Should employees know how much their colleagues are earning? For many organisations that could open a can of worms, says Jennifer Paterson
A televised experiment on pay transparency has shone a spotlight on the implications of employees disclosing salary details to colleagues, and whether transparency is really the best policy in the workplace.
In the Channel 4 programme Show me your money, which aired on 11 July, staff at Pimlico Plumbers were challenged to reveal their earnings in order to establish a fairer system of pay.
Charlie Mullins, managing director at the London-based plumbing firm, said: “We didn’t have an up-to-date pay structure in place. There was a lot of uncertainty, which staff wanted us to deal with. When the idea was put to us by Channel 4, we decided to do it to get things equal and fair. We now have a more equal workplace and more equal wages.”
But although this approach can be right for some employers, implementing a consistent level of pay across an organisation does not work for most, said Chris Charman, director of reward, talent management and communications at Towers Watson. “That kind of approach, where everyone is paid the same, can be right in some organisations, but most organisations don’t do that,” he said.
“Most employees are comfortable with a difference in pay, that it is part of the management process of making sure that it is consistent. The vast majority of organisations are dealing with the legacy of many years of post-merger integration, different lengths of tenure and standards of performance, which means that being transparent is very challenging.”
To be fully transparent, an employer must also be prepared to explain pay differences to staff. “If you draw back the curtain on pay, you are drawing back the curtain on a whole load of discussions, which might not be appropriate or desirable,” said Charman.
“Where pay differences are unjustified, that is likely to lead to a cost impact. Where thosedifferences are justified, employers have to be prepared to stand up and address concerns in a way that doesn’t get into the specifics of personal performance.”
Ronnie Fox, principal in employment law at law firm Fox, said: “A swing from a situation where employees are effectively prevented from sharing information about their pay to one where they are required to do so is not a good move. First and foremost, knowing what the person at the next desk earns is unlikely to promote a good relationship with them.”
More appropriate approaches to pay management include conducting job evaluations and comparing market data. “Only when employers have got those underpinnings can they really think about the degree to which they want to be transparent,” added Charman.
Employers must also bear in mind that there may well be good reasons for differing salary levels in some cases, for example where these are based on performance.
Charman added: “Everyone earning the same, in principle, was the guiding force for the television programme, but it goes against everything that most organisations have been trying to do over recent years, which is to fairly drive the right degree of difference between pay for people based on performance, contribution and market rate.”
Transparency in the workplace is a solid policy, where appropriate, but it must be about the transparency of the entire pay structure rather than about individual salaries. “People should know where their role sits in the grading structure, what the pay ranges are for all roles, and they should be clear about the benefits and incentive targets for roles,” said Charman.
“Employers should be very open about the structure, setting a good yardstick to which the organisation can aspire and be held to, because trying to reduce discretion in that sense is a good thing.”
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