Salary Transparency: Do the Upsides Outweigh the Traditional Concerns?

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So how would you feel if everyone at your company knew your exact salary, and vice versa? Do you think the advantages would outweigh the disadvantages?

This has been a frequent topic in the press lately since companies like Buffer and SumAll have publicly endorsed the practice. Proponents of salary transparency argue that it has a number of benefits, including determining employees’ value to their company, scrutinizing inflated executive salaries and eliminating a salary gender gap.

In countries such as Sweden and Norway, where residents’ tax returns are available to the public, salary transparency seems as though it would have a shorter road to travel toward gaining acceptance. But in the U.S. and U.K., the thought of openly sharing one’s salary info still seems a little too personal.

Yet the CEOs of the companies who have adopted this practice firmly believe in it. Are they onto something?

Does salary transparency create trust?

According to Dane Atkinson, CEO of data analytics firm SumAll, the primary advantage of salary transparency is that it creates trust. It removes speculation as to whether one employee negotiated better than another.

Also, it forces employees to produce. No longer can an employee slip under the radar doing sub par work. If they are under-delivering as compared to those with equal or lesser salaries, everyone will know. Suddenly, the playing field becomes level.

Atkinson told MSNBC that while salary knowledge allows employees to measure where they stand monetarily with respect to their co-workers, this is beneficial for salary negotiations and leads to more open communication between employees and employers. Additionally, Atkinson takes it a step further.

In an interview with The New York Times, he said that when he considers hiring a new candidate, he shares the candidate’s proposed salary with employees in a peer group, who then vote on whether or not they approve. If the group doesn’t agree on the proposed salary, the candidate isn’t hired.

Joel Gascoigne, CEO of social media publishing platform Buffer, corroborated Atkinson’s sentiments, saying that the key benefit is trust, and that it encourages responsibility and fairness. Gascoigne has even implemented a formula for calculating employees’ salaries:

Job type x experience + location = salary.

Transparency in Norway: Bridging the gender gap

Numeric values are assigned to each of these variables across the board, and employees can see exactly how their salaries are determined.

In an interview with NBC’s Today show, workplace expert Lindsey Pollak pointed out that the Millennial generation is already used to sharing information on social media – everything from what they pay for rent to what they had for breakfast. It’s only natural that they share their salaries as well.

Couple this with the number of websites that make salary information readily available – Glassdoor.com, Payscale.com and Salary.com. It makes sense, according to Pollak, that salary information be shared publicly.

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So aside from employee trust, has salary transparency actually yielded any of the projected positive results? According to Gascoigne, it has actually attracted candidates to Buffer. In addition, SumAll boasts an employee retention rate of 95 percent. And since making citizens’ salaries public in 2002, the country of Norway saw a significant decrease in the salary gender gap.

Obviously, the concept of salary transparency has its critics, and there are plenty of them. In a recent online poll conducted by Today.com, 60 percent of respondents were against salary transparency.

“Painful to put in place”

It’s not hard to foresee the problems it could cause in the workplace, with jealousy among co-workers only being the tip of the iceberg. Employers would be held accountable like never before. They would have to be prepared to explain how they determined each employee’s salary, and how lower-paid employees could attain higher salaries by furthering their education or boosting performance.

Even Atkinson has admitted that implementing salary transparency at SumAll has been “a lot of work.” He added, “You need to explain why you’ve made choices and where people ended up.” Gascoigne also agreed that, “It will be painful to put in place – some may not be comfortable with it, and some salaries may need to change.”

Regarding Sweden’s policy of making its residents’ incomes available to the public, Fredrik Gustafsson, a tax partner at DLA Nordic law firm in Stockholm, said the system was not popular in the country. His said his wife refers to it as “a shopping list for criminals,” and he stated that he can’t imagine it working in the U.S.

All things considered, it becomes evident why no Fortune 500 companies have adopted the practice.

So where do you stand on the subject of salary transparency? Would you trade confidentiality for employer accountability? Privacy for possible clarity toward a path to attaining a raise or promotion?

How do you think it would affect interoffice relationships at your company? Do you think the risk would be worth the reward?

John Feldmann is a writer, blogger and content developer for Insperity, a leading provider of human resources and business performance solutions. He has more than a decade of marketing and copywriting experience in the recruiting and advertising industries, working with clients in such disciplines as real estate, construction, engineering, accounting, healthcare and technology. He currently specializes in employment branding and recruitment marketing.

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9 Comments on “Salary Transparency: Do the Upsides Outweigh the Traditional Concerns?

  1. I’d love to just start by having companies tell you the salary RANGE for a given role. For example, if you are a Senior Project Manager your salary will be between X and Y.

  2. John – I have been an advocate for salary transparency since the early ’90’s, when I realized that compensation secrecy was toxic to a culture driven by values. I believe that it is even more important in the evolving models of business organization, where the hierarchical structure is rapidly becoming a hindrance to success. To remain competitive in this new business world companies will need to fess up to all the inequities that exist and put in place strategies to correct them. It will be very difficult and very painful, and there will be lots of white water to negotiate before the calm, but in the end it will happen, because the talent necessary for progress will demand it.

    1. I tend to agree with you John. But because of the opposition that still exists, I question whether transparency will ever be widely implemented, regardless of its advantages.

  3. I implemented salary transparency in two companies. It wasn’t hard to do as they were startups and there was no entrenched culture to change. It was just the way things were done. As a leader, I liked it, because it forced me to be accountable for the wage structure that we used. Ultimately, like the SumAll CEO I downloaded and involved some of the salary level decision making to the team. It was just easier to talk about salaries when it was open. As for the effect it had on driving performance, I can’t comment. I am not sure we would have performed better or worse without transparency. Assuming it had no effect on performance I would still do it again, given the right circumstances, as it created a sense of fairness over the compensations issue.

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