Transparent Wage Policies: Honest or Chaos Provoking?

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A common policy found in many businesses is a prohibition against the disclosure of wage information. This type of policy serves the purpose of preventing workers from battling with HR and each other over who is getting paid what and why. Keeping wages under wraps also prevents employee jealousy about managerial and executive salaries. After all, if nobody knows how much the CEO is making, then nobody can be upset about it.

A non-disclosure policy is particularly useful when employees with the same job descriptions are not being paid the same, keeping in mind there can be many legitimate, nondiscriminatory reasons for wage differences. For example, one employee may have more skills or experience than another.

For these reasons and others, non-disclosure policies traditionally have been accepted as the best way to keep all employees happy while respecting employee and employer privacy. However, some are beginning to question whether transparent policies are a more honest way of doing business.

Transparent wage policies prevent employees from wondering if the company is hiding information. More importantly, transparent wage policies help employees gain a clear understanding of what they need to do to take their careers to the next level.

Still, such policies have an obvious downside. If employees are aware of what everyone else in the office is making, HR, managers, and even executives may begin receiving more demands for pay raises. In the worst-case scenario, employees could threaten or file lawsuits because of real or perceived pay inequities.

Transparent wage policies are just beginning to make their way into the corporate world, but they aren’t exactly a groundbreaking concept. In fact, government-regulated institutions have publicized their wage information for decades. And private, nonprofit organizations are required to disclose the salaries of key team members on their 990 forms.

It seems, then, that private for-profit companies are the last to jump on the transparency bandwagon.

Is compensation an equal rights issue?

Some activists believe the full disclosure of employee salaries should become the legal standard to protect minority groups. The logic here is pretty straightforward. If employers knew everyone could view salary information, they’d have greater incentive to ensure they were compensating workers in accordance with the law. The argument has some merit, because transparency does foster accountability. 

Other considerations

But perhaps the best reason for an employer to consider adopting a transparent wage policy is that transparency is attractive to employees who value honesty. For companies seeking to create a genuine and productive workforce, therefore, transparent policies seem to be the way to go.

This past year, startup company Buffer made the switch from a non-disclosure policy to a transparent wage policy. All Buffer employees are now fully aware of their coworkers’ wages, as well as the formula used to determine those wages.

Buffer has made their stance on transparent wage policies loud and clear. In fact, they’ve even gone so far as to post employee wages on the internet for public viewing. Leaders of the company support the notion that transparency leads to trust and therefore a healthy work environment.

A transparent policy may not be right for all organizations, but it could definitely be right for some. If your company is considering making the switch, be sure to consult a compensation management professional to get the tools you need to make the transition a smooth one.

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