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Objectively speaking, the only party that would not benefit from everyone knowing what everybody else earns (specially people in similar positions) is the employer.

Yet, there's a stigma about it.

Knowing that someone earns more than you may generate jealousy, but on the other hand, it could give you arguments when asking for a raise.

What are the pros and cons about knowing what my co-workers earn? Would it negatively affect the work environment? Are there benefits or should I just accept that someone was a better negotiator than me signing in and not worry about it?

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Would love to see actual data to back up any answers on this... –  Shog9 Apr 11 '12 at 1:09
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I was in a presentation today about next year's health-care options, and the presenter, in talking about some of the costs, said something like "so that sounds high, but in a company where the average salary is $X it's not a big deal". Jaws dropped around the room, presumably mostly of people making well under $X. That probably wasn't the best way to do this. –  Monica Cellio Nov 12 '12 at 20:39

6 Answers 6

up vote 40 down vote accepted

Why to do it:

Transparency of things like salaries generally lead to more fairness. It also forces employers to base salaries on more objective (and open) justifications for setting salaries, as opposed to who the best negotiator is, nepotism, or other potentially corrosive practices.

This can work best in environments where performance is highly objective vs. subjective. For example, my very first job, Taco Bell, would pay a certain bonus if you could pass a test that proved that you had food ingredients and amounts memorized. The reason is because a high percentage of how efficient a particular restaurant location was had to do with how quickly and accurately the employees could produce food, to order, the same way every time. In this case, it's clear what the incentive is for both the employer and the employee, and therefore under what conditions it was easy for a boss to give me an "automatic" pay bump due to efficiency gain.

In places where performance is more subjective, simply having a process for how salaries are determined, and having that process be open to discussion to some level, can contribute to a feeling of fairness. Organizations that operate as cooperatives (where the employees also own the company) are examples of where everyone's incentives are aligned, generally, can handle this well.

Going too far with an approach that focuses on measurements is that you can fall into the trap of reducing everything to performance numbers, which are only motivating to some employees, to the exclusion of others. An approach such as this also tends to focus on efficiency instead of other factors that may be valuable to the company and its employees, such as culture, design, customer satisfaction, etc.

Fairness is what is important, regardless of what the right approach is in the specific case. If you focus on fairness, then you can't worry too much about jealousy. You might have some people that are jealous, but so long as the path to get from where they are to where they want to be is clear (and it's not an old boys club where the path is clear, but you also have to kiss a lot of ass needlessly), then you can always point jealous employees back to that process.

In case I haven't said it already, I don't think there's ever a downside (for the employees) to opening up the process. It can help shed light on unfair practices that may exist, even if the employer isn't trying to be unfair.

Regarding fears that it won't work:

I've seen transparency work. I think the fear that it's a slippery slope toward every-increasing salaries or complaining employees is just silly: the company can always say "no". Transparency in this case tends to fail only if you don't also publish a list of fair, reasonable criteria for setting salaries which can be largely objectively measured.

I've also had a personal experience where an employee found out that they were being paid significantly less than another employee who (by the agreement of all their peers and supervisor) did a poorer job, and hadn't been there as long, nor was as productive. The unfortunate response the underpaid employee was given was, "Well, it's not going to change, so there's nothing to negotiate here."

I only found out about this situation when the supervising manager was later replaced - not because of this situation, but this was one of the things that came in out the process. As a result, the company established a more open process to setting starting and advancing salaries. While individual salaries were still never revealed, managers made sure that they had "real" reasons for paying people what they did, so that when employees did discuss their salaries (which is pretty much inevitable), and asked questions of their supervisor, they were able to discuss the standards for setting salaries, and direct action the employee could take to increase their salary, which pretty much solved these problems.

One, very public (and one private) example of this working:

StackExchange itself publishes its compensation determination strategy. I'm not trying to tout StackExchange just because we're using their services, they're simply one of the best examples of ways to run a company more openly, and they actually make the compensation strategy public for the entire world to see.

Ternary Software (now closed, but the spiritual predecessor to Holocracy One) also had an open salary strategy. Everyone knew everyone else's salary and the criteria that went into it, but things didn't start this way. In fact, the persons who enacted a more open system not only made money a non-issue by publishing the criteria for setting salaries, they also lowered their own base salaries, and (based on group agreement) refocused compensation based on what was both good for the company's success, and the employee's long-term growth and motivation.

The result was that the group decided what mattered to the life and success of the company, and gave employees a clear direction for increasing their salary if they desired (believe it or not, this isn't always the highest priority for employees). When the employees did bigger and better things, the company also was doing bigger and better things, so it was a no-brainer to give someone a bonus when they clearly, and directly affected the bottom line for the better.

Regarding how to do it

Now, you did ask about whether or not you should encourage employees to share their salaries. The transition from secrecy to transparency takes time. I would say that going gangbusters and encouraging everyone to switch to transparency tomorrow is likely to turn a few heads and breed confusion - probably not a good idea. You're almost certainly going to hear all the fears that you can imagine about why this won't work.

The trick is to take it slow. Different companies (and company cultures) will take different amounts of time to make a transition like this (and if they decide not to make this transition, that might be okay too). So, take it one step at a time. Maybe propose a small change. Maybe talk about exposing the salary slowly and implementing only a handful of changes each quarter. Maybe start with a discussion about how compensation should be determined and start getting ideas. Yes, you will, of course, get the people who say, "Well, I produce $5,000 in revenue to the company every month, and I therefore should get paid precisely that amount"), but this is unrealistic and impractical on a number of levels, and that's not how businesses work, grow, or improve. People that want to make exactly the money that they bring in should become independent contractors - they can live and die by exactly the amount of money they bring in the door all they want.

I think one of the most important things here is that you be just as transparent about how and when you plan to make this transition as you plan on being when you reach transparency. Every company culture will inevitably decide that their comfort level is a little different than other places, and it's okay if they don't end up where you hope they will. These ideas go against a lot of social norms, and it's going to take time to make whatever transition an organization decides to take on.

One completely different way to do this might be to simply announce a bonus for some performance metric, let other people propose additional, incremental changes in conjunction with the business owners, and let the momentum of this process guide it.

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@mhoran_psprep - that's obviously true. From a legal standpoint the owners "own" the company, and can use its resources as they see fit. You're also right that the management doesn't "owe" the employee a justification. This is why I included real-world, working examples of not only where it does work, but the added, potential benefits of enacting a policy such as this. I think there is real evidence against the idea that this "never works out." –  jefflunt Apr 11 '12 at 1:43
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This only works when the salary is shared anonymously. Once names are attached the the salary it becomes about the person not the salary. So while the principal is sound the practice fails. –  ReallyTiredOfThisGame Apr 28 '12 at 4:22

Many companies like to write policies that say discussing salary/wage/benefits to be a fireable offense. The National Labor Relations Board has repeatedly held that discussing salaries, wages and benefits to be an "organizing activity" covered by section 7 of the NLRA and that company policies forbidding such discussions are banned because they violate section 8 of the NLRA (one example is Handicabs, Inc. v. NLRB, 95 F.3d 68).

should I just accept that someone was a better negotiator than me signing in and not worry about it?

This is typically how I accept and rationalize it. However, I'm a male, and this sort of rationalization - that someone else is a better negotiator - can quickly land you into the mine field of gender wage disparity in the workplace. If every female earns less than every male for the same job, your company has an expensive legal problem brewing. Hiding wage information can delay such legal problems to where they become moot.

Would it negatively affect the work environment?

This can easily happen. I've worked at offices where one person who was a far better negotiator than the rest of us was earning almost double what the other folks who did the same job were earning. It caused a lot of grumbling and animosity because company policies didn't allow for the sort of raises that would be needed to get the lower paid folks up to what the star negotiator was making. In that case, quitting to go work elsewhere was the only way to get a raise that got me even close to what the expert negotiators were making. I've identified my poor negotiating skills to be one of the areas I need to work on.

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Not only is it a fireable offense, but most companies wouldn't hestitate for second to fire you for this. It would be very expensive for them and sow hate and discontent if employees actually knew what other employees were making. –  HLGEM Apr 11 '12 at 5:17
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@HLGEM - this answer specifically stated that it's illegal to make it a fireable offense, in the US at least. –  weronika Apr 12 '12 at 1:41
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And if you can afford the labor lawyer to fight it, go for it. –  HLGEM Apr 12 '12 at 3:54
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@HLGEM: I believe that most labor lawyers in the US take cases on contingency –  kevin cline Jun 18 '12 at 19:05
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@weronika - in the 24 "Right to Work" states, this is not an issue. Officially you are let go for "insert legal reason here" (or no reason). –  BryanH Nov 14 '12 at 19:20

From personal experience both for myself and for several co-workers I bought into the rule about 20 years ago that:

"little good can come from it, and a lot of bad can".

One personal example too - when I first started working (25 years ago) I was on minimum wage - $5.95 an hour. Everyone else was getting more, most folks were on $7 -$8. When the annual pay raise came everyone got 0-4%... except for folks on the minimum, who got 10% ($5.95 to $6.55). When I heard this I was very excited and pretty open and vocal about it... the result was that several existing employees (on $8 - $9) were really put out at my 10% raise to $6.55 This was a learning experience for me !

I would say approach this via "list the benefits", "list the downsides".
Most folks find that the later is fairly long and the former quite short (or non existent!).

There are many issues like this where you can't apply a programmers algorithm, it's a softer human thing that is usually not appropriate for surveys and statistics, because they wouldn't generate much useful data either - just imagine wording the questions and trying to get honest answers).

The main exception to this is non-profits, charities, government, etc. where publishing salaries, both internally and publicly is done.

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H-E double hockey sticks NO.

If your justification for getting a raise is the schoolyard, "B-b-but Juan got a bigger raise than me!" then you're finished. Pack your bags and get out. If you can't justify your raise by your contributions to the company's bottom line, then a) you don't get how companies operate (hint: profit) and b) you don't deserve that raise anyway.

My salary is NONE OF YOUR BUSINESS. Why? Because I am a better negotiator than you. And because I make more than you, when you happen to catch me taking a quick break after a solid coding session, you immediately assume that I'm a lazabout and eventually will start bellyaching about it.

Ask yourself this: when you hired on, did you get the salary you were happy with?

If yes, then what difference does it make what other people earn? You're happy with your salary! Learn how to become a better negotiator if you want to start with a higher salary.

If it is no, then whose fault is it? Juan? The boss? No, it is yours: you agreed to that salary when you hired on. Learn how to become a better negotiator if you want to start with a higher salary.

I would never* work for a company where salaries were disclosed, because it is counter-productive: there is no upside and plenty of downsides.

*Exception: government jobs require disclosure.

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I cannot fully grasp what sort of world-view considers a few hours at the negotiating table the basis for fair compensation as opposed to evaluation doing the actual job. –  Telastyn Nov 13 '12 at 0:21
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@Telastyn - the one held by most people who run companies. These folks are often business folk, and a large part of what they do is to negotiate deals of various kinds, and to try to get as much as they can while paying as little as possible in such deals. To them, the amount of money to pay you is just one more thing to negotiate. –  Michael Kohne Nov 14 '12 at 12:43
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@bryanh - It's one thing to negotiate. But I read your answer to say that salary information should never be public because (heaven forbid) other people might then want to make the same amount for doing the same quality work. You're not arguing just that good negotiators should get good compensation but that poor negotiators should get poor compensation regardless of the relative quality of your work. –  Telastyn Nov 14 '12 at 19:04

Context:

Salary is typically only one factor in the equation that is 'work compensation'. Others are:

  • Your perceived value to the company
  • The money you receive (your salary)
  • Your benefits; e.g. "I drop off my kids at school and arrive late"
  • Your negotiation skills and your own demands
  • The available budget

Fot the company:

Salary = Value - Ideal_Profit_for_company * negotiation_factor

For you:

Salary + Benefits = Effort

This is in equilibrium for everybody. A low salary may indicate low demands, bad negotiation skills or maybe a lot of other benefits ("I love biking to work!")

On top of that: the company has financial targets, so the total Profit = Value - Costs should be positive (and preferably: high).

Immediate effect:

What happens when you openly communicate salary? (remember: the total amount of money the company can spend on salary remains equal)

  • Some people will see they do the same effort, while they are paid less. They will want a raise (or worse: will work less!).
  • Nobody will want to reduce his salary for the benefit of others.

So basically, you have a conflict. Some people will demand a salary increase, nobody will ask for a salary reduction.

Long-term benefits:

What is it you want to achieve? Equal pay for equal work? Equal pay for equal results? Are you willing to accept that some people are paid 10x your salary? Are you willing to accept that some people will be paid equal to you, although they receive much more benefits than you?

Opening up salary will not fix the problem. What does work, is a system like the one in use at Valve: peer-reviewed salary. They try to estimate the value of a person as quantified as possible, and base salary only on that. It works, but only for very bright people, which is why Valve hires extremely selectively.

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I try to look at the question from a slightly different angle: Practically all blue-collar workers I know discuss their salaries freely among collegues, to the point of actually comparing and discussing the numbers every month. The (non-representative) sample of folks I know describe that they often support each other in negotiating for better pay or onditions. I must add that this is all in large companies, they will have a very formal handling of working hours, payscales and so on. In these settings, the workers clearly profit from a lack of salary confidentiality.

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