The concept of pay transparency is intimidating, and rightfully so. Once people know what others are making—and how their own pay measures up—conflict is a natural next step. At least, this is what most business owners have historically assumed.
However, many in the coffee industry—especially in the retail sector—are moving toward or have already implemented pay transparency. Not only a way to make their cafés more equitable, pay transparency can be a tool to set clear expectations, increase productivity, and reduce conflict.
What are the benefits of pay transparency, and how can cafés implement transparent pay structures without added expense or conflict? Experts from pay-transparent cafés have the answers and are eager to spread the word.
What Is Pay Transparency?
Among compensation professionals, there are three specific categories of policy that fall under the umbrella of the term “pay transparency”:
- Pay process transparency refers to being clear and open about how compensation decisions are made.
- Pay disclosure refers to revealing employee-level compensation information to other employees.
- Employee-led pay transparency is when employees share and discuss their pay amongst themselves.
According to Stephanie Thomas, Ph. D., of the compensation professional website Compensation Cafe, many employers have tried to discourage this employee-led policy. However, it is illegal to prevent employees from discussing their salaries under the 1935 National Labor Relations Act.
Many employers fear pay transparency because what they’re picturing is pay disclosure, often without pay process transparency. While the two policies complement each other, pay process transparency is often wholly independent from pay disclosure. Whereas pay disclosure could lead to conflict around certain employees getting paid more than others, pay process transparency promises to reduce that type of conflict by explaining why those employees make more and give others a chance to increase their own earnings.
Where pay disclosure in a vacuum could highlight and publicize salary inequities within a company while not inherently fixing them, pay process transparency can reduce or fix salary inequities by creating positive, equitable systems for compensation and accountability.
While many companies have implemented pay transparency policies to great success, there’s a crucial factor to keep in mind: when people know that another person makes more than they do, they fully understand why. Since employers have no legal power to restrict employee-led pay transparency (employees discussing wages amongst themselves), they benefit from getting ahead of it in every way possible.
Show Me The Benefits
Pay transparency comes with many well-documented benefits, including:
- Promoting equity and fairness
- Helping motivate workers
- Reducing gossip and negativity around compensation
- Improving retention
Pay process transparency is relatively easy to implement and paves the way for the smooth implementation of pay disclosure and full pay transparency, which combines the two.
Fairness & Equity
When transparent pay ranges are in place for worker compensation at every level, employees are practically guaranteed fair and equitable salaries based on clear, tangible markers.
Pay process transparency helps reduce the gender pay gap, where, according to the Bureau of Labor Statistics, in 2018, white women made 78 cents on each dollar compared to white men, Black women earned 64 cents, and Latinx women just 54 cents. Transparent processes also help with similar gaps that exist for non-white male workers.
In other words, pay process transparency helps all workers know they are getting paid fairly, which positively impacts morale. When pay processes aren’t transparent, workers may hear pay details through the grapevine, not knowing why certain employees are paid more than others. This fosters resentment and makes employees question whether they’re genuinely valued.
Conversely, when people know exactly why they are paid what they’re paid, that resentment is replaced with understanding and motivation.
Stephen X. Welch is the education director at Ultimo Coffee in Philadelphia, a company that has successfully implemented pay process transparency.
“I’ve found that employees tend to be more satisfied with their pay rate when they know they’re on equal footing with their peers, or if they aren’t, having very clear explications why,” he says. “It removes the confusion and resentment I’ve encountered in other cafés that grow around unequal or unfair pay practices.”
Ritual Coffee Roasters in San Francisco emphasizes the benefits in situations where employees come in with different experience levels. At Ritual, all employees start at the same rate with the same pre-scheduled raises based on in-house training.
“Everyone has the same expectations, and the same rules apply to everyone,” says Daria Whalen, Ritual’s director of education. “I think people value understanding what is expected of them and knowing each of their co-workers has been in the same position.”
Motivation
When companies implement transparent pay processes, they can encourage employees to increase their value to the company, thereby increasing their pay. By laying out tangible steps that lead to pay increases, companies define their values in a way that enhances company culture and focuses baristas’ energy in the right direction.
Ritual’s baristas, for instance, earn a raise for passing a milk test and then an espresso test. These tests take place at intervals based on experience level and learning speed. Next comes a six-month and one-year check-in, then annual reviews and raises.
The cost of living in San Francisco is incorporated into Ritual’s compensation plan as a specific increase to all retail employee pay, announced at company-wide meetings. Ritual adjusts from the bottom up, raising the company minimum and other retail salaries by the same amount. The company clearly demonstrates that it values equality and loyalty by having everyone start at the same rate and get the same raises over time.
At Ultimo Coffee, baristas benefit from transparent raise structures that reward standard time and training markers. Other motivators include advanced participation in educational programs within the company and success at local competitions. By raising pay based on factors like competency in espresso, time spent in the company, continuing education, and wider industry participation, Ultimo shows baristas they are okay with employees doing just their shift work, but there’s room for them to grow past that. A raise for winning a local throwdown demonstrates that the company values representation in a larger industry context. When everyone is working with the same values in mind, this helps focus company culture.
Less Conflict & Negativity
There is no place for gossip or resentment when everyone knows who makes what. Say one worker finds out that a less-tenured worker makes more than they do or someone questions why a worker they manage makes more: situations of ambiguity give room for conflicts to thrive. Pay transparency removes questions about pay and lets workers focus on their work. This result is not only logical—it’s also validated by research.
One study by Emiliano Huet-Vaughn, an assistant professor of economics at Middlebury College, found that participants who were shown their earnings and how they compared with others worked harder and increased their performance. A similar study by Elena Belogolovsky of Cornell University and Peter Bamberger of Tel Aviv University found that pay secrecy was associated with decreased performance.
On top of that, a study from PayScale, a wage data collection and analysis group, found that only 45% of participants who felt they were underpaid were actually earning less than their peers in similar roles.
By showing people where they stand, you reduce negativity and conflict based on a misperception of inequity and reduce inequity itself.
Illustrations by Jordan Johnson
Retention
Another survey from PayScale found that the more information employees have about why they earn what they do, especially in relation to their peers, the less likely they are to quit. According to the survey, the main predictor of “satisfaction” and “intent to leave” is whether employees feel they are paid fairly.
Transparency dramatically raises the “satisfaction” metric—even at companies that pay below-market wages. When employees know why they’re paid less than they could earn elsewhere, 82% say they’re “satisfied” with their jobs and plan to stick around.
Welch has seen positive retention as a result of pay process transparency. “It shows people what they’ll be making at what point on their career path in the café, even without a promotion to upper management or another role. We have folks on staff who have been with the company for years, so I can’t help but think it helps.”
The key is that, on top of the increased morale that comes with knowing you’re being treated fairly, people can look within the pay structure and plan for their future, making them more likely to stick around and plan their future as part of a transparent business.
Implementing Wage Transparency
Now that we’ve established the benefits of pay transparency, here are steps you can take to make your company transparent. These steps will help you define your values and outline your policies, which will help focus organizational and staff efforts. Taking these steps is worth your time whether or not you value pay transparency.
Spreadsheet it
Put everyone’s wages into a spreadsheet with their title, years at the company, and relevant experience level before joining the company. For privacy’s sake, this info should be private and not seen by anyone but you.
Figure out starting wages
Determine your company minimum. Does everyone in your company start at the minimum? If not, what is the starting range? Break starting wages into one, two, or three starting rates, based on specific factors like experience.
Examples
One starting rate looks like this: all baristas make $X/hour to start.
Two starting rates could look like this: baristas with one year of experience make $X an hour, and baristas with two or more years make $Y/hour to start.
Three starting rates could look like this: baristas with one year of experience make $X an hour to start, baristas with 1–2 years make $Y, and baristas with three or more years make $Z.
Review your review process
Break down the different tiers of training your company has and decide when to reward with raises. If raises happen informally, you now get a chance to formalize the process. You can do this either by milestone or by time; for instance, you can choose to give raises after completing a milk-training raise or after a three-month employment period. You can also decide these tiers are not when raises happen, but it’s important to outline them.
Think about how often reviews should happen. Are they linked to raises or not? Which factors determine that? Remember, if you like the way raises are doled out at your cafe but want it to be more transparent, you don’t necessarily need to change anything—you just need to figure out what’s happening in your cafe and communicate with your staff.
Record, record, record
Using your spreadsheet, outline all the positions in your company and create pay ranges for the various positions. Again, break them down into one, two, or three rates based on real-world factors.
Square up
This is the tricky part. You might see that someone’s compensation isn’t fair within the new structure you’ve created. Sometimes a lack of pay transparency leads to certain employees getting raises because they asked or were in the right place at the right time.
When a transparent system is in place, get ready to square up the compensation of anyone who is out of range of their position. Be prepared to do the right thing and fix the disparities with the rollout of your new pay process transparency. Employees should be excited about the new process, and squaring up helps get everyone on board.
Spread the word
Once you have your policy in writing and are ready to rectify any past errors, add your transparent pay process policy to your handbook and send a memo to your staff. Give them a clear venue to get in touch with any questions.
Extra credit
If you enjoy this process and want to take things further, you can get even more transparent by adding pay disclosure to your business and becoming fully transparent. To do this, update your spreadsheet and make it accessible to your employees. Once they have the tools to understand why people are making what they are, there’s no reason it should cause extra conflict.
If you’re really excited by your newfound pay transparency, you can post this information for the public on your website. You can even issue a press release and tell the world about your transparent company. The more you promote a culture of transparency and its benefits, the better the chance you’ll attract new talent who share those values and want to work with you.
Transparency Around The World
In specialty coffee, industry marketing has placed a heavy emphasis on the value of transparency in promoting sustainability, quality, and equity across the supply chain—and rightly so. It’s essential to justify why the best coffee costs more: it’s not just an issue of quality but fairness and sustainability.
Transparency often stops at the green coffee level of the labor chain. Nowadays, more and more coffee US companies are investing in transparency to promote equity and sustainable compensation for labor, ensuring that—just as paying fair prices for green coffee makes coffee production sustainable—paying fair wages for café labor makes café work sustainable.
As companies that have taken the transparent leap have seen, the benefits can be solid. They are not just moral or theoretical but fiscal. Companies that invest in transparency receive dividends in morale, retention, and fairness, and they promote a positive labor standard that makes coffee work sustainable into the future. Increasing pay transparency is absolutely doable; if it interests you, you should try it.
Illustrations by Jordan Johnson. This article was originally published on July 11, 2018 and has been updated to meet Fresh Cup’s current editorial standards.
