Should You Disclose Company Salaries to All Employees?

Author: Imagination Date: April 29, 2013

Compensation DisclosureDisclosing salaries to employees can help with retention, but there are still some drawbacks.

At her previous job, architect Oscia Wilson asked a colleague with the same degree and experience how much he was making. She discovered his salary was 30 percent more than hers. When she complained to management, Wilson recalls, “Their position was I didn’t negotiate hard enough.”

Wilson quit to start her own firm in San Francisco, Boiled Architecture, where she takes a decidedly different approach by posting company-wide salaries on a shared Google document alongside profit and loss information. 

According to the Wall Street Journal, this aligns Wilson with a growing number of startups that are choosing to reveal salaries. While doing so may pose some initial challenges, it could also reap some surprising rewards.

Transparency Builds Loyalty reports that companies that share information about pay ranges tend to have more committed employees and higher retention rates, in part by promoting a culture of fairness. Sensitive discussions about performance can still be held privately. But transparency eliminates suspicions about employees’ places in the pecking order, freeing them to focus on their jobs.

A More Informed Workforce

Keeping salaries in the dark obfuscates the relationship between pay and your bottom line. Exposing them makes everyone more informed about how his or her role fits in with the company’s larger goals.

Ultimately, the decision forces you to justify what everyone makes, including yourself. Initially, Wilson was making the same amount as her top employee but working more hours. So in disclosing her own salary, she gave herself a small raise so that employees wouldn’t undervalue her as a boss.

RELATED: How to Determine Your Own Salary  

A Tricky Transition

If the very idea of transparency feels wrong, find out why. Many small business owners conceal salary information to avoid conflict because a friend or relative is making disproportionately more than others. Disclosure will force you to correct that mistake and may even save you money, says Brazen Careerist co-founder Penelope Trunk, who blogs from her farm in southwest Wisconsin. 

When Trunk first made salaries public, she says she lowered the salary of one overpaid worker by $20,000. She recommends making any necessary adjustments before disclosing salaries and explaining to affected employees the rationale behind your actions. 

Why Limit Disclosure?

One CEO who disclosed employees’ salaries told the Wall Street Journal  that he couldn't hire prized applicants without raising everyone else's salaries or getting them to agree to exceptions. If transparency isn’t working out, you can always revert to your former methods until you get to the root of the problem. Just be sure that fair compensation, not fear of the unknown, is behind your decision.

RELATED: 7 Steps to Preventing Payroll Fraud  

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