Does salary secrecy help or hurt a workplace?

Most employers have a long held practice of not discussing salaries, other than with the person in question, and being very guarded about releasing that type of information in their workplace.

However, salaries have become increasingly transparent, with many public institutions and smaller employers openly disclosing salary ranges and even individual salaries. 

The practice has become commonplace in the public sector, most notably for employees above a certain threshold of $60.000, $80,000 or a $100,000, depending on the jurisdiction.

Many publicly-traded companies require such transparency for senior executives, and many private sector employers have been convinced that salary transparency can increase trust, reduce misinformation and help employees make job decisions. 

It can also lead to meaningful conversations about pay and gender equity.

Advocates of such an approach have long argued that over time, salaries will become fairer as they become known within an organization.

But what is the real impact when everyone knows or doesn't know how much everybody else makes? 

Those in favour of salary secrecy cite increased tension and jealousy between employees when salaries are transparent, and the increased burden on managers to deal with pay-related complaints that comes with openness around the issue.

A  2011 Princeton study found that employees who are paid below the median for their group or unit enjoyed less job and pay satisfaction.

Interestingly, there was no impact, positively or negatively, for those paid above the median. 

If you buy the argument that lower paid individuals, within a certain pay grade may, resent those whose performance is lesser than their peers, some would argue their dissatisfaction may lead to their departure, and a chance for the employer to improve performance.

Certainly, the inability for employees to put the raw numbers in context can create challenges for employers.

Many will argue that you need trust within your ranks, and with management, before you can have transparency in such matters.

Promoting healthy conversations

I believe that putting business owners and managers in a position to have conversations about issues of salary, worth and what it takes to get to a higher pay grade are all healthy and beneficial.

In the 2015 article, "Summing up: What Are the Limits On Workplace Transparency?" by James Heskett, he states, "Organizational transparency today most often is associated with good management practice. It is thought by some to generate the trust that fosters everything from cooperation to speed in decision making and execution."

These are interesting times, where an increasing number of employers routinely publish their salary ranges, while in other cases employees are required to sign a salary confidentiality agreement (along with other routine confidentiality provisions).

We have a workforce increasingly populated by younger workers who, through their online lives, have a very different perspective on privacy and who believe transparency equals fairness.

There are even employers who encourage employees to self-disclose their pay on the company intranet.

As one business owner and chief executive officer recently said to me, "I am open with salary ranges for various positions and relish the opportunity to talk to staff about why a certain role warrants a certain pay grade."

He said those conversations help everyone understand the variety of skills and talents needed to make the company successful.

Besides, he says, "Most of his staff share their salary information with their work pals anyway, so by being open about it we get to put that information in context."