Everyone talks about increasing transparency in business, but when it comes to deciding whether or not to divulge salary information at your own company, there's no clear right or wrong answer.
The transparency trend is being driven by a number of factors, according to the Society for Human Resource Management: increasing availability of such information from sites such as Glassdoor.com, Salary.com and companies like compensation benchmarking software provider PayScale.com; an increasingly tight labor market and awareness of pay equity; and the influence of the millennial generation, who're already accustomed to openness and transparency through social media.
Salary transparency is much more common in high-tech firms, especially small startups competing aggressively for talent in markets like Silicon Valley, Seattle and New York City, says PayScale.com vice president of marketing Tim Low. While transparency can go a long way toward increasing employee engagement and fostering trust between businesses and their employees, Low says most organizations would do best to apply transparency in moderation.
"It should be a decision that's made on a continuum, and honestly takes into account a number of factors. For our clients, we don't push for either end of the spectrum -- complete transparency or complete secrecy," Low says.
The Middle Ground
The middle ground allows businesses plenty of flexibility and gives ample capability to foster trust and fairness while still being able to adjust compensation to accommodate special cases, says Low.
"You can be extremely open with your employees about how salary decisions are made, how you benchmark the 'going rate' for certain positions, etc., without necessarily posting everyone's salary on the wall," Low says.
Divulging salaries at an organization that didn't previously do so can create a chaotic situation and incite jealousy and conflict, according to Tracy Cashman, partner and senior vice president, information technology search at executive search and recruitment firm WinterWyman.
"Salary transparency can be tricky; it's a huge sea change for organizations, especially if transparency reveals pay inequality. While this could be a great opportunity to address below-market pay rates or to address pay discrepancies, it can even cause conflict at organizations that do pay equitably," Cashman says, so it's best to make sure organizations are fully prepared for every contingency.
Low advises considering five factors before deciding whether to make salaries transparent.
1. Can You Communicate Your Strategy and Rationale?
Effective communication is key, otherwise you risk alienating employees rather than having them feel more closely aligned with the organization. Develop a communication plan and arm managers with the relevant information so they can better handle difficult conversations with employees about how each salary was decided. Employees will feel reassured if they can see market data about compensation to show how their boss arrived at each salary decision.
"Your managers must have confidence and feel that they are in control when having compensation conversations. They need to understand the strategy and the rationale behind why employees are paid their salaries, and the data has to back up the assertions that workers are being paid fairly and being dealt with honestly. The worst thing that could happen would be to have your employees feel you're capricious and arbitrary about pay," says Low.