Salaries – should it be confidential or made public?

Thursday, August 24, 2006

There goes a saying "Never ask a man his salary and a woman her age". With increasing number of women in the workforce today, the saying may not be applicable. But politeness demands we follow this.
Time for some reality check:

  1. Do you know the salary of your college friend who joined along with you as a fresher at the same level?
  2. 5 years later when you switched organizations, do you know the salary of your colleague sitting next to you?
  3. Do you know how much your boss makes?
  4. Any idea how much the CEO makes?

While the response to the first question could be an overwhelming "Yes", I believe the number will come down gradually to almost nil for the subsequent questions. It is fair to assume that people guesstimate the packages of people at different levels of the organization ladder that fit an experience-skill set bracket or "band" of job titles.  
This school of thought –"Why secret salaries are a baaaaaad idea" on The Chief Happiness Officer blog - prompted me to write this post.
Alexander argues the case against secret salaries as –
  1. It frustrates employees because any unfairness (real or perceived) can't be addressed directly.
  2. They're not secret anyway. People talk, you know.
  3. It perpetuates unfair salaries which is bad for people and for the organization
He argues the case for open salaries as –
Making salaries public (inside the company of course) has some major advantages:
  1. Salaries will become more fair. The system gets a chance to adjust itself.
  2. It will be easier to retain the best employees because they're more likely to feel they're getting a fair salary.
  3. The pressure is on the people with the high salaries to earn their keep. Everybody has to pull their weight - the higher the salary, the larger the weight.
I believe in the policy that salaries should be kept confidential because ---

  1. Avoid chaos: In an organization like mine that employs over 30,000 people, you would like the HR to perform other functions effectively rather than resolving conflicts that arise because of salaries known to everyone. You don't have a choice to ignore because it is official. Cases such as "They're not secret anyway. People talk, you know", employees wouldn't have substantial proof to question because it is hearsay! There are many instances where people inflate and announce their salaries to boost their egos.
  2. Respect Privacy: Just as the date of birth of a person is confidential known only to the HR folks, compensation and benefits is something that you have earned (by hook or crook) and should be respected. By allowing someone to question, you are basically allowing the person to question the decision making capabilities of all involved in the recruitment process – the interviewer, the HR manager, the candidate for his proficiencies and negotiation skills.
  3. Fairness does not mean openness:  Fairness does not necessarily imply openness. Organizations make policies and stick to them if they have to run efficiently and smoothly in the long run. Salaries cannot generally be prejudiced or subjective drastically. They don't give a person $10,000 more in his/her package because he/she looked hot or was well behaved. Sure, that would have had an influence but the scope of variation would be a small percentage. To allow for this is why salary brackets are created. This takes care of human judgement errors if any.  Fairness does exist to an extent as employees in many organization do know what the salary bracket for the various designations.
  4. Are appraisals and salaries the same? While most people would agree with me that performance appraisals should be made public within a company, I don't think the same can be extended to salaries. Just as your client contacts or list of customers is confidential information, so are salaries.
Would you like an openness that leads to more distrust and an environment where the camaraderie between employees is lost? Would you like to be in a workplace where you are constantly judged by yoru subordinates and peers if you justify your salary? Is this productive?

E-mail me your opinion on this –should a open book policy be followed or should it kept secret?

Categories: , ,