I’ve seen a lot of media coverage in the last couple weeks regarding one former Google employee’s effort to bring more pay transparency to her workplace by creating a spreadsheet for co-workers to share their salary information with one another. Since that story broke, the commentary has been along the lines of, “Yes! You should do this, too. Just tell everyone what you make. It will work out great.”
I understand the motivation. Everyone wants to ensure they’re being paid fairly. On its face, battling against potential pay inequity by openly discussing pay with co-workers sounds like a valid solution. But here’s why it’s actually a terrible idea.
Compensation Is Not That Simple
Salaries typically fall within a range, rather than being a set number for a specific position. Different employees working the same job will hopefully be somewhere within that range, but won’t necessarily have identical salaries.
That’s not how employee compensation works. There are many factors that may have an impact on someone’s compensation — years of experience, special skill sets, certifications, management experience, performance, etc.
Unless you’re planning to ask everyone to share their resumes and performance evaluations along with their salary, you can’t possibly know all the factors that may have impacted a co-worker’s compensation compared to your own.
If companies are too close-mouthed about how they set compensation … they risk losing their best employees over a misunderstanding.
Your employer is also hopefully comparing pay data at your organization with similar employers competing for the same talent in your city — what’s called a “labor market.” Employers define labor markets using geography, industry, the size of the organization and a number of other facets that can have an impact on compensation for employees. A single organization may be competing for talent in more than one labor market.
For example, in Seattle, the tech talent pool is highly sought after by companies ranging from small startups to the tech giants Google, Microsoft, Amazon and Facebook. If you employ software developers and other related workers, you may have to be more competitive with pay packages for that set of employees than you would be for other departments — human resources, sales, marketing, etc.
So, a manager in engineering likely won’t make the same salary as a manager in human resources. You don’t have to like it, but that actually is fair. The market for human resource managers simply isn’t as competitive.
We’re Only Human
Do you think things might get awkward if you share your salary openly with your co-workers? It absolutely will. Somebody is going to be making more than somebody else, and if there isn’t an open dialogue happening with your company about why people are paid the way they are, you’re left to figure out why the differences might exist.
Resentment is almost guaranteed. It’s certainly possible that there’s some discrimination at work. It’s also possible that someone has better qualifications than you, and therefore demands a higher salary.
So while I believe transparency around pay is essential, sharing salaries in a spreadsheet isn’t going to solve issues around pay equity. There’s too much room for misunderstanding the data and what it actually is revealing.
Also, some people will just never feel comfortable talking openly about their own pay with peers. What about them? Do they not deserve fair pay if they’re not willing to share with co-workers what they’re currently making?
Us Versus Them Is Not The Path Forward
True pay transparency should be an open dialogue between employers and employees. Storming your HR department to demand fair pay based on what could be misleading data shared haphazardly is unlikely to result in what you really want — fair pay based on the current labor market for your position and qualifications.
What Google (and other employers) need to take away from this is that when you’re not communicating well with your employees about your compensation strategy and practices, and how you as a company are ensuring that pay remains equitable, you leave room for speculation.
People are not always leaving companies because they’re underpaid, but because they believe they are.
And the speculation is unlikely to be favorable. A lack of information naturally leads to a breakdown in trust.
We recently asked our employee survey respondents whether they believed they were underpaid. It turns out 55 percent of those who felt underpaid were actually paid at or above market value. People are not always leaving companies because they’re underpaid, but because they believe they are.
If companies are too close-mouthed about how they set compensation — what data they use, how they determine their labor markets, why employees fall where they do within a range — they risk losing their best employees over a misunderstanding.
And, if pay inequities do exist, being open about how the organization is attempting to remedy those inequities can go a long way in maintaining trust with employees. Salesforce CEO Marc Benioff, for example, recently announced that he’s actively examining any issues that may exist around a gender pay gap at the company by closely examining the salaries of its 16,000 employees.
He has admitted that it may take a couple of years to rectify all the issues, but it’s a first step — and one that he’s making publicly rather than behind closed doors. Other companies would be wise to follow suit and discuss compensation practices more openly.
That doesn’t mean posting everyone’s salary up on the wall, but it does mean being proactive about discussing compensation with your employees. Keeping it secret does far more harm than good.