Should Employers Make Employees’ Salaries Public?

By: Nancy Ordman

Employees of some public agencies do not have a choice: for those who earn salaries over some annual amount, their cash compensation cannot be kept secret. In some states payroll figures show up in newspapers (Kentucky, Indiana, California, Rhode Island, Ohio, Georgia, Minnesota, Connecticut, among others). But most other workers expect their compensation to be kept private. Many private employers, unlike their public counterparts, actively discourage or forbid their employees from discussing their salaries.

David Burkus, author and associate professor of leadership and innovation at Oral Roberts University, strongly disagrees with secrecy and is actively promoting salary transparency. In his highly-popular TED talk, “Why you should know how much your

Image credit: Salary by Nick Youngson/Alpha Stock Images CC BY-SA 3.0

coworkers get paid,” Burkus asserts that salary secrecy is much more detrimental to staff morale than complete openness.

The most frequently voiced reason for secrecy is that, in Burkus words, “If everybody knew what everybody got paid, then all hell would break loose.”

If Employee A discovers that her compensation is significantly lower than Employee B for very similar responsibilities and tasks, Employee A, and all the other “underpaid” employees, could storm the bastion of human resources demanding equity. Or some might quit. In either case, the employer ends up in a bad situation.

Burkus points out that silence and secrecy works for the employer and against the employees. The company saves money by paying some staff much less than their colleagues and perhaps the average for particular jobs in the relevant labor market. Secrecy creates information asymmetry, an economic concept where one party to an agreement has much more information than the other party. If every employee knew salaries for all of their colleagues, every employee could negotiate his or her salary from a position of knowledge.

Discrimination is another reason Burkus advocates transparency. Buried in salary information could be evidence of discrimination on many counts – gender, national origin and so forth. The plight of women in the workplace is an old and obvious example; female teachers used to be paid far less than men because the men had families to support. In 2016 the AAUW  reported a 20 percent wage gap between women and men.

Even if employees appreciate the purported advantages transparency offers, would they embrace this policy in their own workplaces? The idea of transparency did not originate with Burkus. A 2011 Atlantic article by Daniel Indiviglio brings up the same pro-openness points Burkus advocates. An article in Payscale differentiates between complete transparency – salaries are posted on the company intranet – and a well-defined compensation philosophy, where the factors that affect salaries are elucidated and communicated to staff.

Some private companies — SumAll, Buffer and Whole Foods (which is now part of Amazon), among others — have tried full salary transparency. Everyone knows what everyone else makes. How well does transparency work in practice? Both SumAll and Buffer are smallish, newish start-ups, with millennial-heavy staffs. Both companies make a point of describing company culture on their websites. Buffer has a blog that describes the evolution of their commitment to “default to transparency.” Dan Adkinson, SumAll’s founder said that “SumAll employees regularly get offers from companies like Google and Facebook and turn them down because they’d rather work in SumAll’s open salary culture.”

How far will the move towards transparency go? Perhaps as millennials constitute a larger share of the workforce they will push to spread this gospel to more companies, and not just start-ups. This generation of workers is far more familiar with, and accustomed to, sharing personal information publicly on social media. Even if companies do not go as far as posting salaries on the break room bulletin board, revisiting compensation principles and sharing that information with staff could be more prevalent in the future.