclose employee pay, the conversation around salary transparency is gaining momentum. While disclosing salaries can address hidden biases, it can also affect employee motivation, retention, and overall culture–for better and worse.
Sector by sector: A new study from the University of California, Riverside, examines how combining compensation transparency with performance rankings influences employees’ sense of entitlement and worth. In some highly competitive sectors like investment banking and consulting, openly disclosing an individual’s rank is a longstanding practice. But mandatory disclosure laws and a nationwide push to codify these policies might not translate to other industries that lack the same cultural norms.
Delta between high and low performers: The research is said to be the first to investigate how learning about coworkers’ salaries can prompt employees to feel they deserve more or less, depending on their rank. For high-performing employees, the study’s findings showed a pronounced surge in what the researchers call “standard-based entitlement,” prompting these workers to demand significantly higher raises.
Motivational gaps: By contrast, lower-ranked employees often felt discouraged and reluctant to negotiate, with some even concluding they did not deserve a raise. As a result, salary information tied to explicit performance rankings appeared to widen the motivational gap between top performers and everyone else. The introduction of rank-based pay data can also undermine teamwork by intensifying social comparisons, especially for individuals who find themselves below the top tier.
Slow to adopt: Industry data from a Mercer survey says that just under 20% of U.S. companies have a formal pay transparency policy, and three quarters of employers feel unprepared for evolving regulations. That means the vast majority of employers are still designing a viable pay transparency strategy while also weighing compliance and cultural impacts.
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