Why you should know how much your colleague get paid?

Published on: Fri 21 October 2016 by Admin

At your workplace, do you know your colleague’s salary? Should you know this sensitive information? Do you want to know?

The subject of pay is very uncomfortable to many but, deep down, we’re all a tad curious what the person sitting at the desk next to us makes aren’t we?

The perceived reality if everybody knew each other’s salary is anarchy! Surely, arguments would break out, raises would be demanded and there would be a mass exodus of employees.

However, this is simply not the case. There are now a wealth of studies that showcase the benefits of pay transparency as opposed to pay secrecy.

Pay transparency leads to motivation, satisfaction and retention

In 2015, software company PayScale surveyed 71,000 U.S. employees. It found, two thirds of those paid the market rate for their position felt that they were being underpaid.

Furthermore, out of those two thirds, 60% reported low job satisfaction and intended to quit within the next six months.

The researchers even found at companies which pay below-market wages (e.g. start-ups), 82% of employees reported job satisfaction and that they had no plans of leaving their posts.

Knowing why you are getting paid less as opposed to being left in the dark is a far more preferable.

Dave Smith, chief product officer at PayScale states:

“Just explaining to people why they make what they make can have a dramatic impact on both satisfaction and retention.”

It isn’t just PayScale who have conducted research. Glassdoor’s global salary transparency survey included responses from 8,254 employees in Canada, Switzerland, Germany, France, the Netherlands, the UK and the US.

It found that 70% of employee respondents believe that salary transparency has a positive impact on their job satisfaction.

Pay transparency will aid the pursuit of true equality in the workplace

Pay secrecy makes it easier to ignore discrimination in the workplace.

In our recent blog, we cite how women in the UK will have to wait until 2069 for the gender pay gap to close.

Pay transparency could help close the gender pay gap sooner, as shown by a 2011 report from the institute for women’s policy research.

It showed the gender wage gap in America at the time stood at 23% but, in the federal government where salaries are pinned at certain levels, the gender gap shrinks to 11%!

So what have we learnt? Pay transparency yields a more motivated and happy workforce, employers will retain more staff and it will aid the battle against discrimination in the workplace.

What’s not to like!?

Views from the experts

David D’Souza – 101 Half Connected Things – @dds180

“With greater emphasis than ever on a sense of ‘fairness’ in the workplace, the debate over reward transparency is important and timely. The debate over Exec pay continues to dominate the headlines with 7 in 10 employees believing CEO pay in the UK is too high or far too high. The complexity of human behaviour, however, means that organisations need to think hard about the impact and fall out of decisions to become more transparent around reward. Pay remains a complex and emotive issue – and requires solutions that are not only bold but delivered with care.”

Sharlyn Lauby – The HR Bartender – @hrbartender

“There are two key considerations in answering this question. First, this question is about trust. Do employees trust that the company has a fair and competitive compensation philosophy? If the answer is “yes”, then employees believe that issues about setting compensation for new hires, reviewing pay in the market, and pay increases are being handled well.

The second consideration is knowledge – about compensation practices. Knowing what another employee is paid can appear to be very unfair if you don’t understand the principles of compensation.”

Perry Timms – Adjusted Development – @pthr_perry

“We are worried that people will call into question why they aren’t paid the same as us with perhaps little comprehension about our role, responsibilities and more.  YET if we flipped this: if we were able to describe what IMPACT our work had and even more so WHAT VALUE we actually create for the company then who will really care that much what others actually earn?

We could also use open salary information to check how we fare against competitors pay.  And it may result in less people feeling hard done by with their most significant element of reward – their salary.  OR it could make people think they could go there and earn more…but is that the only reason to leave?  It could spark some open and transparent conversations about tendency to leave and might result in more honesty about ‘flight risk’.”

Tell us your views on the subject matter? Is the subject of pay still an uncomfortable one for you? Should your employer adopt pay transparency? Let us know in the comment section below!