Column: Fahy On Pay Transparency & More
[Opinion column written by Michael Fahy]
The Government’s recent announcement that it intends to bring pay transparency legislation is an interesting one.
Pay transparency is having a big moment in many jurisdictions. Laws now require salary ranges in job postings across almost half of U.S. states, and companies from startups to Fortune 500s are experimenting with open pay bands.
Minister Hayward has laid out a plan that seems straightforward. Afterall, sunlight kills discrimination, builds trust, and gives workers across all work sectors, blue and white collar, real leverage. However, the risk is equally real. You can expose unfairness and accidentally destroy the flexibility that makes compensation work, especially in the IB sector which is keeping the Bermuda economy afloat.
The fact is that both sides of the debate are right. The trick is knowing which parts to keep and which to discard. I am going to consider both.
Private pay systems make it easy for small biases to compound. For example, let’s say a manager offers 5% less to the candidate who “seems flexible,” another manager gives a bump to the person who negotiated hard, and two years later you have a gap with no clear reason. When bands and criteria are public, those gaps show up fast.
Research shows that companies that adopted structured transparency have seen unexplained gender and racial pay gaps shrink because the data stops being deniable. That is a major positive argument for pay transparency.
Pay transparency also replaces rumors with a process. Employees rarely just quit over money alone. They quit when they believe the system is arbitrary. Publishing clear levels, expectations, and pay ranges does not guarantee everyone loves their number, but it does replace “they must like her more” with “I’m at Level 3 because I haven’t led cross-functional projects yet.”
That clarity reduces turnover and lets managers spend time coaching instead of damage control.
Pay transparency also forces bad actors to clean up their own house. You cannot publish a band for “Senior property analyst” if you do not know what a Senior Property Analyst actually does. Transparency forces companies to define roles, standardise performance criteria, and train managers to have honest conversations. Those are improvements most businesses would want anyway.
Pay transparency can also level the playing field in hiring. This is something the Minister is quite correct about. New graduates, career switchers, and people outside the old-boys network usually walk into negotiations blind.
Posted ranges give everyone the same starting point. You still negotiate on experience, scarcity, and risk. With transparency you’re negotiating from a shared baseline, not from a hunch.
With all that said, and not to be a “contrarian” as I’ve been labeled when I’m pointing out issues to consider, but having looked at this in depth the intent does not always lead to the outcome originally desired. This is what the Minister needs to be careful about.
Salary reflects a bundle based on experience, scope, risk, performance, and market scarcity. A public grid reduces that to a single number. When an employee sees a colleague paid 10% more, they rarely see the 2 a.m. firefighting or the niche skill that justified it. The result is what has been termed as “envy inefficiency”. This is when people interpret legitimate differences as unfairness.
Another issue that may arise is that negotiation and flexibility shrink. If the band for a financial analyst is say, $150k–$170k, and visible to all, high-value candidates who would have negotiated $190k may walk away. Companies then lose the ability to pay surgical premiums for hard-to-fill roles. Over time, pay compresses toward the median, and exceptional talent is then underpaid.
Also, when pay is private, disputes remain in the HR office. When pay is public, they move into the public arena and become a part of interoffice chatter. Managers can then spend more time defending decisions and less time on strategy. Research shows that trust in leadership can dip in the first 18 months, even if the system is fairer, because expectations outpace what any process can deliver.
Transparency must be measured against the higher legal and competitive risks it creates. A 5% unexplained gap may become the basis for an employment tribunal claim, even when location, function, or performance explain it. Competitors can use a company’s public bands to poach selectively, and managers lose the ability to pay strategically and end up paying reactively. So what is a middle way? That is called structured transparency. Where pay transparency is common the following is often considered:
1. Publish bands and criteria, not individual salaries. Let people see the range for Level 4 and what it takes to get there. Keep individual pay private, tied to a band.
2. Define roles before publication. If a company cannot explain the difference between Level 3 and Level 4, they should not post the band until it is sorted out.
3. Audit and explain gaps. Run pay equity analyses twice a year. If a gap exists, publish the plan to close it.
4. Preserve room for exceptional cases. Use equity, bonuses, and scope to reward outliers without blowing up the band.
5. Set the transparency requirements to entities that have more than a yet to be determined number of staff. A small specialty reinsurer may have two underwriters and publishing their pay bands on a work permit renewal would not be helpful in a very competitive world.
Finally we have to be careful that we don’t kill the goose that continues to lay the golden egg, namely the highly competitive insurance and reinsurance sector.
It is important that sector is given enough flexibility to reward rare skill, take on risk, and respond to competition. Pay is one of the few tools companies have to do that. Flatten it into a public grid without context, and you do not get fairness. Instead, you get compression, cynicism, and a system that can’t reward the people who create the most value. However, a goose in the dark lays eggs no one trusts. If employees never see the logic behind pay, they assume the worst, accuse decisions makers of descrimination and leave.
The careful path is to open the nest just enough. Show the structure, the criteria, the bands. Explain the exceptions. Keep the ability to reward what grids cannot capture.
Transparency without process just makes unfairness easier to see. Process without transparency lets unfairness fester. If we do both, we can get a system where people believe the game is fair enough to keep playing it.
- Michael Fahy is the Shadow Minister of Economy, Labour & Housing, and the OBA MP for Pembroke South West. He can be reached at mfahy@oba.bm or opedfahy@gmail.com
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