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October 13, 2017 / Business

Why transparency is important in payroll system

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Many organizations still consider that it is important to maintain privacy of all payroll information. One of the points in new employees’ offer letter is to avoid sharing salary information. It could very become one of the causes of termination. However, organisations may surprisingly benefit after making the payroll information transparent in the workplace.

Today companies are putting a lot of emphasis on becoming radically transparent. Transparency is being encouraged in various aspects of the company, right from the goal setting process at organisational levels to the individual level goals. Payroll needs to very well be a part of this growing phenomenon. There are reasons for companies to consider making payroll open information.

Making the payroll process transparent is certainly a bold HR strategy as it lets every employee know how much their peers are earning. There are a couple of benefits that organisations can experience:

transparency Important Payroll system

Eliminate​ ​suspicion:

By sharing payroll information openly, companies can instantly put suspicions of unfairness to rest if the right system is used. By sharing the methods and ideologies that employee pay structure is based on, as well as everyone’s salaries, employees can see that increments are given based solely on performance and efforts. If it isn’t clear as to why a particular employee is making more money, it can reduce the benefits of payroll transparency.

By making payroll information visible to everyone, suspicions of discrimination, playing favourites and general biases are put to rest. Due to transparency, employees can compare their earnings with their colleagues and determine the cause of the alleged gap. Payroll transparency is especially important to ensure there is no gender bias in the workplace.

Reduce​ ​turnover.

Transparent processes ensure that employees do not feel cheated or undervalued. On the contrary it lets everyone gauge what they make against company averages. Knowing what colleagues make and what qualifies individuals for a pay raise is motivating. The process helps employees find the necessary methods they need to advocate for themselves such as an attractive incentive or a change in their designation.

Eliminate​ ​salary​ ​negotiation:

By not revealing payroll information during recruitment, many applicants feel their times is being wasted as eventually it is revealed that the salary does not always match with their expectations. This can be harmful for the company as many positions could be left unfilled. Making employee salaries transparent during the recruitment process can ensure that the entire process is more efficient. It will definitely attract candidates whose salary expectations match the position.

Motivated​ ​employees

Transparent payroll information can motivate employees as they are easily able to view what their peers are making. Employees can be told they can earn more money by working harder or being promoted. But by being able to view exactly what their peers and superiors make on the company website can make the prospects seem more real. Revealing salaries for all positions can motivate employees further about receiving training and learning new skills. In the end all of this is sure to increase overall productivity.

Conclusion:

Making payroll transparent is essential for building trust. And being honest about payroll information is one way of establishing trust between management and employees. The more information employees have, the less time they have to spend racking their brains about payroll.

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