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Friday, April 11, 2014 - 3:34am

WORKING: Sharing Employees' Salaries Might Make Them Work Harder

Updated: 8 months ago.
If you knew how much money all of your work colleagues make, would that irritate you? Or might that knowledge spur you to work harder? It may seem a silly question, but a new study from Cornell University found it’s not. In fact, openness around pay can boost productivity. (Photo Courtesy of Marius Muresan via freeimages.com.)

If you knew how much money all of your work colleagues make, would that irritate you? Or might that knowledge spur you to work harder?

It may seem a silly question, but a new study from Cornell University found it’s not. In fact, openness around pay can boost productivity.

“It creates greater transparency,” said Brandon Smith, who studies and advises companies on workplace culture and communication. “People eventually get clear on what’s expected of them. They know how people get rewarded, and so then they can model that. That’s where we see the increase in performance. There’s a greater clarity on what’s expected.”

Smith said salary transparency also will quickly eliminate wage gaps between women and men.

“Now no longer are you going to pay Susan 70 percent of what you pay Bob,” said Smith, a business professor at Emory and Georgia State universities. “It’s going to be quite obvious, and looking at it in the face, you’re going to change all that and make it even.”

Of course, such openness around salaries is tricky, particularly when people doing the same or similar jobs are paid differently. Smith said some of that disparity comes from what’s called “salary compression.”

Basically, companies have to pay new workers more initially just to get them in the door, and sometimes that’s more money than long-time employees are making. Smith said organizations that are open about pay then have to go back to those existing employees and be honest about the additional money.

Do they have to subsequently bump up the pay of those employees?

“You don’t have to, but they’re going to be upset if they find out you just hired somebody and paid them that much more,” he said.

Still, Smith said he recommends organizations consider more transparency about how much they pay employees.

“The world that we’re living in--and the way that the next generation has been brought up--that line between private and public is so blurry,” he said. “You’d be really well-advised to be leading that charge versus trying to fight it.”

This is all a timely conversation. The U.S. Senate last week debated whether employers should be allowed to forbid their workers from talking to each other about their pay. NPR’s Jennifer Ludden reported many companies require employees to sign an agreement that they will stay quiet about their compensation or face punishment or dismissal—despite federal law that makes such punishment illegal.

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