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By Irelis Arias
It takes one glance at social media to realize our lives are shifting on the edge of transparency. We openly share our phone numbers, engagements and marriages (and breakups and divorces), religious and political views, workouts, hobbies, travels… You name it, and there’s probably an app you can use to connect and share it with the social network of your choice.
There’s still one area of our lives kept relatively in the dark, however: our income. Thanks to online shopping and the ubiquitous “share” button, our spending can be, well, shared very easily. The money we make, though, remains private. Many companies currently limit what employees can divulge about their salaries to outsiders, and while employees are legally allowed to discuss – both in person and on social media – personal salaries with other coworkers, there are regulations in place to keep this information from flowing too freely. Salary information has to be given by the employee in question – not another coworker, personnel files, paystubs, or the human resources department – outside of work hours, and these discussions can’t occur between employees and their supervisors. But as we embrace transparency in other aspects of our lives, will companies start opening up the doors on salaries?
Some companies already have. Buffer and SumAll, two tech startups, both have complete salary transparency;. Buffer has even gone a step further and published those salaries – and the formula for how those salaries were derived – on their blog for anyone to see. The push for salary transparency is gaining momentum, but does it have a place in your company? Here are the upsides and downsides of open salaries.
The main argument for salary transparency is that it creates an environment of honesty, openness, and trust. If employees know their salaries are fair and comparable to those of their colleagues, they can more easily trust their managers and company. They can also see just how valuable they and their jobs are to the company. Even if employees aren’t happy with how their salaries stack up, it can open up a productive dialogue as to why those salary differences exist and what employees can do to earn raises, thereby making your employees more productive.
While happier, more trusting employees will lead to better work and productivity, research has shown another big benefit for employers. Open salaries force companies to examine any underlying biases or discrimination in pay, especially those between men and women. The Institute for Women’s Policy Research has shown that the pay gap in the public sector, where salaries are public record, is only 11%. The pay gap as a whole, between both public and private sector, is at 23%. When salaries are private, it’s harder for women to draw attention to this issue and it can be harder for companies to take notice of. Posting your salaries publicly makes it easier to notice and correct any discrepancies before any workers take legal action.
While no company wants to be accused of discrimination, is it really fair to pay all similarly-positioned employees the same salary? Are any two employees completely identical, deserving of exactly equal salaries? Do they put in the same workload, undertake equal amounts of work, or produce equal products? Probably not – and that’s okay. It’s illegal to pay different amounts based upon discriminatory factors or protected classes, such as gender or race, but to pay different salaries based upon other measurable factors – like longevity, productivity, experience, or other work-related qualities – is completely legal and arguably fair. But will your employees see it as such? With open salaries, companies might have to consider shifting their pay scale for the role, not the person. Otherwise, accusations of fairness and favoritism may come into play.
If salaries are really unequal, it might create resentment, even across different sectors or positions. Since salary transparency isn’t mandated for privately-held companies, exact numbers are hard to pin down, but the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) estimates that CEOs make, on average, 354 times what the average employee makes. Your company might not have such wide-sweeping pay ranges, but if your top-earning employees are significantly out-earning your average employees, even the hard-working ones, there may be some bitterness about those numbers – and you may need to provide an answer.
Even salary transparency devotees have to acknowledge that startups have fewer problems in adopting open salaries. In the beginning, most companies have a set salary formula or equation, usually a result of a limited budget. Salaries are more likely to be closer in range, too, even for CEOs and average employees. As companies earn more money, create more jobs, and hire more people, equations or formulas may not be used anymore, and salaries may come about from negotiations or raises. If you publish numbers and employees have questions, it may be harder to answer how or why one employee makes a certain amount while another one doesn’t.
That doesn’t mean that large companies can’t adopt open salary policies. Whole Foods has successfully implemented an open salary policy for over 25 years. Admittedly, the company was significantly smaller back then; however, the policy has remained in effect throughout and is one of the biggest benefits that current and former employees tout. Whole Foods currently employs nearly 60,000 people, and all of their employees have access to salary information for all other employees.
Established companies looking to make a shift toward more transparency don’t have to take an all-or-nothing approach. Instead of citing exact salaries for every employee, companies can give salary ranges or average salaries based upon any number of factors, such as titles, longevity, department, or performance. General statistics for many of these factors are available on the Internet, but your company can provide its employees with company-specific statistics, far more useful than those found on the Internet. These numbers can help give your employees a basic idea of where they stand and what they can expect from you going forward. This will offer most of the benefits of total transparency without any of the drawbacks.
Irelis Arias is a Human Resources Director who specializes in employee relations, leadership and employee development, recruitment, training, compensation, and benefits. In her role, Irelis draws from 20 years of HR compliance and employment law experience, including 12 years working for a top national labor and employment law firm. Irelis has been instrumental in helping to identify areas in need of improvement and implement successful action plans. When she’s not helping others seek career success, Irelis devotes her time and attention to her three active sons. She enjoys spending time with her family and working out to stay healthy.