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by Alexander Kjerulf

It’s a golden rule in most businesses that salaries must be kept secret. Except for a few heretics, it is almost universally accepted that mayhem would ensue in the workplace if people knew what their co-workers, their managers or—gasp—the CEO was making.

It’s time to stop the code of silence. Bringing salaries out into the open makes a lot of sense—and it offers advantages for both the organization and for its people.

Here are three major reasons why secret salaries are silly:

  1. It frustrates employees because any unfairness (real or perceived) can’t be addressed directly.
  2. They’re not secret anyway. People talk, you know.
  3. It perpetuates unfair salaries, which is bad for people and for the organization.

Example: If Johnson over in production is making $1,000 more a month than I am and the CEO is making 22 times what I’m making, there’s probably a good reason for it—one that I as an employee am entitled to know and am capable of understanding.

A dirty little secret

So why have salaries always been treated as state secrets?

The main reason may be precisely because they’re not currently fair, and therefore making them open seems dangerous to many workplaces. Maybe Johnson is making more than I am not because he does a better job, but because he drives a harder bargain when it comes time to negotiate salaries. That doesn’t seem fair, does it?

And there’s the problem: If Johnson’s salary is (unfairly) higher than mine, and secret, I can’t complain to my manager about it because I can’t admit that I know about it. When a company sets up a situation where people can see the unfairness but can’t address it directly, or even discuss it openly, they’re rigging the system for maximum frustration.

A company must attempt to pay each employee a fair salary—one that matches the employee’s skills, the market average and that of other similar-level employees inside the company. In other words, the company itself has a vested interest in keeping salaries fair.

Keeping salaries secret makes that nearly impossible.

The case for open salaries

Making salaries public (inside the company, of course) has some major advantages:

  1. Salaries will become more fair. The system gets a chance to adjust itself.
  2. It will be easier to retain the best employees because they’re more likely to feel they’re receiving fair pay.
  3. The pressure is on the people with the highest salaries to earn their keep. Everybody has to pull his or her weight.

There is one requirement for open salaries to work, though: Employees must know what factors influence salaries.

Are they based on customer satisfaction, hours worked, quality, sales figures, seniority, skills, commitment to the company or education? What matters when setting salaries and what doesn’t matter? If the company has not clearly stated the criteria, comparisons are meaningless.

In my workplace, we agreed that the most important factors would be customer satisfaction and commitment to the company. We put this in a document on our intranet. It almost made salary a nonissue. It was certainly nothing that caused us any frustration or troubles.

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Author: Alexander Kjerulf is an expert on happiness at work and author of Happy Hour is 9 to 5. He speaks to and consults with companies all over the world. Contact him at alexander@kjerulf.com.

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