Should Salaries Be Transparent?

As a career expert at career site Glassdoor.com and a former executive vice president of human resources for video game company Electronic Arts, Rusty Rueff has seen the benefits and pitfalls of salary transparency. He serves as a nonexecutive director on the board at Glassdoor and video recruiting company HireVue, where he promotes the free flow of salary information. Now, as some organizations are embracing employees’ instant, online access to sensitive company documents, how companies adopt, implement and monitor compensation is evolving.

What are some of the benefits of instituting complete compensation transparency?
We are in an age where there are no secrets anyway. People speak more openly and freely about their experiences, and if they are not speaking about it, they are posting it on Facebook. The benefit of having complete transparency in how a company is doing, or in compensation, is that [organizations] are ultimately making their employees better and more knowledgeable, creating better expectations for those who are either thinking about taking a job or those already in a position in a company.

It’s true that knowledge is power, but what is not true in today’s world is that knowledge is held only by one party. Today, everybody has knowledge, and those who lean into that with transparency are going to be the companies, or the managers, or the HR function people will trust most because what they say is true from multiple sources.

If social media impacts a company’s transparency, how has the Internet changed employee access to salary information?
It’s made accessibility of information much easier. What used to take years to catch up with, now you have available as a resource. That accessibility is a big deal. What transparency does, and what the Internet does, is level the playing field. No longer does the employer have the inside knowledge about pay levels. With websites [such as] Glassdoor.com and others, people can find information so they can figure out how pay is based in a specific company, a specific title or even a specific location.

On the other side, for HR leaders or recruiters, we used to have to guess and try to figure out what pay level was going to be attractive to a certain candidate. They have got the insight on how competitors pay, and they understand how their pay packages either stack up or don’t stack up.

Is easily accessible information a positive thing?
Absolutely. Any long-lasting relationship will be balanced, and whether that’s a personal relationship, a business relationship or two countries trying to have an international relationship, they work best when both sides respect each other and have balanced power and information. To think the employment relationship was forever going to be healthy and good with one side having all the power and information — that was a flawed thought. The only thing missing was the balance of shared information, and today you have that. That makes for healthy relationships, and the employment relationship should be a healthy relationship.

How are millennials changing the way salaries are reported and perceived since they spend much of their time connected online?
Millennials are fueling social media and fueling where there is a desire for transparency. They are changing the ways a company’s salary is reported and the way salary is perceived. They expect better access to information. For them, it feels natural that they can find and share personal information within seconds, and that they shouldn’t have to go spend a bunch of research time.

You mentioned a lot of positives, but what are the downsides of knowing pay differentials?
With information comes responsibility. With information comes a need to manage your own perception of that information. If you don’t have maturity, either on the side of the employee or the employer, be ready for the things that come from understanding and gaining information. The other downside, if you want to call it that, in the transparency around pay differentials and pay is there is more likelihood the laws of supply and demand and our capitalist nature will drive salary up.

Is there ever an appropriate time to ask a fellow worker about his or her pay?
Yes, but it depends. It’s about the motivation, and it’s about understanding who you are asking and what they will do with that information. When I say motivation, motivation is about the purity of understanding to gain knowledge for the betterment of your position. You’re not putting down or harming someone by trying to brag or boast or cause some kind of negative reaction. Then I think it’s fine.

You’ve got to know your company and your colleagues, your boss and your co-worker well, and you’ve got to know the best time to bring it up. Consider all your options about how to research pay and compensation packages before you jump to that conversation with a co-worker. You can get information from people who know and who may not be your co-worker. You can get information from someone who used to work at a company. The lack of understanding and maturity level of individuals on a team could put you in an awkward position with your co-workers and the boss.

What would be your advice to companies trying to make compensation more transparent?
It’s funny because companies will adopt values and principles, and it’s really easy to throw that transparent word up on the board and say, “We’re going to be transparent in everything that we do.” Before you adopt that value, where you say, “I’m going to be transparent,” you should play out all of the scenarios and come to the qualifying statement that comes with that. Somebody is going to walk into your office, and they are going to ask a question or post a question on a company blog that you’re not going to want to answer, but they are going to say, “You said that you were going to be transparent.” You don’t want to turn a very positive trait into a negative or a cynical opportunity for employees.

What steps should a company take if it is serious about implementing salary transparency?
First, be careful with what you say and totally understand what that means. That would literally encourage a manager or a management team to use the whiteboard and draw a spectrum of what is being transparent. What are the things where we can be totally transparent? If there are things that really can’t be transparent, then I would qualify that statement with, “We will be transparent to the point of XYZ,” which would either harm the individual, or harm the company or our executives.

Don’t start it until you are really ready to take the first step, go forward and stick with it. If you start it and then you stop or pull back, the consequences will be dire. You will have lost credibility and the trust of your employees, and more than likely, you will lose the best of the best who will go elsewhere where they can trust the management team.

Jessica DuBois-Maahs is a former intern at Talent Management magazine. She can be reached at editor@talentmgt.com.

Is Salary Transparency Legal?
While every company in the U.S. has the right to dictate its own transparency policy, under the Equal Pay Act employers in certain states can take action against employees who discuss their wages with others, according to govtrack.us. Only a few states, including California, Colorado, Illinois and Michigan, prohibit employers from penalizing employees who discuss their compensation.

The Paycheck Fairness Act, which was introduced in January 2013 and is pending in Congress, seeks to reform the Equal Pay Act by abolishing an employer’s ability to punish employees who share their salary information with one another. The act also would require employers to prove that pay differentials are correlated to an employee’s job performance and would permit employees to seek punitive damages for proven pay discrimination.

— Jessica DuBois-Maahs