Pay transparency is a conversation that is slowly gaining traction in the region. It is a growing conversation in the West, and several legislations have been passed in some parts of the US mandating salary ranges in job listings.

The World Economic Forum reported that salary transparency laws cover one in five US workers. In 2023, California passed a law requiring companies with 15 or more employees to include salary ranges in job postings. Current employees can also request the pay range for their positions. Companies with over 100 employees must also submit a pay data report each May.

The conversation has since carried over to the MENA region. A 2023 report by Michael Page showed that 92% of UAE job seekers say job postings should include a salary range. Not all candidates read job advertisements because they want to apply. The report noted that some simply use the information to benchmark the advertised role’s salary and job description against their employment terms.

THE CONSEQUENCES OF PAY SECRECY

According to the World Economic Forum’s Global Gender Gap Report 2023, it will take another 169 years to close the global economic gender gap. Pay transparency is a crucial tool for addressing wage gaps in many countries.

In the report, OECD economists Valerie Frey and Lyydia Alajääskö say that pay gap reporting requirements in Denmark and the UK “appear to have led to a narrowing of the gender pay gap in affected firms.”

Career Counselor and Managing Director of Linkksearch Nathalie Cooper says gender-based pay gaps can still exist, which may negatively impact an employer’s brand and ability to attract top talent. 

Cooper also adds that a lack of transparency regarding salaries makes employees feel undervalued and less motivated, and they eventually leave for better-paid opportunities.

Similarly, Marketa Simkova, Partner and head of People, Performance, and Culture at KPMG Middle East, says pay secrecy can erode employee trust.

“When employees are unaware of the pay structure or how salaries are determined, they may feel that their employer is not being transparent or fair, which can create distrust,” she states.

“Pay secrecy can also lead to false assumptions. Without clear information, employees may assume that pay disparities exist due to favoritism or bias, which can harm the employer’s reputation and weaken workplace morale,” Simkova adds.

She explains that pay secrecy can also eventually lead to a higher employee turnover due to employees feeling disconnected or unsure about the fairness of their compensation. This increased turnover can lead to higher recruitment and training costs for the employer.

Mohammad Osama, CEO of recruitment and executive search firm GRG, believes a key negative consequence of pay secrecy in the region is employers’ practice of differentiated pay scales for expats from different countries. However, he says this practice has significantly decreased over the last 15 years.

CULTURAL FACTORS

Cultural norms contribute to the prevalence of pay secrecy in the region. Pay secrecy is a complex issue regardless of geographical location. While Western countries often rely on labor regulations and collective bargaining to promote salary disclosure, cultural factors can influence transparency levels in different regions, says Simkova.

“In the MENA region, lower pay secrecy is significantly influenced by cultural and societal norms. Therefore, discussions about salaries remain somewhat taboo,” adds Simkova.

The rapid growth of businesses in the MENA region necessitates attracting top talent. This competitive landscape empowers companies to offer attractive compensation packages to secure skilled professionals. Some employers keep salary information confidential to maintain control over the narrative and prevent unrealistic expectations. 

Similarly, Cooper says pay secrecy is deeply rooted in MENA’s culture and society. “Traditional values make discussing money publicly uncomfortable. Workplace hierarchies also play a part, making open salary talks taboo and discouraging such conversations.” 

“Due to these cultural norms, achieving financial independence and openly discussing compensation remain significant hurdles for many. This lack of transparency can perpetuate pay disparities,” Cooper adds.

People and culture expert and HR consultant Ola Elkelany also believes cultural and societal factors contribute to the prevalence of pay secrecy in the MENA region. 

“Gender discrimination, network hiring, and protection given to higher management are some of these factors,” she says, adding that network hiring is usually misused in small companies without a solid pay structure, leading to pay gaps between people holding the same job. The source of hiring is the only notable difference.

USEFUL STRATEGIES

Osama says that pay structures must be standardized based on the nature and seniority of the role. Otherwise, employees will pick up on pay disparities, leading to widespread distrust and depleted morale. 

He explains that organizations must conduct a detailed analysis of their compensation and benefits structure based on job evaluations to be transparent about pay scales. 

This ensures a fair, methodical pay structure, boosting trust and employee morale by making workers feel their compensation aligns with their role and level in the organization.

Similarly, companies should communicate clear pay principles by publishing internal rules, pay structures, and progression procedures within the organization. 

“This clear communication and transparency about factors like bonuses, promotions, and performance-related rewards allows employees to understand how pay decisions are made, therefore seeing clear pathways for advancement,” says Simkova.

She emphasizes promoting equal opportunities and creating a more equitable work environment; all employees should have the same resources, training, and growth opportunities, regardless of their background or personal traits. A strong, unbiased performance management framework is essential.

Additionally, to ensure pay equity, Simkova says that companies should establish a pay review system that assesses performance and contributions without considering gender, nationality, or other unrelated factors.

“Another critical strategy is to minimize exceptions to pay rules. Internal guidelines for pay and promotion should be followed consistently, with deviations allowed only if formally approved by the company’s governance structure. 

Simkova adds that establishing consistency in the onboarding process is essential. Organizations should ensure equal pay for equal roles and avoid basing job structure on prior employment. 

Each role must have a clear progression path to integrate new hires fairly and align their compensation with job responsibilities, not previous earnings.

Highlighting the importance of fostering a culture where compensation discussions are normalized, and governmental involvement is essential in addressing pay secrecy in the region, particularly in the private sector, Elkelany says, “A legal framework designed to prevent the causes of pay secrecy will be the most effective solution for implementation and auditing.”