Pay Equity and Transparency: An Overview of its Impact on Employee Trust and Performance in Canadian Organizations

Background: Pay transparency laws are proliferating in Canadian provinces, but little empirical data exists to determine whether open-pay policies provide the desired organizational advantages in the Canadian workplace environment. Aims: This comparative study investigated whether employees in open-pay organizations have significantly higher trust and performance ratings than employees in traditional confidential-pay settings, after adjusting for years of professional experience. Methods: A quantitative cross-sectional design analyzed survey data from 300 employees across Canadian organizations. Independent samples t-tests and hierarchical multiple regression analyses were conducted using SPSS version 29 to test three hypotheses. Results: Employees under open-pay policies reported significantly higher trust (M = 4.02, SD = 0.65) than those under confidential policies (M = 3.44, SD = 0.79), t(276.78) = -6.85, p < .001, d = 1.02. Performance ratings were also significantly higher in open-pay organizations (M = 4.17, SD = 0.57) compared to confidential-pay settings (M = 3.80, SD = 0.69), t(278.08) = -5.05, p < .001, d = 0.54. After controlling for years of experience, pay policy remained a significant positive predictor of both trust (β = .376, p < .001) and performance (β = .284, p < .001), uniquely explaining 14.0% and 8.0% of the variance respectively. Conclusion: Pay transparency has been linked to significant benefits in employee trust and performance in Canadian organizations. This study offers empirical evidence on provincial pay transparency programs and indicates that compensation openness is a compliance measure and a strategic chance to improve organizational performance.