How Knowing Your Coworker's Salary Affects Your Work Environment

Gravity Payments

What if, one day, you show up for work and find out everyone -- from the janitor to the CEO -- knows exactly how much you make, down to the last cent?

How would you react?

You'd probably freak out, that's for sure.

Or maybe it's your employer who'd freak out, if the recent uproar over at Google is anything to go by.

In case you haven't heard, one of the search giant's engineers, Erica Baker, created a document where her colleagues could report their salaries.

Although her manager reprimanded her for it, her coworkers thought she did a good thing, and rewarded her with several $150 "peer bonus" recommendations.

These recommendations are given to an employee who a colleague says has done something exceptionally good, subject to management approval.

Baker then claimed, in a series of tweets, that management blocked the bonus, even though Google insisted pay gaps didn't exist in the company and that employees were free to share their salaries with each other.

Needless to say, Baker has since left the search giant.

This isn't the first time Google has had to deal with something like this. Back in 2010, Dan Auerbach, an engineer, asked his coworkers to share their salaries on an internal website he made, with hopes it would lead to pay equality.

However, he eventually took down the site because Google claimed it didn't have enough security controls to protect employees' personally identifiable information.

Although Auerbach acknowledged the company's concerns, he also felt they weren't enough to justify black holing the site.

Transparency: Is It Best For Salaries?

More importantly though, these incidents beg the question: Should transparent salary policies be the norm, rather than the exception? I argue yes.

As an employee, you probably already know, deep down, there's no real harm in knowing how much everyone makes.

Sure, there might be a few people who'd get jealous and grumble about inequality and unfairness, but as long as the powers that be can prove your salaries are justified (not pulled from thin air),  it's perfectly fine, right?

Your employers might not agree, though. And here's why (from their point of view):

The Cons Of Making Salaries Public

"Fair" pay is expensive.

Let's say Alice and Bob have the same job, but Alice is paid higher. If Bob gets wind of it, he'll use that information to pressure his boss into raising his salary to an amount at least equal to Alice's.

And if he succeeds in getting a raise, what's to stop other employees from trying to do the same?

Employees' privacy gets compromised.

It's the unspoken rule of the office: If you know your coworker's salary, it's practically the same as knowing details about his or her sex life.

It makes for great conversation in certain social contexts, like drinking parties, but it definitely falls into TMI territory.

Company integrity might get called into question.

If, in fact, the salaries were drawn up from an elaborate game of pin the tail on the donkey, can you imagine how everyone in the company would react?

Competitiveness might get eroded.

Many companies claim its pay structures form part of its trade secrets.

In other words, if a company leaks salary information into the world, it might as well leak everything else that helped it become successful.

Human nature is what it is.

Let's face it: We don't like it when other people get a leg up on us.

The moment we find out someone earns more than us, no matter what degrees we may or may not hold, our egos get blown to smithereens.

Why is this person earning more than me? What's the point of working hard? Should I find another place to work where my efforts will be appreciated?

The Pros Of Making Salaries Public

It's important to understand the cons of transparent salaries, so we can make a stronger case for the pros.

It's also important to gear those pros toward employers, since they're the ones who have the direct, ultimate power to decide whether salaries should be made publicly available or not.

If you want to persuade your boss -- and your boss' boss -- to consider sharing salaries, tell them the following:

- Transparent salaries improve productivity.

According to a Glassdoor research report, employees actually work better when salaries are transparent, as long as the salaries make sense and are administered fairly.

If employees are motivated, they're more productive, and therefore contribute more to the bottom line.

If they contribute enough to the bottom line, they can eventually compensate for any across-the-board increase in salary expenses.

- Salary non-disclosure agreements are technically illegal.

Since 1935, the National Labor Relations Act has protected employees' right to discuss work-related matters that affect them, including compensation.

Also, there's the Lilly Ledbetter Fair Pay Act of 2009, which gives more leeway for women to sue employers in cases of gender-based pay discrimination.

And if employers think these laws are completely toothless, they should think again.

In 2013, Lyn Teare won a case against her previous company after getting fired for inquiring about salary distribution.

- Companies have already begun to implement "transparent salary" policies — with great success.

There's Buffer, which disclosed not only individual salaries, but also its formula for arriving at such. There's SumAll, a tech company where everyone knows what everyone else makes.

There's Whole Foods, which has been transparent about its compensation since 1986.

And this is just the tip of the iceberg.

Universities and government offices regularly post employees' salaries online, while Wall Street's industry publications have league tables on banker's salaries.

- The quality of hires goes up.

In the Aljazeera article linked above, SumAll founder Dane Atkinson admitted its transparent salary policy turned off some potential hires.

But those who continued on proved they were great cultural fits for the company, and therefore became vital to SumAll's success.

- Culture becomes more open.

When salaries are displayed for the entire company to see, it's with the understanding that no one will misuse that information for self-serving purposes.

This implicit trust in the employees can contribute both to engagement and overall job satisfaction, which in turn can help the company weather through tough times.

- Employees will sniff out salary information anyway, NDA or no NDA.

Even if they promise not to disclose their salaries on paper, what's to stop them from discussing the same out of management's earshot, or looking up ballpark figures on sites like Glassdoor, PayScale and SalaryExpert?

How to Change Company Policy

From these points, we can safely say transparent salary policies benefit employers as well as employees.

At the same time, we shouldn't be too quick to incorporate a change as significant as this into company culture. Before we do so, we need to:

- Assess the company's readiness for transparent salaries.

As this LinkedIn article points out, transparent salaries won't work for every company.

Since companies like Buffer already had an open culture to begin with, it didn't take them long to adjust to their new policy.

However, if your company has a stiffer, more traditional culture, transparent salaries will need more time to work their magic.

- Pilot test it first.

Before Buffer publicized its salaries, it first tested its idea at an internal level.

Based on employees' feedback, it adjusted its salary formula to reflect fairer compensation.

You can ask your boss to do something similar, though it might be trickier if your company doesn't have a definite formula for calculating compensation.

- Gather honest employee feedback.

Another option is to conduct a company-wide survey on salary transparency.

Explain what it is, how it will affect the employees and why they should take time to answer the survey.

Ask them thoughtful questions, like what will make the policy work, what will make it fail, where they'd prefer to have their salary disclosed and other concerns.

- Note any changes in the company after the policy's implementation.

If there are any improvements in company metrics after salaries become transparent, write them down for management.

They'll need that information to decide whether the policy should be continued or not, so take good notes.

Salary transparency is a complex issue and should be treated as such. The pros may outweigh the cons, but both should be considered in order to execute the most effective transparency policy for your company.

Meanwhile, let me know what you think of "salary sharing" in the comments!