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Broadcasting Employees' Salaries Might Actually Pad Your Paycheck

Giving your employees an open look into your compensation policies can ease resentment and help foster understanding.
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As the old saying goes, sunlight is the best disinfectant.

The same can be said for wage transparency. After all, there's probably no issue more important, or emotional, to your employees than compensation. And whether it’s a cultural taboo to discuss how much you make or because some workplace rules forbid actual discussion of compensation, lack of transparency can also foster real wage inequality, either consciously or unconsciously.

In an attempt to make things clear on the federal level, at the beginning of April, President Obama issued an executive order to make pay transparent for employees of federal contractors.

That order garnered less attention than the President's memorandum about federal contractors, requiring them to supply pay data to the Department of Labor in an attempt to close the pay gap between male and female workers. But it's just as important, since pay transparency and the gender gap in compensation are related.

About half of all employees work for companies that prohibit or discourage discussion of wages at work, according to a January 2014 study by the Institute for Women's Policy Research. The numbers are worse when you look at the private sector, climbing to more like 60 percent of companies that forbid such discussions.

"While there may be no direct link between pay secrecy and pay inequality, pay secrecy appears to contribute to the gender gap in earnings," the study says.

Though it’s a bit of a grey zone, workplace policies forbidding discussion of wages aren't legal. The National Labor Relations Act of 1935 protects the ability of employees to associate, organize, and bargain collectively for conditions such as wages. According to the Act:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.

The President's executive order appears to have relied heavily on the language of the Act:

Ensuring that employees of Federal contractors may discuss their compensation without fear of adverse action will enhance the ability of Federal contractors and their employees to detect and remediate unlawful discriminatory practices, which will contribute to a more efficient market in Federal contracting.

While the federal government makes its own compensation scale fairly transparent, it's really startups that are pushing transparency in the private world. Among those is Buffer, an application-based online publishing company, which goes as far as posting online the salaries, and the equations for determining those salaries, of everyone who works for the company.

"One of the highest values we have at Buffer is transparency," Joel Gascoigne, chief executive and founder of Buffer wrote on his blog last December. "Transparency breeds trust, and that’s one of the key reasons for us to place such a high importance on it. Open salaries are a step towards the ultimate goal of Buffer being a completely 'Open Company.'"

Opening Up

Want to give it a try? Online benefits and compensation company PayScale recommends these tips to help make compensation more transparent to your employees:

  • Explain how positions are slotted into different pay grades.
  • Show employees how they can progress through the company's pay ladder, which can function as an incentive to grow.
  • Convey and document the reasons for pay differences, such as levels of education and degrees of experience.
  • Explain the total package of benefits and compensation to which employees are entitled.
  • Make someone available to explain compensation and benefits as a way to ensure clarity.
IMAGE: Official White House Photo by Pete Souza
Last updated: Apr 23, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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