The Benefits Of Open Salaries In The Workplace

Published in

LeadWise

5 min readMar 16, 2017

Can you imagine knowing the salary of every single person you work with?

While it seems like a work environment with that amount of transparency may be far off, it could actually be closer to reality than we think.

Salary transparency initiatives are slowly coming to fruition globally, but there’s still a long way to go. Starting in March 2018, companies with 100 or more employees will have to furnish wage information in the US. This comes in the wake of the previous government’s efforts to bridge gender wage gaps. Another executive order (signed by Barack Obama) requires federal contractors to submit salary information for men and women.

The United States isn’t the only country that will require companies to address salary inequality. In countries like Sweden, Italy, France, Austria and Finland, companies with more than a specified amount of employees are required to have an action plan that minimizes the gender wage gap. They’re also required to report their progress every few years.

This will make companies look through their pay systems, fix any inequality and create a blueprint for pay transparency.

Of course, not all countries are prioritizing open salaries or addressing pay inequality. For example, executives in China and Russia are often paid large sums of money off the books to avoid taxes.

Employers now need to open a line of communication with their employees. There are a few companies that are setting an example of salary transparency for those to follow.

SumAll and Buffer have grabbed headlines for doing the unthinkable: They made salaries of all employees available to each other (or even to the public in Buffer’s case), thus opening up the dialogue on pay, discrimination, negotiation and turnover.

Tangible Results

Now that it’s been a few years since these startups abolished pay secrecy, has it changed anything? Dane Atkinson, CEO of SumAll, believes open salaries have created a marketplace where merit, trust and equality thrives.

These companies report tangible improvements to their work culture and lowered turnover. A growing body of research suggests that keeping pay information secret can reduce employee engagement.

The PayScale survey of over 71,000 US employees was quite revealing about the link between employee engagement and access to pay information. Clear communication about what a company pays its employees is crucial in deciding employee engagement. A staggering 82 percent employees were satisfied with being underpaid, as long as they knew the reasons for it. Two-thirds respondents felt they were underpaid when companies claimed they paid the “market rate”; and 60 per cent of those who felt they were underpaid hinted at quitting.

Although a transparent pay policy may seem like a product of the internet era, it has been around since the 1980s. Whole Foods and Semco have successfully practiced this for over three decades.

Transparency Pioneers

Whole Foods co-CEO John Mackey made salary information open since 1986 to help employees better understand why some were paid more than others. The idea was to show how they too could increase their pay through comparison. This has created a sense of “shared fate” among the employees. The company also gives them a greater stake in the business through access to all of its financial data. In return, they are a motivated community that values productivity- reflected in the company’s meteoric rise in the supermarket business.

Semco, a company owned by LeadWise’s co-founder, Ricardo Semler, is one of the companies that Buffer CEO and co-founder Joel Gascoigne says inspired him to create a culture of transparency. The Brazilian company has spearheaded business practices that are employee friendly, while not compromising on its growth. It’s high employee engagement and ridiculously low turnover is legendary.

If so much good can be attained by just opening up salary information, why does the idea feel counter-intuitive? When people are willingly suspending their privacies in the name of social networking, why do we cringe at the thought of pay transparency? Many employers don’t seem to know it is illegal to prevent employees from discussing their pay.

Secret of the salaried

Existing research views pay secrecy as a form of organizational paternalism. Organizations treat employees like children whose autonomy needs to be limited, seemingly, for their own good. Managers are conditioned to believe employees want their pay information to kept secret; that it might upset them to know what others make; and that it may prompt them to act “irrationally”, like quitting. It becomes a win-win situation for any company — employees are kept under control and managers feel good about it because they are supposedly acting in the best interests of employees.

Why they did it and you should too

Buffer reported that applications have skyrocketed after they published the salary of its employees online. CEO Gasciogne, believes that by becoming transparent, they are now attracting applicants who believe in long-term commitment and a people-centric work culture. Gascoigne says that Buffer’s salary calculation formula is being picked up by startups like CustomerIO and Groove.

In creating a pay policy that resonates with merit, SumAll has kept more employees than it has lost. Their less-than-10 percent turnover is a big payout of this initiative. Their high retention rate is a reflection of the trust gained by being open about pay. It’s inevitable that employees discover what their coworkers make, despite it being shrouded in mystery. And that’s the moment people decide to jump ship. Instead, an open salary policy motivates people to strive harder to even out inequalities.

Everything for everyone

Both startups and established companies around the world are increasingly embracing the benefits of being transparent — new age office spaces are often entirely open plan, with glass walls; technology is making sharing seem more effortless than maintaining a secret; and access to information at all levels is creating the sense of ownership that ensures everyone’s truly onboard.

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LeadWise believes that we need to change how work works. We do this by developing online and in-person courses, workshops and cultivating peer-learning through our international community. Join the movement at www.leadwise.co.