There is often little communication about the wages that individual employees earn in a company. Is that a problem? And if so, how do you approach that?
Are there good reasons for wage transparency?
With pay secrecy – so ‘secrecy about salaries’, the counterpart of pay transparency – people will make assumptions anyway. If you ask people what they think their colleague deserves, for example, it appears that they believe they deserve more than what it really is. That has been proven. In the absence of communication, there is also less clarity about how the reward system works.
And are there any disadvantages?
Employees overestimate the salary of their colleagues and their direct reports. You could then argue for pay transparency. But a recent study contradicts that because there are also side effects. It leads to jealousy towards the one who earns more. And that has been shown to have a negative impact on the willingness to help those colleagues.
Moreover, not all employees are pro-transparent. This is the case, for example, for employees who are more focused on the collective than the individual. This also applies to older employees, to those who attach more importance to social harmony and reputation and those who think that they earn much more or just less than others.
The impact of salary transparency also has to do with the actual salary. If an employee is relatively low in the salaried class, it is not a good idea, just because people will see how much more their colleagues earn. Management will also have to spend more time dealing with employee questions and concerns. ”
What is the right solution then?
What I find much more important than wage transparency is pay communication from three dimensions. Technical because employees understand how the remuneration is determined. Symbolic because it gives a signal about the values of the company. A company that communicates in the right way about pay will also be seen as a transparent and honest company.
And finally, strategic because a company then explains to the employees why they do (not) do certain things. For example, some companies only allow the bonus to depend on the collective results. In this way, they want to combat suboptimal behavior and focus attention on the team. It is good to make that clear too.
How important do employees think about wage transparency?
Research by different organizations revealed that employees are not immediately asking for the salaries of their colleagues. It is essential that there are proper processes surrounding pay communication, that there is involvement of employees, that they can make their complaints known. And also that there is excellent communication about the remuneration strategy and other wage-related issues.
Information about the wages of a colleague
Employees are mainly looking for personalized information. The so-called total reward statement is one of the essential parts of good communication. Employees receive a concise and useful overview of their remuneration package, with specific figures. Employers may not get rid of it with a salary slip. This usually does not immediately provide a good overview because the document was previously drafted in technical terms.
An individualized reward statement is one of the most effective tools for reward communication. Employees can find information about the salary and the benefits package, such as the number of days of vacation, the amounts that were deposited in the pension plan, the death cover, the insurance policies, etc.
What are the recommendations to companies?
The most essential element is that employees feel that they are being rewarded fairly. In our culture, you do this mainly with proper procedures, with employee participation and by allowing them to make known that they are not satisfied. People are also primarily interested in their situation. Use a mix of communication media and keep in mind that some messages must be delivered personally. Have an annual salary interview.
There is still a significant challenge to increase the appreciation of the total package – and indeed around the additional benefits such as pensions, insurance, training. But I note that communication about those benefits is often very dull. For this purpose, companies could hire someone who has experience with ‘perking up and difficult’. Please note: if your company does not yet have your payroll in order, it is a bad idea to communicate a lot.