The Pros & Cons of Salary Transparency for Malaysian Employees (and Employers)

One of the most contentious topics in HR has been the concept of pay transparency. Some parties believe that pay transparency improves upon the concept of fair pay and equity, while others argue that these benefits are not worth the potential negative consequences of such policies. 

Some employers even prohibit the discussion/disclosure of salary details, and this can sometimes be considered almost taboo in certain circles. But is pay transparency really a problem? Should you encourage/discourage this for your employees? Here are some of the main pros and cons of pay transparency to take note of when making your decision. 

Is salary transparency good for employers and employees?

This depends on a number of factors, but there are a number of benefits that salary transparency can offer — to both employers and employees. These include: 

1. Reduced bias & improved pay equity 

One of the key advantages of salary transparency is that it can help to improve pay equality among employees from diverse backgrounds, free from prejudicial bias. Bias can come in many different forms, including ethnicity, gender, or background, and as such, it’s crucial to avoid this in your organisation. 

In contrast, having a transparent approach towards salary (and other remuneration details) can reduce the risk of having bias when it comes to rewarding employees — ultimately improving pay equity. This works best in companies with well structured setups, where rewards and compensation are allocated in a clearly refined manner.

2. Improved employee morale & retention

An honest approach with salary can also be a key factor in improving employee morale, and subsequently, employee retention. Pay transparency helps to reduce potential situations where employees are under or overpaid, helping individuals to feel more confident about their abilities and value to the organisation.

This, in turn, helps companies retain their best employees. Happy employees are much more likely to stay at an organisation, especially when it comes to the long term. 

3. Streamlined recruitment process

Pay transparency also helps to streamline the recruitment process. On the one hand, job listings with stated pay ranges help to weed out candidates who might not fit within a certain bracket, while those that do apply will be more agreeable to the set pay range/budget available. 

And if your organisation offers competitive remuneration, having a transparent salary range can also help to advertise and attract the very best candidates to your organisation. 

What’s the downside of pay transparency for employers in Malaysia?

Like all things, there are a number of possible downsides to having pay transparency for both employees and employers in Malaysia. This highlights the need to consider all aspects of similar policies before implementation, with disadvantages of salary transparency including: 

1. Impact on team morale 

Salary transparency can help with team morale — but if implemented poorly, it can also have a negative impact on the happiness of your team. It’s crucial that HR managers and employers conduct a full review of employee remuneration in accordance with market rates before executing pay transparency policies. 

2. Increased turnover rates 

This can also affect the turnover rate at your organisation. With salary being disclosed openly, you run the risk of some employees feeling unhappy with their salary packages — with an eye on higher-performing (and earning) employees sometimes causing affected individuals to search for new opportunities. 

How to get the most out of salary transparency in Malaysia?

There isn’t one simple answer to this. The success of pay transparency in Malaysia very much depends on a number of factors, which is why employers must have a clear idea of why/how/when to implement such policies. 

In general, it’s important to communicate and explain the reasoning behind pay scales and remuneration — the better the understanding of your company’s employees, the better chances you have of reaping the benefits of pay transparency.