If you could find out your co-workers’ salaries… would you want to know? What if, in order to discover their salaries, you had to make yours known as well?
Salary transparency in the workplace has been taboo since people started bringing lunch to work. However, there are companies in America (e.g. Whole Foods, Buffer, and SumAll) who are changing that narrative.
The question is: does salary transparency in the workplace… work?
The downsides are obvious:
- Underpaid employees become upset and demand higher salaries or leave
- The formula for compensation/rewards is called into question, causing confusion and/or resentment
Personally, I’m a big fan. From my first day at a “real-world” job, I felt uneasy about the secrecy of salaries. And if I did come to find out a co-worker’s salary, I was told I couldn’t use that as a benchmark for my salary!
Let’s just say that didn’t give me a ‘warm and fuzzy’ feeling. I’m confident we’ll see this dynamic change in my lifetime.
Why I love salary transparency in the workplace
No one likes having secrets kept from them. Here’s why salary transparency is far overdue.
Transparency build trust
When a company keeps you in the dark about compensation, you can’t help but feel shorted. What do they know that they don’t want you to know?
I don’t think it’s conspiracy-level thinking to say that companies want to keep their costs down. One way they do that is by keeping their workforce’s compensation in check. If no one knows who’s paid what, companies can more easily control salaries because their employees lack the information necessary to negotiate most effectively.
Now imagine a company that openly shares and discusses compensation. Suddenly there’s more open dialogue about where each employee stands. No longer is it a mystery why John makes $X and Sally makes $Y. Instead of hiding behind outdated norms, everyone’s working with the same information and more productive conversations can take place.
That’s why salary transparency in the workplace builds trust.
As an employee, it’s just as important to know you’re being rewarded for exceptional work as it is to know you need to pick up the production to get a raise. Companies hold lots of power. It’s goes a long way to share some of it with employees.
Greater incentives to excel
When performance is only measured against corporate goals, it can be difficult to tell what the appropriate reward is. There’s an added level of complexity and competition when employees can judge their performance and salaries against those of their co-workers.
In fact, a UC Berkeley study shows that salary transparency increases productivity for under-performers. That same study showed it has an even greater effect on top-performers!
I believe hiding salaries hurts performance. Not every employee agrees with their performance goals and when people can only base their performance against an arbitrary benchmark, they get complacent. And that’s not good for anybody.
Want a workplace that strives for continual improvement? Let it be known who the top performers are and how much they’re paid. It’s up to everyone else to rise to the challenge.
Clarity about company values
An employee’s compensation is directly related to how a company values them. Without salary transparency in the workplace, employees only know what the employer wants them to know.
In an effort to control costs, companies could be hindering the development of their employees’ skill sets by not inviting open conversations about how they can increase their pay significantly. Today, many people face the scenario of getting something like a 5% raise for beating their goals or 0-2% for not meeting expectations. Then, the manager often vaguely alludes to some skills development that the company has barely any interest in facilitating.
The employee feels trapped. They wonder what the new hires are being paid and why management thinks they’re so special. Wouldn’t it make sense for that to be a topic of conversation so the employee can use that benchmark to improve their skills?
Salary transparency makes it easy to determine what companies value. Upset that Debbie makes 20% more than you? Here’s why and here’s what you can do to change that.
Fewer unexpected departures
People are creatures of habit. We like to sit in ‘our seat’ and eat at certain times. We like consistency.
That’s why when someone leaves their job, it’s usually due to another company providing what’s perceived as a much greater opportunity, or the employee feeling underappreciated, trapped, or overworked and under-compensated in their current spot.
In my estimation, people would rather see things improve with their current employer than take their talents elsewhere. I’m also fairly certain that companies hate when employees leave unexpectedly.
That’s why I think increased communication about salaries would lead to less untimely departures. If the only way to discover your market value is to seek employment elsewhere, that’s exactly what a smart person is going to do!
Would you like salary transparency in your workplace?
To make more money, we have to talk about it more often. Salary is a sensitive topic, but should it be? How would you feel if your co-workers knew your salary? Would it affect your company and your performance positively or negatively? Let me know in the comments.
All opinions expressed on this blog are solely those of Home at 30 and are in no way affiliated with any other organization or institution. The purpose of this blog is to give general education and information about investing, wealth, careers, and college; It is not intended to be professional advice.
Author: Josh Ramos
Josh attended Wake Forest University and paid a fortune for it. Since then, he’s realized the obstacles that Americans face in moving up on the ladder of wealth. By founding Home at 30, he wants to help students learn the skills necessary for taking the next step on their journey to building wealth.