Managerial Accounting; Does Pay Transparency within an Organizations Support Employee Recruitment and Retention?

The performance and success of any organization is solely based on how employees are motivated. This kind of motivation is derived from several elements among them being better remuneration, good working environment, and the key being transparency. Absorbing new employees calls for the recruiters, to be open with the system they use to either employ or fire an individual. In most of the large organization, the challenge of dubious methods to recruit new workers based on ethnicity and tribe has contributed to denying the most qualified people, to occupy those open vacancies. The consequences are observed in form of poor quality work, which later lowers the profits of an organization. Transparency is defined by Furnham & Palaiou (2017) as the openness in conducting the activities that affect an organization, thus reducing the conflicts within the business.

In order to understand the impact of pay transparency of recruitment and retention, it is paramount to consider a number of theories that centers around the topic. The first one is organizational justice theory. Put across by Greenberg by the year 1987, it argues that employees judge the behavior of an organization based on the working environment that surrounds them. subsequently, the attitude of the worker is affected and influenced by what the top management and the supervisors treats the junior workers (Gilliland & Chan, n.d). This theory affirms that if an organization does not consider the plight of its people, the same is translated to the productivity. In this case, any injustice in recruitment, that includes lack of disclosing the actual pay lowers the motivation of the employees, which would subsequently increase the turnover rate. Overall, organizational justice theory is about the perception and attitude of the people.

In the same vein cognitive dissonance theory affirms that people have an inner being that keeps all the attitudes together, thus avoiding disharmony. When the behavior and attitudes are not in sync, a problem must appear. The alteration causes discomfort; which can impede the performance of the employee. In regard to the topic that is under consideration, lack of pay transparency is the dissonance, which can have a lot of implications to the performance of the employees (Kiss & Willemsen,2017). For example, if a worker realizes that the management employs people out of connection instead of considering the qualifications, this can encourage the existing ones to look for safer places. They assume that the current job is not secure, and they might lose it any time. The restlessness in the mind might further degrade the relationship with others, thus killing social life.

Furthermore, social comparison theory is of the idea that people self-evaluate their stands by comparing themselves with others.  They base their performance to the pay they receive (Suls & Wheeler,2000). In most instances, the employees on the same rank should be paid equally, but any discrepancy in earning would bring about organizational conflict, thus propagating less productivity in the rest of the team members. The final loser is the employing organization, as innovativeness and creativity is highly reduced, and to some extent diminish the profitability.

Conclusively, pay transparency is something that can cause the distractions in an organization, if not well managed. Employees feel safe, if the remunerations are well distributed without favoring any party whatsoever. Also, keeping the issues to do with payment open during the recruitment process motivates the new workers who are experienced to join an organization. The same phenomenon is translated to the existing employees, who feel much safer to continue working in their present assignment. As the time changes, organizations are learning of the importance of keeping all the internal activities open and subject to scrutiny by the workers, so as to grow together a whole unit.


Furnham, A., & Palaiou, K. (2017). Applicant Attraction to Organizations and Job Choice. The Wiley Blackwell Handbook of the Psychology of Recruitment, Selection and Employee Retention, 71-90.

Gilliland, S. W., & Chan, D. (n.d.). Justice in Organizations: Theory, Methods, and Applications. Handbook of Industrial, Work & Organizational Psychology – Volume 2: Organizational Psychology, 143-165.

Kiss, M., &Willemsen, S. (2017). Taming Dissonance: Cognitive Operations and Interpretive Strategies. Impossible Puzzle Films.

Suls, J., & Wheeler, L. (2000). A Selective History of Classic and Neo-Social Comparison Theory. Handbook of Social Comparison, 3-19.