Time to lift the lid on employee salaries

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It’s an unquestioned norm: salaries are not open for everyone in an organisation to know. It’s generally accepted that mayhem would ensue in the workplace if people knew what their co-workers, their managers or – gasp – the CEO was making, according to a leading workplace commentator.

If an employee finds out that their colleague, who seemingly performs the same tasks, holds the same responsibility and has a comparable level of skills and experience makes $1,000 more per month, presumably there would be a good and fair reason – one that the employee is capable of understanding and accepting. “The main reason may precisely be that they’re not currently fair and therefore making them open seems dangerous to many workplaces,” Alexander Kjerulf, author of Happy Hour is 9 to 5, said in his online blog.

In the absence of any reasonable explanation over the pay discrepancy, the employee inevitably becomes resentful and looks to move on, he added. According to Kjerulf, there are three reasons why keeping salaries a secret is damaging:

 

  • It frustrates employees because any unfairness (real or perceived) can’t be addressed directly.   
  • They’re not secret anyway. People talk.   
  • It perpetuates unfair salaries which is bad for people and for the organisation.

In organisations where salaries are kept secret, employees inevitably become aware of how much their colleagues earn, but may feel they can’t address it with their HR manager or direct manager, because they aren’t supposed to know, Kjerulf said. “When a company sets up a situation where people can see the unfairness but can’t address it directly, or even discuss it openly, they’re rigging the system for maximum frustration.”

The case for open salaries

Making salaries public (inside the company of course) has some major advantages according to Kjerulf:

 

  • Salaries will become more fair. The system gets a chance to adjust itself.   
  • It will be easier to retain the best employees because they’re more likely to feel they’re getting a fair salary.   
  • 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.   
  • Employees will be made aware of the factors that influence their salary. And whether they are a reflection of customer satisfaction, hours worked, quality, sales figures, seniority, skills, commitment to the company and/or education, being made aware of the figure they could earn with additional skills or results is a source of employee motivation.

Pushing for pay equity

In New Zealand the gender pay gap measured by average hourly earnings has persisted at about 12% for the last 10 years, according to Dr Judy McGregor, who is Equal Employment Opportunity Commissioner. “Pay equity legislation is necessary because efforts and approaches to date have been only partly successful, which is an experience mirrored by comparable countries. Current legal remedies have not resulted in systemic change and neither has voluntary/non-interventionist policies.”

While a pay equity bill was introduced into parliament last year, the National-led government discontinued pay investigations, the five-year Pay and Employment Equity Plan of Action and the Pay and Employment Equity Unit, Department of Labour in 2009. Further, a lack of transparency about pay and criteria for progression made equality and anti-discrimination difficult, McGregor added.

Meanwhile, the Australian Equal Opportunity for Women in the Workplace Agency believes employers should make their salary policies more transparent, and have provided the following checklist to assist pay equity best practice:

 

  • Do your organisation’s policies and practices support pay equity? Is there a transparent performance review process and equitable access to training, promotions, and rewards and benefits programs?   
  • Does your organisation have an equitable wage setting process that has been checked to ensure it is free of gender bias?   
  • Are jobs fully and fairly described and valued, and work value factors such as skill, level of responsibility and working conditions consistently measured?   
  • Has your organisation undertaken a pay equity audit to determine areas and occupations where gender pay inequity may exist? A pay equity tool is available from EOWA’s website. An audit usually involves a review of the payroll data to identify the areas where there may be gender inequities.   
  • Is pay equity incorporated into your organisation’s business objectives and goals?   
  • Does your organisation compare salaries for men and women upon commencement, yearly and on promotion to analyse where gaps exist and either seek justification for any imbalances or work to eliminate them altogether?

(New Zealand reporting by Miriam Bell)

 

Related story: Pay equity questions for government after UN report

 

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  • Marney Ainsworth on 2/10/2012 8:08:41 a.m.

    Salaries must be transparent. Without transparency, authentic team work is not possible as barriers of secrets, silence and lies create invisible divides. Authentic team work is a prerequisite of high performance and shared responsibility.

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