Many (if not all) companies have provisos when you become a salaried employee that you not discuss your salary/compensation package with other employees.
Most people have been raised in a mindset, largely because their parents have worked for companies like this (and maybe their grandparents, too – it is 2013, after all, and this is not a new phenomenon), that they shouldn’t ever discuss how much they make doing job R when their friend does job H – even at a different company.
Let me state, first, that I am not going to promulgate the idea that everyone should go around bragging about how much they make – especially if you are in front of either mixed company, or in front of someone you know is having a difficult time financially- after all, who wants to be the one guy in the room making $35000 when everyone else is in the 6 figures and gloating about it? I sure wouldn’t.
However, (and maybe I’m weird – though I don’t think so) I have never cared about how much you made in comparison to myself. If we are doing the same work with the same experience and we do not have the same compensation, it implies that one of us negotiated better (I have some thoughts about negotiating, too, both published and not). If you manage to get an extra $1 an hour ($2080 more per year), that’s awesome.
Given that the previous paragraph, outside of “basic” jobs like warehouse work, cleaning cars, etc, never happens – why should anyone be surprised that not everyone has the same compensation as the next guy? Somewhere along the line we got the idea that salary+benefits needed to be “fair”. “Fair” is a concept that only exists in economic theories not based on effort. (The first thing to know about compensation is encapsulated in the book Everything is Negotiable – and a related, but highly specifized1 form for salaries.)
There are services like Glassdoor that help to provide “competitive” salary information … but salary is only a small portion of compensation. Let’s say you and I both make $5000 a month ($60000 a year – make the math easy). But you have 2 weeks of vacation, and I have 4. But I took the lower-deductible insurance option, and you took the higher. Which one of us is bringing home more per month? Who cares! My individual desires and needs are, apparently, being met on my package, and yours are with yours. So why does it matter that we not discuss salary information with each other? Transparency is vital in the security world, it also is internally in a company. And between friends (though, of course, the amount of data we dump, and the methods we choose, will vary) it establishes trust.
Do I care if everyone in the world knows how much I earn per year? No. Tax returns are not public, but they’re not exactly private, either (they’re not that difficult to get if you want them). House sales prices are matters of public record. And from a house sale, along with known mortgage rates at the time of sale, you can determine how much someone is spending on their housing payment every month within a decent error margin (eg, $200000 home, 4% interest, 30 year mortgage, 10% down, you have in the ballpark of a $1000 base mortgage payment2 – within about 5-10% (to cover taxes, insurance, and PMI)). Presuming you’re not living on your credit cards, that means you’re making at a minimum $1500 a month ($18000 a year) just to afford to have a house payment. Add-in other normal essentials of 21st century America (car insurance and maintenance (or bike/bus money), groceries, phone, internet, tv, student loan, etc), and you’re at least at the household income level of $40000 (pretax). Likely quite a bit higher – especially if you have a car payment of any kind.
Why go through the miniature exercise above? Because no one seems to mind comparing they car insurance premiums. Or how often they eat out. Or what they like to cook at home. But SALARY! Heaven forbid you ever talk about THAT! That’s the one no-no in discussion of financial data between friends and coworkers. But it’s irrational when in just a few second you can ballpark the minimum someone earns.
We can compare generalities – vacation time, insurance plans, sick policies, maybe even bonuses (but only as percentages – don’t you dare use real dollars when discussing them) … but not the salary.
I read recently an Atlantic article discussing Millennials and the slow break-down of corporate boundaries to sharing compensation information. I think that’s wonderful.
Publicizing (at least internally) salaries (even if it’s in bands, a la FogCreek, HP, IBM, or the Federal Government (and Military)) is extremely positive. It doesn’t disclose stock options, bonuses, etc, but can give some kind of indication between colleagues of their relative value to their employer.
At one former employer, I found out shortly after I started that another recent hire (with more years of support experience) was being paid barely more than half what I was. And had had no options when he started (just weeks before me), when I had a modest issuance. Neither of us was upset about how much I was being paid, but I was disappointed to finally see “in the real world” such salary discrimination going on. The entire reason he was paid so much less than me? He didn’t negotiate well.
It was technically against company policy for him to tell me how much he made. And me him. Technically, it was a dismissable offense.
That’s the ridiculous part of not sharing compensation data – that by sharing it you can have your employment terminated. Employers who are worried about little things like whether a given employee knows another employee’s salary are [most likely] micromanaging – at least from the Personnel Department3.
Additionally, if the company is concerned that finding out how much someone else is earning is going to cause unhappiness amongst the team, they’ve done several other things wrong. They’ve [at least]:
- hired people whose only motivation is money (or believe that’s the only motivator)
- intentionally tried to undervalue their team
- established an immediate sense of distrust
- decided to treat their employees like children instead of adults who can rationally and intelligently discuss differences between themselves – and not just on their preferred lunch joint
I would love to see this aura of distrust disappear.
If you really do have people whose only motivation is money, you need a better team: they’ll jump ship as soon as something more lucrative comes along – instead of changing only when the work becomes more boring .. or more interesting elsewhere.
1 I know it’s not a word – I’m using it anyway
2 Divide the mortgage amount by 180, and you have the rough base payment on a 30 year mortgage (for the under 5% mortgages I see in mid-2013); your base payment is the home’s cost *2 / 360 (number of months in 30 years) – or just price/180
3 I positively despise the term “Human Resources” – employees are only “resources” to the MBA types: they’re people, and should be accorded good treatment (including referentially) as such
The issues with doing this are:
1. It creates an upper limit for salaries
2. Its hard to incentize hard working employees
3. Employers have an easier time refusing above average salaries if the information is published
1) there already is an “upper limit” for most jobs – it’s whatever the market will support
2) if you’re only able to incentivize your workers via money, you have the wrong kind of workers – or the wrong mindset to come up with incentives
3) hence saying that this might only want to be internal to a given company 😉
Hrm. I totally disagree with you on this one, actually.
There are so many factors that affect someone’s salary. For example, off the top of my head:
1) Experience & education differences
2) Prior compensation – no one wants to take a pay cut from their previous job
3) External economic factors (market, unemployment rates)
4) Size of potential new hires pool
5) Strategic value – new hire may have competitive information, specific experience, or other intrinsic value
6) Negotiating position – are you out of work for 2 years? Currently employed at a competitor with a strong salary? Moving across the country or internationally for the position?
Exposing salaries is highly likely to lead to discord among a team in nearly every case. Knowing your co-worker’s salaries is pretty much only good for only one thing: leverage by the employee to negotiate a comparable salary for themselves.
In most other scenarios, you’re opening up a huge can of worms. Imagine you’re a new hire, and everyone makes 40% more than you – and you know it. Optimistically, you might say that will encourage you to climb the ladder. Realistically, I think it’s likely you’re going to resent that, especially if you end up working long hours, having to pitch in to help your coworkers, etc. – “hey, you’re getting the big bucks, why don’t you do it!”.
Or imagine you’re working with someone that’s doing nominally the same job as you are, but negotiated themselves a better package – or simply gets a better raise than you. Most people will see that as unfair. The vast majority of people are not self-critical and honest enough to look at the situation and ask if that person is creating more value to the team, works more efficiently than them, or otherwise earned themselves greater compensation.
Last but not least, open salary information encourages an environment where people are actively competing for their ‘slice of the pie’. I for one am not particularly interested in a corporate cage match approach to employment where everyone is constantly fighting for dollars. Granted some people will act that way anyway, but publicizing inequities would only exacerbate that behavior.
1) Hence using the “pay band” approach
2) Not true – many people will take a “pay cut” when where they are going is “better” for them (work-life balance, vacation, benefits, type of work, etc)
3) Money is not the only motivating factor (or, shouldn’t be – you end up with lots of disgruntled folks then): if your existing team is made up of $60k people and you can’t get someone new for under $80k, you need to increase your existing team’s compensation – because they’ll walk if it really is only about money
4) Not sure what you meant here
5) See (1) – use the band concept to place them in the “right” salary range
6) This seems to sum across other points, but while everything is negotiable, if you use the band approach, you can negotiate based on a variety of factors and not merely money
And it’s not good for only one thing – it’s good to find out what you can do to move up: see, eg, the Military Pay Scale – there’s no using a Captain’s salary as negotiating leverage for an E-4.
If someone is doing nominally the same job, but is in a band 4 vs your 3, then there is something else that put them there.
I still don’t see how transparency will cause a “corporate cage match” (though it’s an interesting visual…). If money is your only motivator, then you’re going to be that way anywhere.
I think the disconnect is you’re saying “money isn’t the only motivator”, but that’s not necessary for it to be problematic. Let’s say we both work at the same company, in the same role. And let’s assume we both really like the job, the work, and the environment – so far, so good. Then I find out you’re making more than I am, even though we work side by side doing the same nominal role.
THAT is where money becomes a motivating (or demotivating) factor, even if someone isn’t 100% money driven, and even if they have lots of other good reasons to be motivated at work. Conversely, if the pay isn’t public information, that whole issue just doesn’t exist. I’m happy doing what I’m doing and getting paid what I get paid, and so are you, with neither of us is negatively affected by the other’s compensation.
Proposing a system like government pay where you get paid in bands based on rote accomplishments e.g. number of years in, number of continuing education credits, etc. doesn’t seem all that appealing either. My experience has been anything that uses level-ups to determine pay or stature just encourages clock-punching, box-checking behavior. That’s not truly motivating for unhappy employees any more than dangling money in front of them is.
Also, on point #2 – I said no one *wants* to take a pay cut. People *choose* to take a pay cut for various worthwhile reasons, sure… but I don’t know of anyone who actually thought “oh sweet, I can make less money with this job too? That’s perfect, I’ve always wanted to do that!” 😀