Tag: Executive Compensation

hreonline.com
By Julie Cook Ramirez

Employers are under pressure to divulge salary information. Could one of the last workplace taboos be going by the wayside?

Thursday, February 4, 2016

You are not to tell anyone how much you’re paid.

It’s an unwritten rule at many companies, while other employers openly inform their employees they are not to share salary information with colleagues. A 2010 Institute for Women’s Policy Research/Rockefeller Survey of Economic Security found half of all workers were either “explicitly prohibited or strongly discouraged” from discussing pay with their coworkers.

That may all be changing, as employees are increasingly seeking to discuss pay issues both inside and outside company walls. In large part, the trend is being driven by social media, coupled with the emergence of millennials in the workplace, according to Kevin Hallock, director of the Institute for Compensation Studies at Cornell University in Ithaca, N.Y., and author of Pay: Why People Earn What They Earn and What You Can Do Now to Make More. Younger employees, in particular, are comfortable sharing virtually every detail of their lives, he says, so divulging their salary doesn’t seem like a breach of privacy.

It’s not just employees who are openly discussing compensation. A small but growing number of employers are making such information available, either internally to the workforce at large or externally, posting all workers’ salaries on their websites for the world to see. The most widely publicized example is Austin, Tex.-based Whole Foods Market, which allows employees to view information on pay and bonuses for everyone from the CEO down. The policy was introduced by then-co-CEO John Mackey in 1986, just six years after the natural-food retailer’s inception. The goal was to encourage competition by helping employees understand why some people are paid more than others. If workers understood what types of performance led to greater compensation, Mackey reasoned, they would be motivated to adopt similar workplace behaviors themselves.

While Whole Foods is a notable exception, the trend toward pay transparency is almost exclusively limited to “small tech-y companies,” according to Ed Lawler, director of the Center for Effective Organizations at the University of Southern California’s Marshall School of Business in Los Angeles. For the most part, large companies have shied away from the idea, instead adopting a “what you don’t know won’t hurt me” attitude, says Lawler. That’s unfortunate, he says, because they have much to gain from sharing pay information with the workforce.

“They seem to be stuck in the mindset of ‘If I don’t have to defend it, life is better and people are happier,’” says Lawler. “If you have a reasonably administered pay system that meets a certain agenda, like pay for performance, and it’s defensible, you are better off from an organizational effectiveness point of view of making that clear and visible to people. It’s a big credibility builder.”

While Hallock sees more employers “experimenting” with pay transparency than ever before, he agrees that “most organizations are very reluctant” to divulge salary information. Usually, that’s because they fear the “chaos that might come with it,” he says, as employees learn they are making less money than colleagues they consider their inferiors. That bedlam can be avoided by adopting an approach in which salary information is accompanied by the opportunity to ask questions, learn more about the connection between pay and performance, and map out a plan for increasing their own earning potential, according to Sarah Moore, a partner in the Cleveland office of Fisher & Phillips.

“To the extent that you can have a conversation with the employees and provide each of them a context for where they are in the scheme of things, that’s always a preferred approach, rather than just putting it up on the bulletin board,” says Moore.

That’s the approach taken by Whole Foods. Rather than posting such data on the company intranet for easy access, the retailer requires employees to make an appointment with an HR manager to see others’ salary information. That enables the retailer to achieve its goal of bolstering employee performance through pay transparency.

Even if an employer chooses not to officially divulge compensation data, technology is enabling employees to disseminate such information themselves via anonymous interoffice messenger apps like “Get the Memo” or websites such as Glassdoor.com, where current and former employees review companies and their management. One enterprising Google employee simply created an Excel spreadsheet where employees could plug in their salary information.

While conventional wisdom may frown on such activities — and some employers might seek to squelch them — they could have no choice but to accept pay transparency as a component of the 21st century workplace. Legally speaking, says Moore, employees have every right to tell anyone they choose how much they make. Section 7 of the National Labor Relations Act makes it legal for employees to discuss the terms and conditions of their employment with each other. That includes salary and benefits.

The end of pay secrecy is inevitable, says Moore. She advises employers to get in front of the issue and begin laying the groundwork for a smooth transition into the world of pay transparency.

“The first step is to make sure the most-valued employees are compensated in a manner that is reflective of objective fairness so that when that information is rolled out, they don’t have a situation where a lot of angry people feel burned and ready to walk out the door,” says Moore. “The key is to make sure it’s done in a measured way, keeping an eye on retention of the most valued employees and recognizing you are going to have some people who just aren’t happy regardless.”

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