Traditional workplace etiquette dictates that employees should not at all divulge their secrets about the money they receive, whether it is in a more friendly setting with your family members or if it involves your coworkers. This taboo has been created by corporations to keep employees from talking about their salaries and thus, inevitably asking for a raise should their own salaries fall short of their expectations.
The truth however is that when employee salaries are kept secret, bad office practices run amok. This includes both gender and racial discrimination. While this might reflect well on the company’s bottom line in the short run, it could backfire in the long run. An investigation was conducted against Google by the Department of Labor which alleges that the search engine giant has been ‘discriminating against women’ and taking it to quite an extreme. One of the main accusations leveled at the company was the fact that they refused to disclose their data about employee salary history.
This will soon change however since many states in the US are pushing toward transparency laws which will address this issue. Companies will soon be forced to divulge secrets about how much their workers earn and what parameters are used to set the wage. A recent example is New York’s transparency laws called the Equal Pay Bill regulations stipulates in section 194-1.1 that no employee should be prohibited from inquiring about or disclosing wages within the institution.
These regulations have been backed up research which shows that wage transparency is actually good for both employee and employers. A positive correlation has been drawn between salary data and employee performance.
Employee motivation
It all boils down to two pertinent keywords – ‘employee motivation’. When it gets hit, so does the organization’s bottom line. Treating an employee’s wages as ‘top secret data’ doesn’t really bode well for their motivation level and productivity, and could even result in problems with employee retention.
For instance, Elena Gittler, an assistant professor at Cornell University, published a study which established the link between employee teamwork and salary transparency. It found that employees are able to work better then they know each other’s wages.
Gittler found that companies that use an accurate performance-based pay system allowed more skilled workers to earn more while those who adopted pay secrecy skewed the perception of other workers’ expertise.
Comparing your salary with others doesn’t have to be a taboo
The ability to compare their wages with others allows employees to work harder and more productively because it instills a sense of ‘competition’ within the workers. They know their coworker is earning more not because of gender or racial bias, but because the person is more skilled and worker harder.
Experts have also found that employers who keep their wages a secret are not able to retain their employees in the long run and this always looks bad on their bottom line. Firms who choose to keep their workers’ wages a secret might just be eliciting inequality without even knowing it.
Learn more about pay transparency by consulting with experts at JS Benefits Groups who will help you design an effective pay roll scheme so you can focus on things that actually matter i.e. the job.
