Time to End Pay Secrecy?

A recent Ted Talk by Management Researcher David Burkus looked at the question of pay transparency. This is a hot topic and it was a fascinating talk. Here’s a summary.

How much do you get paid?  Or the person next to you at work? These tend to be uncomfortable questions and, whilst we all ask them, we rarely get the answer. Pay is usually subject to secrecy. The assumed reason is that if everybody knew what everybody got paid there’d be arguments, even a few people who’d leave their job.

Pay secrecy is also a way for employers to save money.  During the hiring or promotion process, or at annual pay reviews, pay secrecy gives employers the negotiating edge. As Burkus said: “Imagine how much better you could negotiate for a raise if you knew everybody’s salary”.

But this secrecy leads to dissatisfaction. When employees don’t know how their pay compares to their peers’ – and most don’t – they’re more likely to feel underpaid. In the US, in 2015, a survey of 70,000 employees found that two-thirds of people paid at the market rate felt they were underpaid, and 60 percent of that group said they intended to quit.

Pay secrecy also adds to discrimination and to feelings of discrimination. In 2011, a US report from the Institute for Women’s Policy Research found that the gender wage gap between men and women was 23 percent.  This compared with Government departments where the gender wage gap was 11 percent because they’re pinned to certain levels which everybody knows.

Burkus points out:

“If we really want to close the gender wage gap, maybe we should start by opening up the payroll… Letting people know what you make might feel uncomfortable, but isn’t it less uncomfortable than always wondering if you’re being discriminated against, or if your wife or your daughter or your sister is being paid unfairly?”

So, what would happen if we removed the secrecy and provided pay transparency instead? Some companies already do, from technology start-ups like Buffer, to WholeFoods with their tens of thousands of employees. Some post individual salaries, some post pay levels, some keep the information inside the company, others go public. There are many different approaches.

The results are clear. Studies have repeatedly found that when people know how they’re being paid, and how that pay compares to their peers’, they’re more likely to work hard to improve their performance. They are more likely to be engaged, and they’re less likely to leave.

Pay transparency makes for a better workplace for both employees and the organisation. Burkus believes the time has come for pay transparency and urges organisations to deliver. He concludes: “How much do you get paid? And how does that compare to the people you work with? You should know. And so should they.”

(Here’s a link to the full Ted talk: www.ted.com/talks/david_burkus_why_you_should_know_how_much_your_coworkers_get_paid )