Changing an age old tradition of keeping the salary packages under wraps, it seems, is no longer sustainable as organizations look for better ways to engage and retain the best employees. But how can removing a layer of secrecy from salary packages impact employee engagement and retention? The core principle of transparency rests on honesty and integrity. When employees see that the organization and the leadership are being honest with them at every level, it encourages a culture of merit-based remunerations, parity, and trust.
Letting the market decide
Typically, salaries reflect the negotiation skills of an individual, not how their skills ought to be valued by the organization. Transparency in salaries puts an end to this practice. Every new hire in the organization gets what they deserve for the skills that they bring to the table, not how well they negotiate. In an organization that is transparent about salary packages, the chances of new employees getting an offer that is too low would be next to nil as someone would speak up about it.
Meritocracy that builds trust
Another typical factor that governs salaries is performance reviews - get enough good ones and you get a raise. Open salaries establish a system of pay raise based on merit, not time. This merit based appraisal imbues a trust through the ranks that are difficult to match by any other means. Female employees, who often witness discrimination with as much as a 25-percent disparity in salaries, would also have access to a level playing field in the workplace based on merit, and not on gender, or ethnicity.
Trust that increases retention
When employees start to trust the organization to reward merit instead of a number of years behind the desk, they would rather stay on with the organization than leave for another that does not offer the same. Finding out that their peers make more than they inevitably lead to discord and mistrust that is never easy to compensate for. With open salaries, employees learn to respect the organization that respects their time and skills. They also learn to respect their own time, thereby leading to highly motivated employees with greater efficiency and output.
The downside of transparency
Like everything else in the world that has a good side, there’s a downside of absolute transparency as well. Companies like Buffer, for example, makes the salaries of employees public. If we look at that closely, it may not be a great thing to do. Transparency within the organization may be a good idea, but making remunerations public may lead to a public backlash as well. Moreover, there are cultural and geopolitical considerations to be kept in mind while doing so. In some parts of the world, especially in Asia and Africa with prevailing adverse law and order conditions, making salaries public may even lead to threats to the personal security of employees.
The thing with secrets is that they always get out. When people find out that they’re being unfairly treated by the organization, they leave without a word instead of discussing the matter. Those who must keep them, often live in the fear of inadvertently letting them out on unsuspecting colleagues. However, when an organization adopts an open salary policy, there are no secrets to keep and everyone can sleep easy.