06.12.2013

Is Your Company Ready to Make Salaries Transparent?

Topics include:

 

These days, it’s considered very cool to be a “transparent” organization that shares with employees its earnings, costs, goals…. But just how transparent

Can you explain the relative value of your employees?
Can you explain the relative value of your employees?

do you want to be? A lot of our clients wrestle with the idea of making salaries transparent: Everybody knows what everybody else is making. I think one reason they wrestle with it is because they’re terrified what will happen if the employees just start telling each other. If that’s the case, it’s a sign that maybe the managers and executives haven’t got rock-solid reasons for why Tiffany’s earning this and Ashley’s earning that. If you don’t have those rock solid reasons, now’s the time to establish them. So is salary transparency a good idea? Well, it’s an interesting idea that has huge pros and cons on each side.

Of course, in government jobs, there’s a grid. You know how much people are making based on experience and tenure. In sales operations, salaries, commissions and bonus plans are known. But in those types of jobs, managers don’t have to show particular discretion. There’s no risk of crying foul; everybody knows the deal. But in many organizations, you’re trying to compare apples to oranges to limes to tomatoes. The market might dictate that an engineer is paid more than an administrative assistant and a sales person is paid more than a marketing person. Someone with a PhD in social work is paid more than someone with a bachelor’s. Each employee has different qualifications, skills, experience and education. But there’s also the manager’s evaluation of what each employee is worth based on what he or she brings to the company.

If you make salaries known among your employees, it could inspire the people who aren’t performing up to par to crank things up a notch. On the other hand, you could land yourself in a tremendous can of worms. If you choose to make salaries transparent you have to prepare for your managers’ offices to be barraged with people complaining. “Why does she make such and such an amount? I’m as much a contributor to this company as she is!” or “I’ve been here longer” or “I want a raise or I’m leaving.”

So here are some things to check before you decide to go all transparent with salaries:

  • What is the emotional maturity level of your employees? Some people understand the relative value brought by their coworkers and they don’t take it personally that they are paid less. In fact, they might see it as inspiration to get that additional certification. But if your employees aren’t emotionally mature, you’re risking inciting a whine fest.

 

  • Do you have evidence-based reasons for the salaries you’ve assigned? I’ve known organizations where salaries were the last things on managers minds and the only people who got raises were the squeaky wheels who asked for them. This is not a good system. You need information that backs up your decisions. Numbers should be connected to information, whether about experience, education or ROI connected to that employee.

 

  • Can you tell employees the path to a higher salary? If an employee lacks the skills for the salary he or she wants, you need to be able to explain what that employee can do to earn a higher salary or position. That requires a well-written job description: This is what I need you to be able to do in order to do this job well. If you prepare the path, employees see that the salary isn’t arbitrary and it isn’t unattainable. It’s their responsibility to earn the salary and they’ll either do so, stop complaining or leave.

 

Some employers believe that that keeping salaries secret foments gossip. People will speculate around the water cooler. But that’s not really a valid reason, because people will gossip and foment about one thing or another regardless. If you share salary information, they may gossip about why this person is getting paid more than that one.

If transparency is important to your organization’s culture and mission, then put it in place. Just make sure you’ve laid the groundwork to handle the outcomes. And if you need help sorting out whether your payscale is equitable and you have the evidence you need to prove it, we can help.

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.