Human resource management principles and practices

¶ … secret and open salary information policies in which the author argues in favor of an "open" policy. Attempt has been made to discuss both sides of the picture and the conclusions have been drawn after a thorough analysis of the arguments.

Salary Information: Secrecy or Openness?

A case can be made both for and against a secret as well as an open pay policy. That is why we find almost an equal number of organizations that follow either of the two systems. There are surprisingly large numbers of organizations, particularly in the private sector, that not only keep the salary information of their employees secret but also require the staff to keep such data under wraps. Punishment for release of pay information in these companies is often severe and can even lead to dismissal. Although there is always some merit in a counter argument, I am convinced that an open salary information policy has greater benefits while a secret pay policy can lead to serious organizational and motivation problems.

Let us look at some of the arguments that have been put forward by the proponents of wage secrecy and analyze whether there are any merits in these contentions. First of all, it has often been claimed that it is the employees themselves who want their pay kept secret, it being privileged information. This claim is not supported by facts. If it did, why would most public organizations, where the labor unions are usually strong, almost unanimously follow an open pay policy? (Ivancevich, 2001. page 337). Only a very few employees would want to keep their pay secret -- the ones who were hand in glove with a manipulative management, or the ones who were unfairly benefiting through such a policy. The vast majority of employees are in favor of an open pay policy, and there is now an increasing recognition in the corporate world that most employees want an open pay system. (Bartol and Martin, 1989). Moreover, the 'privileged information' argument is a negation of one of the fundamental principles of democracy and open societies: the right to know and the freedom of access to information. It is a wonder how the management of so many companies is flouting this very important cornerstone of a free society in the U.S. Of A, the torchbearer and bastion of the free-world.

It can also be said that pay-secrecy saves embarrassment to underpaid or under-performing employees. On the contrary, to my mind, one of the most compelling motivating factors for most people is the desire to move away from pain. If embarrassment at being underpaid were a painful experience for an employee, he would try his utmost to move away from such a situation. Such an effort on the part of an employee can be harnessed effectively by the organization for mutual benefit.

Another argument that has been advocated by supporters of a secretive pay policy is that pay secrecy lessens the opportunity for comparisons among employees and the exposure of perceived inequities. It has been said that no pay system will ever be perceived as fair by everyone and that knowledge of what other employees are being paid, would only highlight the perceived inequities and cause disruption in the workplace. (Robbins, 1996). This is again, contrary to what is most likely to happen. In the absence of open information, inaccurate perceptions about others pay are almost inevitable. Most researches indicate that employees usually overestimate their peers' and their subordinates' pay and underestimate the pay of their superiors. (Ibid.). Inaccuracies in perceptions are thus, likely to magnify rather than reduce a sense of inequity.

Perhaps the most important benefit of an open pay policy is that it helps to promote a culture of openness in the organization and a level of trust between the management and the employees. This, in turn, would help in opening up the lines of communication in an organization and could prove an important catalyst in improving motivation and productivity. Many corporate leaders support this view. For example Robert Howell, CEO of Telecheck Services believes "an open pay system is a means of improving productivity." (Quoted by Ivancevich, in Human Resources Management, page 337). The improvement in productivity is likely to occur when the employees are convinced that the management is fair in rewarding its employees. This is only possible in a transparent rather than a secretive system.