Employee salaries and the process of giving pay raises remains a secret and few are privy to the closely guarded process, sadly it remains archaic even in the modern day age. Disconnect between compensation and performance is one of the biggest contributors of employee angst and subsequent employee disengagement.

Due to lack of transparency, most of the employees fail to understand the compensation program and generally have a perception that it is inconsistent and unfair.Disengaged employees may have reduced productivity and increased chances of attrition.

Time and again we hear that compensation is the not the prime reason for people being in the job, its time we move closer to the reality and agree that compensation does play a big role in keeping people saddled to their jobs, this is particularly true in modern day world - wherein expenses have sky rocketed.

Employees may love the company, however love does not help them run their livelihood. They want to know what can they can do to move their earning northwards in the openly disclosed salary band.

These are some of the perceivable benefits of making the salary information transparent and open to the employees.

Build Trust Among the Employees

Sharing salary ranges with employees demonstrates that the company has nothing to hide and promotes trust. The employees see organization as transparent and not in the power play mode to benefit by pinching pennies from employee’s pocket. Trust is one of the biggest drivers of employee engagement & commitment , nevertheless it remains one of the toughest levers to crack. Once the trust sets in, other organization wide changes are relatively easy to implement. Trust is the DNA of a great organization.

Provide Employees With Positive Reinforcement

By looking at the salary data ranges, the employee is able to see the compensation potential in the role they are playing . Transparent salary ranges may play a big role in positively motivating them to next level of performance.

They start owning their career development and invest time and resources to learn new skills; this in turn may increase their productivity and keep them employable in the larger economy. Contrast this with a case wherein organizations remains saddled with employees who want companies to continuously up skill them to keep them up to speed with market. In the longer run, the companies become highly competitive as the employees continuously learn cutting edge theories.

Promotes Candid Employee Performance Discussion

Openly shared salary ranges provide employees with “ammunition” to initiate conversations regarding performance and the resultant salary they can earn. These self-initiated dialogues may result in improved employee performance as they can see a clear linkage between pay and performance. The employees become open to their developmental needs and start working on it, the development planning discussions will no longer be a tug of war between the employee and the manager.

Build A Culture Of Transparency

Sharing salary information is like picking up the gauntlet and taking the first step in setting up a culture of transparency. The employees will follow and start being more candid, one of the biggest benefits is that this reduces the gossip in the corridors and people will bring the issues to the table and it can be rested to logical conclusion after due consideration.

Employee can plan their Finances better

When employees have a line of sight over potential earnings, they would be able to plan their finances and life better. This would keep them out of the financial distress situations, as they very well know what they can make with their current skill set. This in turn would reduce the panic calls to financial counselor and family stress.

So what is stopping the companies from catching the bull by the horn and reaping benefits?

Most of the companies do not have a scientific process of measuring performance and performance reviews become a formality to fill sheets of paper because some one in the HR / Admin department wants it that way. This inefficient process directly ties into the merit increases, so do you expect the companies to open up their inefficient process to employee questioning and open the Pandora’s box.

The Managers would not be able to play favorites and effectively reward the select few who always nod their head to mangers suggestions. Last but not the least the managers would lose control and power over employees, as the reviews will become transparent, the managers and HR would no longer be demi gods during the compensation review cycle.

Is someone practising this method ?

There is one company - Whole Foods which has gone ahead and even made the salary data public to all employees , staff can easily get an insight into anyone's salary or bonus from the last year - all the way up to the CEO level.

As per a recent article in Business Insider - Mackey, the CEO and others at Whole Foods believe that a culture of shared information helps create a sense of a "shared fate" among employees. "If you're trying to create a high-trust organization, an organization where people are all-for-one and one-for-all, you can't have secrets."

According to authors of “ The Decoded Company: Know Your Talent Better Than You Know Your Customer ” - " Whole Foods is an intriguing example of a company that has successfully bridged the gap between soft-hearted values and logic-driven business acumen ,The combination has resulted in a highly motivated workforce with a deep sense of community who value productivity."

Way Forward

US government seems to favour this approach as a recent executive order from President Obama prohibits federal contractors from retaliating against employees who talk openly about their salaries. It is felt that this will encourage workers especially the ones who are at a disadvantage to ask for raises and prod organisations to move towards pay equity.

Leigh Tost, a management professor at University of Michigan's Ross School of Business says in a article posted on CNN Money - "This will not immediately lead to open and honest conversations around the water cooler about what everyone in the office makes. But that directive, combined with the help of sites like Glassdoor.com -- which allows employees to confidentially disclose their salaries -- and the rise of a generation of workers that expects free-flowing information, signals the emergence of a more transparent workplace."

Jeffrey Pfeffer, professor of organizational behavior at the Stanford Graduate School of Business puts in a word of caution and says in the same article - That sort of openness demands that businesses actually have a good explanation for why one employee makes more than another one , "If you can't explain that, you have a problem."

Please share your positive and negative feelings for an open debate on this topic.