mišljenja i zapažanja o društvu i životu u Hrvatskoj

The Secret Salary

The Secret SalaryFor a society in which so much revolves around money, money surprisingly somehow turns out to be a dirty conversation subject. While comments such as “everything is so expensive these days” or “how much did you pay for the bike?” are generally accepted, others would at least raise eyebrows: “no, no, the Chardonnay is a bit too expensive for me, I’ll have the other one” or “how much do you earn?” I imagine the title of the article gives me away: this last question is the one I would like to talk a little bit about.

If you work in the public sector, your income is public. If you’re in a union, your income is quite likely public. If you live and work in Norway, your income is public. Yes, that applies to all Norwegian tax payers. If you are a public official in most democratic countries, not only is your income public, but also the value of everything you earned prior to entering into service, regardless of how you earned it. However, a lot of private companies try to put a veil over salaries, sometimes informally, sometimes as formally as through explicit contractual obligations. What happens under those conditions?

Well, to begin with, information is power, and this kind of information very much so. To spare you from the temptation of trusting me on this, consider just one example: an employee who is brilliant at his job might spend years working in ignorant bliss in an underpaid position simply because of lack of awareness that others make significantly more money than him in similar positions. Secret salaries create an imbalance of power between the employer and the employee: employers can know employee salaries and the company’s finances, but in many private companies, employees can at best hear rumours about either.

This brings me to the second point, which is that even in companies enforcing strict silence about salaries, people are people: they talk. Such policies have two possible effects: some employees will refrain from talking about their salaries, but many employees will be in peril of a distinct kind of frustrating trap as a result of talking. Basically, when people talk about salaries in companies where salaries are a secret, it is to be expected that some will feel they should be better rewarded for their work compared to their colleagues. However, they will not be in a position to confront management with that because they weren’t allowed to know other people’s salaries in the first place. This is fertile ground for frustrations to develop.

Secret salary consequences for employees are significant. To begin with, money, a key criteria to evaluate a current job or a new job offering is wrapped in a haze of rumour. Most people live from their salaries, but they have to base their wage increase requirements and decisions about job changes on hearsay, rather than facts. The damage people suffer because of this is life-changing: it makes it very hard for people to optimise their salaries with regard to their capabilities and market conditions. They earn less than they should or overshoot with their demands and miss opportunities they should have not missed. People can be less motivated to work towards a promotion because they don’t know how much their boss earns, which introduces doubt and undermines performance: “it’s Saturday night, I’m still at the office, struggling with delivering for the deadline…will it be worth it if it gets me a promotion?”. Not to say that people work only or even primarily for money – some certainly don’t, but income is nevertheless an important factor in most people’s lives.

Secret salaries – especially ones mandated by contracts – create excellent conditions for discrimination according to e.g. gender, skin colour, nationality or any other of the (sadly) widely present forms of discrimination. I would venture a guess that there is much less discrimination in terms of income in public hospitals, than in private companies with secret salaries. In general, secrecy is very rarely an agent of justice – in this case, of just earnings according to value provided to the company.

Clearly, the situation is not black and white: if it were, it would not be a controversial subject. To a degree, money is related to social status, so low-income workers are in a way protected from additional negative side-effects of their lower wages. People with higher income might become targets of thieves and burglars if their income was widely known. Others might go after potential spouses not because of character or appearance, but because of their money: this puts something of a burden of doubt on people who earn and have more and makes their lives more complicated. Secret salaries might make an underpaid employee happier (at lest temporarily) because of a lack of awareness of other people’s income. Finally, there might be an evolutionary force at work: companies which wield the power of secrecy to their (short term?) benefit might be able to gain an advantage against their competition that way.

I don’t think, however, than anyone looking at these arguments for secrecy could see them justifying a salary blackout, at least not without a personal stake in it.

Salaries need not be posted on the Internet, but at a minimum, anyone should be able to disclose his or hers salary at will. In my view, it would be good for both companies and their employees to make key financial information (including salaries) public within the company. I should add that there are extremely successful companies out there which did very well by taking transparency far, far further. It is my opinion that on a fundamental level transparency as a value is generally beneficial. As such, transparency and openness should be a default approach and secrecy only used exceptionally. Salaries which are not secret significantly lessen the impact of individuals’ ability to negotiate – an often irrelevant skill with regard to skills necessary for the job. That leaves less manoeuvring room for either side of the negotiation table and makes it possible to better match capabilities with compensation. Power should never be handed into someone else’s hands without very good reasons and this power of information should not be granted easily to companies, especially not as a default. Instead, people should be given room to grow as adults. We are not doing anyone a favour by sparing them from coping with how society values them as contributing members. We are treating them as children, preventing them from growing at best or, at worst, trying to exploit them.

Comments on: "The Secret Salary" (2)

  1. Josh said:

    There are many market driven qualities that some people can possess which might be clear to employer but not to the employees. Employer often needs to make a decision based on a lot of factors that employees would never think of. Do you think that employees would really accept the fact that some of their coworkers contribute more to the company than they do? Also I would say that negotiation is very important skill no matter what person does. Having public salaries opens endless discussions “why he has 150 more than me and I am (in my head) a better salesmen”.

    This all takes too much time and effort from the employer and he is the one defining rules. So simple rule to make is to keep salaries as a secret and save a lot of time.

    • Hi Josh, thanks for the comment. You’ve made a few points so I will take them one by one…

      Even if employers are much better at recognising employee qualities than employees themselves (and I don’t think that that is necessarily the case), known salaries would certainly act as an incentive for employees to learn. They would hear “yes, she’s better paid than you because of X, Y and Z” and with each such conversation they would be better able to gauge the value of X, Y and Z and could also quickly start thinking along the lines of “what could I do to be better at X or what could I bring to the table instead?” Known salaries act as a catalyst to that kind of process, not as an inhibitor and this is to the benefit of employers as well, at least the ones who dare to apply the approach.

      As for my opinion about whether employees could look beyond their egos and hear the actual message…we are not born with any of the personality traits that constitute what we call “adult behaviour”: we learn them. If you don’t expose people to a situation, don’t give them an opportunity to react, learn and improve, if you treat them as children, then sure, they will act as children. Kids get evaluated every other day until they’re done with formal education: a salary is just one more kind of grade. I don’t think new people coming into the workforce would see it as a cultural change at all. Furthermore, I do believe that any healthy individual who moved to Norway where income publication is mandatory by law would quickly adapt and soon enjoy the transparency of the system and the opportunities it provides. If Norwegians suffer from “endless discussions” about salary differences, it certainly isn’t visible in their economy KPIs: they are one of the richest nations in the world.

      Your entire line of argumentation is, I think, following the wrong trail: what employers aim for with secret salaries are thicker profit margins and short-term “simplicity” is just a side-effect, not the other way around.

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