Could Making Salaries Public Boost Morale in Your Firm?
It may seem outlandish to even ask the question but the idea of open pay (publishing all salaries) is not as far out a concept as you might think. Yes, when Buffer, an innovative fresh, young company made headlines with its open pay policy last year, it would have been tempting to just dismiss this as a marginal venture, not fit for mainstream consumption. This is why I was surprised by the findings of the recent CareerBuilder survey of over 5,000 hiring managers, workers and HR professionals that there is considerable appetite for open salaries, amongst employers at least. Accepting that very few employers implement open salaries, 47 percent view them as positive, with 24 percent saying that it can help to ensure pay equality and 23 percent saying it can help to dispel wrong assumptions.
This injection of honesty and transparency into the corporate nervous system could be just what is needed to help repair trust in corporations, which has been eroded during the recent recession where employees have faced pay freezes, pay cuts, and job insecurity. The extent of this loss of trust is reflected in the APA study, which revealed that a quarter of workers distrust their employers and just half believe they are told the truth. This catastrophic loss of trust is also reflected in this 2014 Randstad study, which showed that 78 percent of workers look for employers that are first and foremost honest. This suggests to me that an open pay policy has the potential to demonstrate honesty and repair broken trust. This is especially if it exposed and lead to the addressing of pay inequality, removed morale damaging incorrect assumptions where employees assume bosses or others are paid far more than they actually are, or they simply don’t understand that person’s compensation structure.
But, it would be folly of me to suggest that there weren’t inherent risks with the open pay structure, which could negatively impact trust. For starters, the CareerBuilder study revealed that 65 percent of employees would not like if it their company openly disclosed salaries, and so, an open pay policy would risk alienating employees. However, I question this figure, as we also don’t know how much of this antipathy is as due to a fear of change itself, rather than fear of the material aspects of the change. Because, it would be a substantial change initiative and so you would expect to need to coach employees on both the risks and benefits that could easily lead to greater positive sentiment from the outset.
However, the risks of open pay cannot be ignored, with the highest risks being jealousy and morale issues and equal pay litigation (which was also a benefit), but these things also occur in a closed pay environment, so the question is whether there will be a net improvement in worker engagement in morale after salaries were made public.
It would, of course, be naïve to think that there wouldn’t be challenges with convincing people to move to an open pay system. SumAll, another company who recently moved to Open Pay, and they acknowledged the challenges of getting people on board but outlined how they rose to that challenge with a program of individual/group communication and education. They traversed this barrier and came out the other side and now claim to be sporting an increased ability to attract talent and they also believe it is improving pay equality.
If you are going to make open salaries work for you, you will need to ensure you have a well structured and rational system so you can justify the pay differences, as well as having a system for addressing pay issues post publication. This is why open pay has been able to work so well in the federal government as there are clear pay structures. You don’t have to develop that level of bureaucracy, it just needs to be rational, defendable and fair.
Now, while I think there is evidence to suggest that open salaries can improve pay equality and help restore trust if implemented effectively, there’s probably not overwhelming evidence to suggest that it would lead to a net improvement in morale (which is not to say it couldn’t if implemented well), so this represents a risk. As a result, if you were going to do it, it might be prudent to try it in an isolated department with the guidance of an external reward consultancy.