Do you know your co-worker's earnings? "It can lead to envy"
Salary transparency sparks discussion. Some feel that openness about wages would reduce unjustified pay disparities and promote equality and fairness in the workplace. Others prefer to keep their salary strictly confidential.
– There used to be a lot of talk about finding meaning in the work one does. Now, the focus has shifted more towards the salary paid for the work, says Maria Järlström, university lecturer in human resource management.
This makes sense in the current state of the world. The costs of basic living necessities, such as electricity, food, and fuel, have risen. No wonder then that salary begins to interest people more than the meaningfulness of work.
The Pay Transparency Directive seeks equality
There are two sides to the discussion surrounding pay openness—first, the equality debate between salaries of men and women and, second, the idea that pay information could be open to all or at least transparent within an organisation.
The EU's Pay Transparency Directive addresses gender pay gaps—which still exist today, despite significant progress. The directive was adopted in the spring of 2023 with the aim of increasing transparency and gender equality in compensation.
– Pay differences have always existed and will continue to do so. But they should be based on the demands of the position, and the employee's skills and performance. Gender should not be a criterion for how much salary is paid, says Järlström.
However, gender-related pay gaps are partly explained by the labour market situation and the tendency of men and women to choose different fields and roles. Fields in which workers are in high demand also tend to pay more. It’s known that women more often seek jobs in the care sector, while men more often aim for leadership positions.
Salary information open for all
In Finland, salary still seems to be a taboo subject. Most are curious about what their co-workers earn, but many don't want to tell their own salary.
Even though salaries are discussed more openly abroad than here, we also have transparency. For instance, tax records are public information, and anyone can check another's income at the tax office's computer—although it won't reveal possible deductions or all sources of taxable income.
Should salary information be openly available to everyone in the workplace? Professor of Economics Hannu Piekkola shakes his head.
– From experience, I know that such openness only leads to envy and resentment.
Piekkola cites challenges in group-based performance pay as an example. Perhaps you've also compared your own efforts to a colleague's contribution in a joint project?
– Sometimes, performance pay can lead to monitoring and controlling a co-worker, instead of rewarding hard work.
Even if everyone knew each other's salaries, the challenge is often that the sum does not tell the whole story. Salary can indicate the level of education required, experience, and expertise, but it doesn’t reveal other possible benefits offered by the employer or included in the job.
Also, expert work, for example, involves projects whose outcomes only become evident after several years. Consequently, measuring the results of the work and compensating based on performance can be challenging.
Incomplete job postings
You've probably applied for a job where the application form asks you to tell your salary expectation. Responding is difficult—you want to avoid pricing your time too low but also don't want to price yourself out of the market.
Rarely does a job posting give enough information to decide a salary expectation, and it's difficult for applicants to figure out the salary levels of an organisation that is unfamiliar to them. Particularly in a tough spot are those who have retrained for a career change or recent graduates who don’t yet have a feel for the industry or working life in general.
– Salary transparency absolutely means that a job advertisement should clearly state the salary to be paid without referring to complex tables in collective agreements, says Järlström.
In Järlström's opinion, the advertisement could at least feature a salary range, allowing for flexibility between an employee's skills and experience in relation to the job's demands.
– Compensation is also a strategic choice for the company. It can be a way to stand out among competitors, or conversely, salaries might be considered business secrets, and companies do not want to share this information in the advertisement, Järlström reflects.
When a job advertisement clearly states the compensation to be paid, it saves time from unsuitable recruitments. The salary indicates the job's demands as well as the employee's skills and experience. Abroad, it is customary to mention, for example, the annual salary for the position in the job advertisement.
– The Finnish salary culture is interesting in that pay is often only discussed when formalizing the employment relationship, notes Piekkola.
However, the salary paid for the work is not the only financial incentive to attract applicants to a job. Often in job advertisements, the so-called intangible benefits remain overshadowed. For instance, how do vacations consume Saturdays, or how do public holidays affect working hours, and is it possible to work remotely?
Switching jobs for a pay raise
As skills and responsibilities increase, the thought of a salary raise begins to creep in. Salary discussions proceed according to workplace practices, and the ease of negotiating pay varies from place to place.
– In Finland, it's not easy to get a pay raise, as our labour markets are still quite rigid, Piekkola considers.
According to Piekkola, individual-level salaries in Finland have been particularly inflexible. This is referred to as wage rigidity. It describes a situation where wage adjustments do not respond quickly enough to economic changes. This can be due to various factors, such as collective agreements, the strength of trade unions, or company practices. In Finland, concentrated labour markets lead to this situation—in some places, there might be only one major employer, and many people work there. Steady pay, irrespective of effort, offers little motivation for employees seeking salary progression.
There are grounds for salary increases when the pay level is no longer in line with the skills and responsibilities. Rarely are raises offered by the employer; the employee usually needs to be proactive.
– Salary is used to attract and retain employees in an organisation. It's not just compensation but a symbolic gesture. It shows the employer's appreciation for the employee's professional skills, says Järlström.