Benefits and Compensation, Learning & Development, Talent

The Lingering Impact of Pay Secrecy

Whether at a family holiday or social function, people are sometimes asked: “So, how much do you make?” It’s an awkward question because Americans are private and sensitive about discussing money. The natural instinct for many when faced with such a question is to simply say, “That’s none of your business.”

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But when it comes to similarly situated workers, that awkward question has more validity. Whether a job applicant reaches out to a current employee to get a sense of how the compensation structure works or two current employees at the same seniority level quiz each other to see if they’re being fairly compensated, there is a real utility in having information on another’s pay.

Salary Discussions Still Sensitive

Still, as Kate Morgan writes in an article for BBC Worklife, one’s salary is still very much a sensitive subject, despite legal prohibitions against punishing employees for sharing. She writes, “In many sectors in the US, a combination of longstanding taboos and company policies keep people from discussing how much money they make—a phenomenon known as ‘pay secrecy.’ Despite legislation that prohibits companies from punishing workers who disclose their pay, many people still work in environments where they don’t or can’t talk about money—something that has profound knock-on effects on wage equality.”

Opening the Door to Compensation Conversations

 So why would companies be so keen on maintaining the secrecy of employee compensation? Well, remember the old adage “knowledge is power.” Employees who have a clearer picture of what their services are worth are more likely to ask for more money.

“Companies are motivated to promote pay secrecy, either covertly or overtly, because it often saves them money,” says Morgan. “It can mean that new hires don’t know what kind of a salary is reasonable for their role—and some may end up receiving lower pay as a result. It can also affect workers already on the career ladder; if people aren’t aware they’re underpaid in comparison to their colleagues, they’re less likely to ask for—or have the leverage to secure—large pay rises.”

Companies need to be careful with policies around sharing salary information. Not only may they be violating laws against punishing employees for sharing that information, but they also may be damaging employee morale and trust.