So lately, I’ve been thinking about how much pay information employers should share with their employees.
First of all, there are different levels of pay disclosure.
In some industries (public university faculty and teachers in unions are good examples), the pay of each employee – or at least the exact criteria governing employee pay – is disclosed to the entire employee population (and in some cases even the general public).
In many organizations the pay grade and salary range for each job is disclosed (while individual employee pay is kept secret)… and in still other companies nothing about pay is shared with the employee population at all.
I actually don’t have a ton of energy around any particular pay philosophy here. I’m a fan of companies doing what is best for their cultures, 1. The market has a way of sorting these things out – as it does most things (if a company isn’t paying competitively it will lose people). I generally think that aside from – A. paying *most* employees within the range (this is a topic for another day) and B. maintaining internal equity (you’d really better) – that most of the rest is context dependent based on company culture and industry. and if an employee doesn’t like it he or she is free to leave. 1
With that said, any organization choosing to disclose employee salaries (or even simply share grades and ranges) needs to make sure that three things are true about pay across the population:
1. There must be pay equity.
If there are exceptionally wide pay disparities between two people in the same job there had better be a heck of a justification behind it.
2. The organization *must* be able to explain and justify the pay structure.
If a company doesn’t have an effective structure in place – or managers can’t explain that structure to their people – then there simply won’t be buy-in from the employee population (which can lead to engagement and ultimately retention issues – not to mention possible lawsuits). For me, the critical thing is that an organization has to be able to defend its decisions around pay. If it can defend and justify its policies in a logical way then most employees will accept it.
3. Employees need to be paid competitively within the range. If a company’s pay philosophy is to pay at p75… yet the median employee is paid at, say, the 20th percentile of the range, it won’t take long for employees to realize that actual pay isn’t in aligned with the strategy (people talk among themselves about salaries more than most employers think).
If an organization can’t do the above things, sharing pay grades/ranges and salaries will cause more problems than it solves.
…With that said, even if a company has its ducks in a row as it concerns legal compliance, internal equity, and consistency with philosophy, it may still be in the best interest of the company to keep pay information close to the vest instead of sharing with the general population.
In some cultures, the truth is that pay is simply better left not discussed. Not all employees can accept that jobs have ranges (and that people are to some extent paid differently). In these instances, no amount of structure and communication will address the morale issues that come with sharing this sort of data.
…Or maybe I’ve got it wrong. Tell me in the comments section below.
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