Startups that offer transparent pay have smaller gender pay gaps. That’s according to data from compensation benchmark platform Figures, which surveyed 493 tech companies across Germany, France and the UK.
It asked each company whether they are transparent on the following:
- Compensation policy (the approach to compensation: when companies make a clear statement of how they want to position themselves in the market when it comes to salary, but don’t offer exact figures. For example, companies might say pay is based on the market median, or that remote teams are paid differently to office-based teams.)
- Salary ranges (does the company disclose how salaries are defined by role, level and location? For example, a senior developer based in Paris could be paid between €60k to €75k annually.)
- Individual salaries (does the company publicly disclose how much each individual employee at the company earns?)
The companies that have complete transparency when it comes to pay — that is, they’ve hit all three criteria — have eliminated pay discrepancies between men and women in the same role and location entirely, according to Figures’ report. Sadly, these companies are in the minority.
Full pay transparency is rare
59% of companies surveyed said they had a transparent compensation policy. 28% make salary ranges open to employees.
Only 12% of companies surveyed said they offered full transparency on individual salaries.
The higher the transparency, the smaller the pay gap
A company-wide pay gap doesn’t necessarily indicate that an organisation pays women less than men for the same job, which is illegal. It could rather point to the fact that there are fewer women in higher-paying, senior roles. Women are underrepresented in the C-suite at startups; six in seven C-level executives are men. And 34% of startup boards still include no women.
Figures first looked at the "adjusted pay gap", in which the average salaries of men and women are compared, based on factors such as role and location. This is the best way of spotting compensation inequalities, according to Figures’ cofounder and CEO Virgile Raingeard.
The report found that in companies without transparent pay policies, men were paid on average 3.5% more than women in the same role.
This dropped to 2.4% for companies with a transparent compensation policy and 2% for companies with a transparent compensation policy and transparent salary ranges.
Companies with entirely transparent pay — those that make all individual salaries publicly known to employees — had no pay gap between men and women in the same role and location.
Full transparency on salaries makes it harder to negotiate on wages — and research shows men are much more likely to negotiate on salary than women.
Negotiation plays the biggest, if not the most important role, when it comes to driving the pay gap between men and women in equal roles
“There are multiple studies that show that salary negotiations are a key driver in justifying the pay gap for people in the same roles. In fact, negotiation plays the biggest, if not the most important role, when it comes to driving the pay gap between men and women in equal roles,” explains Raingeard.
Nevertheless, the report found that companies with some degree of pay transparency — for example, a transparent compensation policy — reduced their gender pay gap by a third, on average.
“Compensation policies can help by being transparent about market positioning, the way salaries are defined during the hiring process and how salaries are defined and reviewed annually,” says Raingeard.
“Transparency could be saying: ‘this is the annual budget we have allocated for salaries and how we define who gets what'."
Having fewer women in senior positions affects a company's gender pay gap
The report also compared the average salaries of men and women in each company regardless of their role: the non-adjusted pay gap. This tends to be between 15 and 20% on average globally, depending on country and location, says Raingeard.
The non-adjusted salary comparisons show that the gender pay gap is 22% on average for entirely non-transparent companies. This dropped to 15% in companies with fully transparent policies.
The large gender pay gap at transparent companies is likely down to the uneven gender split in higher-paying senior positions, says Raingeard
“The big thing that drives the unadjusted pay gap is the roles that men and women hold. This is because women are over-represented in the lowest paying roles in the world, including services and admin-related roles. And there is an under-representation of women in the highest-paying roles,” he explains.
For example, according to Figures’ data set covering tech and developer roles, only 20% of women are in the highest-paid jobs.
“The root cause is not the salary itself, but how do we make sure we can bring more parity in the highest-paying functions?” adds Raingeard.
“If there are more women at the top of the company, then there is, naturally, less of a salary gap.”
German companies are least likely to offer transparency on individual salaries
UK companies were the most likely to offer transparency on individual salaries, followed closely by France.