Pay Secrecy

November 27, 2006

Pay Secrecy Debate

Dr. Davison

Compensation decisions are a significant part of running a company. When deciding how to align compensation with the organization, it is important to consider all options and determine the best fit for the overall organizational strategy. One option that an organization must consider is whether or not to have pay secrecy as a policy. If an organization chooses not to have pay secrecy it is imperative that the organization keeps its salary chart in order. There are many advantages and disadvantages of pay secrecy.

The most important advantage of pay secrecy is to protect the privacy of individuals. If pay secrecy is not a policy then salaries can become public information. Companies that choose to have pay secrecies are usually ones where salaries vary quite a bit within a pay scale. There are many reasons this could happen. It is a lot of work to develop a salary chart and keep it clean. Some companies, especially ones who have already let the salary chart get out of hand, have pay secrecy as a policy because it is easier then keeping the salary chart straight.

In some cases, if pay secrecy is not a policy there could be conflict among employees. For example, a person could make more just because he negotiated harder and either was hired in at a higher rate or was able to receive higher increases. It's possible that the other person never asked for a raise. Another example that would cause conflict would be when an employee has been employed for many years in an organization and a new hire comes in making the same salary or possibly even more. In addition, someone may make more just because the previous job that they held was a higher paying job. All of these examples could cause conflict among employees.

When companies have locations in different geographical areas, pay secrecy would be an advantage rather than a disadvantage. Geographical pay scales are different depending on many things like competition, market base pay, minimum wage, and the available labor market. Pay secrecy would help eliminate employee conflict in this situation because it would be in the best interest of the organization that employees do not have the knowledge of employees pay at other locations. Employees don't want to hear that they are being paid