Compensation Transparency and Pay Compression

الملخص

Pay transparency policies are spreading, but their effects on how salaries are distributed within organisations remain unclear. This article studies compensation transparency and pay compression, the narrowing of pay differences between employees with different experience or performance. Using payroll data from 36 employers over six years, we compare organisations that began publishing salary ranges with similar organisations that did not. After disclosure, pay gaps between men and women narrowed modestly, but differences between longer-serving and newer employees narrowed far more, and high performers received smaller raises relative to peers. Interviews with managers suggest that disclosure made them reluctant to defend large individual differences. We discuss how organisations can pursue fairness without erasing recognition of contribution, for example by publishing clear criteria for progression alongside the ranges themselves. The findings add to debates about equity, motivation and the design of reward systems, and they highlight the need for transparency to be accompanied by explanation and trust.