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Should we compare pay slips? The inequality of earnings

25 April 2017

10:03 AM

25 April 2017

10:03 AM

The most open of folk, who spill saucy secrets about themselves, clam up when asked how much they earn. Revealing your salary, especially to colleagues, is taboo.

Conventional wisdom says that knowing fellow workers’ salaries sows discord. I know first-hand how explosive it can be to learn what people you work with get paid.

I’d been promoted to a senior management role where I needed to know everyone’s pay. On my first morning my new boss entered my office with an armful of employee files and told me to read them. Closing my door, he said he would return to take me to lunch with a bottle of red wine, which he added, I might need.

The files made hard reading. Time and time again, I discovered that lazy or incompetent colleagues made more than dedicated, industrious people at the same level, many of whom were my friends. When I’d finished I was seething. My empathic boss had predicted my reaction – he’d felt the same way when promoted.

Salaries are often determined by negotiation skills, one reason women, who are generally more uncomfortable than men in asking for money, often get less. Salaries also depend on the earnings of previous incumbents, and the state of company coffers when recruits came on board.

Companies usually have the upper hand when recruiting and promoting because they benefit from so-called information asymmetry. They know what all their employees and candidates earn. The latter usually only know their own pay.

Most companies foster the taboo on salary talk partly because they want to offer higher wages to attract and keep talent, without making other workers angry. Sometimes gutsy workers resist.

Famously in the 1920s, bosses at US society magazine Vanity Fair sent a memo to writers banning them from discussing salaries. This irked Dorothy Parker, Robert Benchley, and Robert Sherwood, inseparable friends and members of the famous Algonquin Round Table group of New York City writers, critics, actors. The next day the trio turned up in the office with their salaries on cardboard strung around their necks. Those witty rebels could teach us a lesson.

Discrimination flourishes in the dark. Pay transparency could tackle workplace inequality, particularly the shameful discrepancy between male and female pay in comparable roles.

New rules making employers with 250-plus workers publish gender salary and bonus gaps won’t produce an accurate picture of unequal pay, since there are fewer women in top jobs. However, the spotlight on differences in average earnings will get a dialogue going.

Employers could also benefit from pay transparency. Secrecy gives them short-term gains of buying staff cheaply, but there’s a price paid – suspicious staff.

In a 2015 survey of 71,000 workers by job data site PayScale, two-thirds felt underpaid, even though they got market rates. Workers feeling underpaid tend to be unproductive, and are more likely to quit.

Open conversations about money can even mitigate low pay. If an employer explains why it’s paying below average, employees may understand – at least temporarily. More employee share schemes could help – salary becomes less important for people with a vested interest in a company.

In his book, Under New Management: How Leading Organizations Are Upending Business as Usual, David Burkus says studies show that when people know how they’re being paid and how their pay compares to their peers, they’re more likely to to improve performance and be engaged, and less likely to quit.

A few companies are experimenting with pay transparency. One size does not fit all. Some companies post salaries publicly. Others circulate salaries inside the company, post formulas for calculating pay, or post pay levels.

Pay Criteria are debatable but, stresses Burkus, employees should always know what it takes to make more money in their firm, and that there’s an overarching commitment to fairness.

I don’t fancy full transparency since it is also an invasion of privacy. Many would not want colleagues, spouses, or ex-spouses, knowing what they earn. Some workers would fear being judged for earning too much – or too little. Sponsoring a charity run or contributing to a leaving present could be awkward if workmates knew you were raking it in.

But a little more openness could make the workplace happier, and a touch more worker solidarity would keep employers on their toes. A male friend once confided that the woman promoted to replace him was delighted with her higher salary, but did not know she getting significantly less than he had. ‘If only’, he said, ‘she’d asked me what I got, I’d have been happy to tell her.’

Lynne Bateson is a freelance writer and journalist. She was a national newspaper financial editor and consumer columnist.

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