Originally published on Medium.
Money makes the world go round. It pays the rent, it feeds your kids, it fuels your passions.
Yet, it’s generally taboo to talk about. Overall, we don’t talk about personal finances. They are to be kept private. At work, it’s frowned upon to talk about your salary, and some companies even ban it.
It is becoming more common for leadership decisions, company financials, and individual goals to be shared openly with an entire company. So why do most companies still keep salaries private and how do we benefit from sharing what we make within a company?
Privacy Perks
Without salary transparency, it is easier for employers to compensate employees unfairly. Dane Atkinson, of Sum All, was guilty of this, paying comparable employees different wages just because one was better at negotiating.
Pros to Going Public
The benefits of sharing employees’ wages within a company- or publicly available online- can be identified in four key points.
Enforces Equality
When wages are shared within a company, suspicions of discrimination, favoritism, and unfairness are all put to rest. Sharing wages also ensures pay is dependent on job-related skills and experience, not just negotiating skills.
However, it isn’t as simple as just making wages public. This needs to be enforced with a methodology. Without a system in place to determine salaries, it is easier to justify paying employees different amounts and the reasoning is left up to assumptions.
Buffer shares their methodology online with their salary calculator. Position, location, and experience all factor into an employee’s salary at Buffer.
Motivation
Employees are more likely to work harder when their pay is tied to their performance.
Open salaries also create a sense of shared fate, driving employees to work harder to succeed together. Employees are better at seeking help from the correct resource when they know how much their colleagues are paid.
A study by Elena Belogolovsky, Peter Bamberger, Valeria Alterman, and David T. Wagner found
The positive relationship between pay transparency and efficacious help-seeking is amplified for average and high performers and that for these same individuals a shift from secrecy to transparency is accompanied by a significant increase in efficacious help-seeking.
When salaries and compensation methodologies are out in the open, employees know why they’re making less and can work to circumvent that. This can eliminate much of the traditional and ill-founded “office politics” normally present in an environment of secrecy.
Turnover Reduction
It’s harder for employees to feel cheated or undervalued when they can understand exactly why they make as much as they do. When employees can see how their performance affects their income and where their next raise would put them, they’re more likely to stick around.
At Buffer, instituting transparent salary policies actually caused an influx of applications.
Companies are incentivized to retain current employees as, on average, it costs $150,000 to replace an employee making $60,000 a year.
Establishes Trust
Trust exists best in an environment of transparency. In an environment where pay transparency exists, employee/management relationships and relationships with colleagues are improved as there is less opportunity for resentment.
Understanding colleagues’ salaries, and the reasoning behind them, also make employees more understanding of the value in each other’s time. Instead of saving an hour for oneself at the cost of making three additional hours of work for the team, employees are more likely to go ahead and do the hour of work, knowing how much the other option costs the company.
Having salaries out in the open creates a more people-centric culture.
Wrap Up
Corporate culture is shifting. More and more, companies are finding benefit in sharing information that was once considered “proprietary”. We see this in the sharing of leadership decisions and the insights that led to them, in the sharing of patents to advance collective technologies, and in the growing list of companies that champion pay transparency. And such sharing is paying off — BIG time.
In fact, instituting transparent salary policies actually doubled applications at Buffer.
In addition, pay transparency can increase workplace trust, bolster employee motivation and reduce employee turnover, and drive important conversations about equity among peers. The bottom line: pay transparency benefits all.