With new generations emerging in the workforce, shifts in corporate thinking have begun to occur that have many talking. One of those shifts is toward the adoption of greater transparency between management and employees. The thinking about transparency has started to change in one particularly controversial area: employee salaries.
Most companies treat compensation information as one of the most strictly protected, confidential aspects of employment. It is culturally taboo to openly discuss this information and many companies have explicit policies prohibiting employees from accessing the compensation information of the others with whom they work.
However, certain companies are abandoning the traditional secrecy surrounding employee compensation and are adopting what are called, “open salary” policies. The policies vary from company to company, but essentially, the key idea is to allow employees to be able to view and openly discuss what their coworkers and supervisors earn. Whole Foods Market, SumAll, and Squaremouth are a few of these companies that have opened salary information to all employees. One company, Buffer, a social media firm, has even gone so far as to publically post all of its employees’ salaries on its website by each employee’s name.
Proponents of open salary policies emphasize that the increased transparency with respect to compensation creates a work environment based on meritocracy rather than favoritism. Favoritism, although not inherently unlawful, when based on someone’s protected status such as a person’s gender or race can result in unlawful discrimination. A study from the Penn State Law Review has asserted that open pay can help to eliminate discrimination against women and other minorities. These groups continue to experience pay inequities despite the current federal and state laws in place that prohibit unequal pay based on gender or race. Open pay could be beneficial to the extent that it brings discriminatory practices into the forefront so that they can be addressed and resolved internally, before employees feel so unjustifiably stifled in their career development that they have to leave their companies or take legal measures to remedy the conduct such as filing charges of discrimination or lawsuits.
Critics of open salary policies claim that they can be extremely disruptive. Lower earners may feel embarrassed, have less confidence in their work, or feel less respected by coworkers or supervisors if their pay is shared openly and stacks up less than that of their peers. It may also lead to a lack of trust, teamwork, and/or productivity between employees, if after seeing salary breakdowns, employees believe that certain coworkers or supervisors are overpaid for their actual worth. Some employees may also just view this information as private and not want to be publically identified by their earnings.
It is important to note that some of the same companies who have open salaries also have more, well-defined structures for determining an employee’s salary in attempt to avoid the potential disruptions that could arise from sharing this information. Buffer, for instance, has a very specific salary formula:
Buffer’s formula: salary = job type x seniority x experience + location (+ $10k if the employee chooses more salary over more equity).
The company has different bases depending on the job type and the other factors are measured by a scale of set multipliers. Hence, the idea of sharing salary information does not seem as controversial at a company like Buffer because employees are subject to the same, quantifiable measures, and hence, arguably, less likely to feel as though their salaries or those of their coworkers or supervisors are unfair or unjustified.
Companies who do not use salary formulas and make these decisions by pure discretion, or those that use formulas but leave room for non-quantifiable criteria such as an individual’s salary negotiation skills or likeability, may view open salaries as more problematic because there is greater potential for biases, discriminatory or otherwise, to creep into compensation decisions and they may not want those biases publicized to their workforce.
We are far from open salaries becoming a mainstay employment practice, but the companies who are experimenting with these policies deserve credit for their apparent, positive intentions: promoting greater transparency which can hopefully lead to greater merit-based, equality-driven compensation frameworks for employees.
For more information, please see:
http://www.wsj.com/articles/open-salaries-the-good-the-bad-and-the-awkward-1452624480
