How can a workplace rally after everyone's salary got leaked?

Question

A friend of mine told me an incredible story. 40 people work at his company and, the other day, someone leaked a spreadsheet that listed everyone's salary. A few hours later, the IT department figured out who leaked the spreadsheet. She confessed. And she was immediately terminated.

But now they're suffering some massive fallout. A day later, a software developer marched into his office and shouted, "Billy! I've worked my ass off for you! I missed my son's championship MMA match to troubleshoot that production crisis, and the next weekend I missed my daughter's cheerleading competition to meet that deadline for you! And yet you're paying Marty more money! He's coasting and he sucks!"

In parallel, a member of the IT staff levied a formal complaint with HR. She felt that her salary had been artificially depressed because of sexual discrimination. And now she has numbers to back up her claims.

As a result, my friend's company may be facing a mass exodus. Software developers are in demand, and many will likely walk if the company doesn't meet their new numbers.

So what can my friend's company do to pick up the pieces and patch its culture which was badly bruised by the salary disclosures?

EDIT: My friend is not a manager and did not terminate the woman who leaked the salaries.

Answer 1

So what can my friend's company do to pick up the pieces and patch its culture which was badly bruised by the salary disclosures?

Whenever something dramatically bad happens in a small company, I find that the best way forward is to meet it head on.

A full company meeting should be held to talk about what happened, and what the company plans to do now. People should be free to ask any questions they like, and the questions should be answered publicly.

I would expect senior management to get together before the meeting and decide specifically if they have a problem with salary structures or not. And if they do, what they will do in general, and what they will do about the acute cases specifically.

In general, a review of everyone's salary seems appropriate. For every single employee, their salary should be checked and measured against both the market and the other employees in similar positions. Competent HR people know how to do this. If the company doesn't have sufficiently qualified HR folks, then an outside group should be consulted or retained.

Special attention needs to be paid to all formal complaints and those threatening discrimination lawsuits. The facts of the case need to be determined, and action planned based on those facts. Again, good HR knows how to deal with this. And if necessary, there are groups that specialize in defending discrimination lawsuits.

Going forward, senior management needs to decide if keeping salaries secret is worthwhile or not (some companies and many public sector employers make everyone's salary public knowledge). Doing so would likely be a huge culture change at this company and is not to be undertaken lightly.

And going forward, the company needs to decide if the current salary structure is equitable or not. And if not, they need to figure out how to make it equitable, and keep it that way.

I would expect individual follow-up one-on-one with every employee and their manager. I would expect them to talk about their salary, and why it is appropriate or why it isn't, as well as what will happen going forward.

Answer 2

This is of course a common situations in companies -- salaries do not always perfectly correlate to performance. Instead, they're negotiated when someone is hired, and usually rise slowly over time. Be honest about this to your employees, most of them will already realize this and now you will spell it out. This isn't something you are going to fix entirely, differences will continue to exist because some people negotiated very well when they arrived, and paying everybody at that level is not affordable.

Some people will have really strong arguments for a pay raise based on the leaked information. You'll have to give them one. You should probably have given them one before the leak, otherwise they wouldn't have such strong arguments now, right?

Take the sexism accusation extremely seriously, of course. Is she actually right? Then you have a lot of fixing to do. If she's not and there are good explanations, make them extremely good and public.

But other than that, employment isn't necessarily fair. It's not fun for people to be reminded of that, but it'll fade over time.

Answer 3

Your friend's company has bigger problems than damage control, and its bruises were not caused by the salary disclosures. The situation that you've described implies some deep operational issues, and the path towards picking up the pieces involves addressing them. For instance:

1. Why were there such large discrepancies in the salaries that employees were drawing for performing similar roles?

2. Why did management consider it necessary to declare salary details confidential in the first place, and is the company even in a locale where salary details can be declared confidential in a legally enforceable way?

3. Why did management consider it wise or appropriate to immediately terminate the person who leaked the spreadsheet?

If there's damage that's been done to the company's culture, it sounds like it's because the employees want a greater level of transparency and fairness than management is prepared to give them, and that they (rightly or wrongly) don't trust management to do the right thing if left to their own devices. You don't rebuild that trust by shooting the messenger, blaming the problem on the fact that "confidential" information was leaked, or trying to reinstate the shattered culture of secrecy.

The best way forward is to tackle the issue head-on, and change. Employees seem to want transparency and openness, and through their own actions have created an environment where they have it. The spats between individuals are not productive, so why not move things a step back?

Take an inventory of all the position titles that are in use in the company, and for each one note the key prerequisites and responsibilities and provide an indicative base-salary (which will probably have to be the salary of the highest-compensated employee who has a given title). Make that information accessible to everyone in the company, and then conduct employee reviews to ensure that everyone is 1) properly classified based upon the tasks they perform, and 2) receiving compensation in line with the indicated salary for their role. Use bonuses tied to performance to ensure that high-performing employees are rewarded for their high performance, rather than simply giving them a larger salary than their peers.

That will help resolve the operational issues going forward, and should go a long way towards ensuring that the incident is not repeated. It also helps show employees that management is taking the problem (as in, the real problem, not the "problem" of the leaked salary data) seriously and is taking significant and visible steps to fix it, and retains a significant amount of transparency while removing arguments along the lines of 'person X gets a larger salary than me for doing the same stuff'.

As for rebuilding trust, that's a bit harder. Management has already harshly disciplined an employee for piercing their veil of secrecy. That usually doesn't go over well. Doubly so if what the employee did could be construed as whistleblowing due to the allegations of wage inequity, which it sounds like the leaked data confirmed. But that part's done, and there's no going back on it now.

So my suggestion would be for management to acknowledge that they screwed up, both in terms of how they handled compensation and ongoing employee reviews and in terms of how they responded to the disclosure of the salary details. They should apologize profusely while doing so, and give assurances that the same problems will not be allowed to continue. If they take steps like the ones suggested above to help move the culture to one with more transparency and fairness at the same time, that will help with their credibility as well.

That said, I think some damage/fallout is unavoidable. The company that you describe sounds like it has issues far deeper than a leaked spreadsheet that made a few employees angry. A culture of secrecy is a difficult thing to maintain in this day and age, and there can be consequences to using a culture of secrecy to cover up things like wage inequity. This is what your friend's company is facing now.

Answer 4

As the cover has been blown. The best solution is to be very polite and humble with all employees as there are lots of grudges against you.It would be good to do an appraisal for any employee who demands for an increment. If he truly deserves it than it fine, but if not you need to give him a valid reason based on his performance. If you cannot increase pay for someone tell them to give some time to the company and not to take a decision in anger and haste.

Answer 5

Hopefully, the company has "legitimate" reasons to justify salaries that allow it to answer the difficult questions. "Legitimate" reasons are performance, market value, and value to the company.

"Differences in negotiating" aren't really going to hold water anymore, as everyone is now a great negotiator. (Saying "Bob negotiated better" invites the response "Well, now I'm negotiating better...for the same amount.")

If the company does have good reasons, have a meeting of the whole company.

"It's unfortunate that salaries were leaked, as that is your private information, and it should be up to you whether or not to share that information.

"Here or elsewhere, compensation is complex and based on many internal and external factors: performance, market value, value to the company. Proportions of base salary and bonuses also vary. Comparisons of salary are almost always oversimplified.

"Know that we very carefully review compensation every year during performance reviews, and always make adjustments when appropriate.

"In light of the current situation, we are going to review everyone's compensation early. Since we do this regularly and carefully, we don't necessarily expect a lot to change. But we would like to be open with you and give you the opportunity to ask questions and receive honest answers."

If the company doesn't have "fair" reasons, it's played a dangerous game and gotten caught. There's no way around it; it's going to hurt at least a little, possibly a lot.

I'm not saying that companies are terrible if they have given preference to aggressive negotiators; most of the time that's a smart strategy and can save a lot of money. But there's a risk, and it didn't pan out for them.

Also have a meeting, and say the same things, but be more fully prepared to make adjustments, as salaries are currently out of balance.

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Last, know that it's not the end of the world. Some companies, like Buffer, openly share all salaries. It's not the usual business culture, but it's possible (and, according to some, superior).

Answer 6

So now some people are unhappy about their payment, while some feel better due they are "high" payed (compared to others in the company).

The unhappe employees now want to get the same money, this will be really expensive. In most cases, it's possible to give them a good explanation why they earn less so that they calm down, but still they wont be happy, which affects their moral and thus the quality of their work, latter is the real problem.

One solution could be a collective contract.

Offer a collective contract to everyone in the company (maybe different ones for different jobs), which is a little above the median payment of the specific field of work. This could be a little more expensive, or a little cheaper than negotiateing every salary again, also takes off a LOT of work. Maybe some people expected to get more than the collective contract offers, but at least they know that the payment is fair then, which gives a better feeling, even if they think they could earn a view bucks more.

You cannot force people to join the collective contract, but you can offer it. Everyone who refuses, just stays in his current contract and has no right to complain.

I don't know how common collective contracts are in your area, here in germany they're ordinary. Collective contract doesn't mean everyone gets the same money, but the payment can be staggered by age, time in the company and other conditions. But every employee who knows all the conditions of a coworker, can derive his/her salary if he wants to know.

This concept has many pros and cons, it must be well considered if it fit's the company but in this scenario this could be a good solution.

The fact that everyone knows about others payment is both, a pro and a con within a Collective contract. In your case it's already state, so the con is already there and no argument against CC anymore.

Answer 7

The thing is, a lot of companies has this bubble. They pay whatever they think they need to pay to keep individuals they invested in (and perhaps make them stay happy). It's also common if companies needs to recruit new people during a temporary shortage of skilled labour. These new employees might require more pay than loyal, senior employees already on board. That difference will likely stay around for years.

However, during the salary review - a lot of other reasons for certain pay increment usually comes up, like "you did not complete this and that goal". I guess this particular company may have indirectly implied that the salaries are fair and justified during reviews.

The game is a risk because of what you mentioned.

In theory, it's not relevant for an employee to compare with coworkers salary wise since (s)he accepted the current salary. In practice - it's the human nature to react like these employees did.

To recover, there is no going back to the cat and mouse game. Management needs to be honest - the world is not fair. Maybe the most underpaid key employees might need a decent increment, but I guess open cards is a key factor. Some will leave and some will be unhappy. That's unavoidable.

I think all organisations should have a plan what to do if the salaries leaks out or deal with the consequenses afterwards. At least in Sweden, annual income declaration is public information so in theory anyone can look it up.

Answer 8

Although this does raise issues internally it must certainly affect hiring as well.

During good times, and there are rarely bad times for Software Professionals, companies sometimes offer new hires a greater salary then the existing employees earn at the same grade due to "market conditions".

My old (Huge) company accidentally leaked new hire salaries and we all found we were earning less than new hires at the same grade, this caused a massive fuss with some people simply resigning unless the salaries were matched, after all some had been with the company 5+ years.

The point here is often companies are very duplicitous about salaries and if the **** hits the fan they simply cannot retrieve that trust loss, never, ever with existing arguably disgruntled employees.

They just have to grin and bear it and placate.. which is what they will do.

As for the terminated employee, it might have been best to keep her on with a reprimand, and be open at the same time, it is a small company and that might go some way to rebuilding an element of trust.