October 24, 2018

'How much money do you make?' Experts are urging workers to ask the taboo question.

Daily Briefing

    Read Advisory Board's take: How should you respond to employees talking about their salaries?

    U.S. workers are very reluctant to share their salaries with coworkers, but some experts are urging workers to open up about compensation to push back against pay inequities, Jacob Passy writes for MarketWatch.

    Why people are hesitant to share how much they make

    In a survey of more than 750 workers, researchers from Harvard Business School and UCLA found that 80% of respondents said they would be willing to pay money to prevent an email containing their salary information from being sent to their coworkers. Further, half of the respondents said they wouldn't tell five of their peers how much they make even if they'd receive $125 for doing so.

    The researchers wrote that people tend to be afraid to ask their coworkers about their salaries "because they understand that most coworkers prefer to keep their salary information private," while others hesitate to ask "because that may force them to reveal their own salaries, which they dislike."

    Further, some employees feel like they don't have to ask about their peers' salaries because they believe they already know what their colleagues make—but that assumption is usually wrong, the study revealed. When asked to guess their coworkers' average salary, only about 25% of respondents were able to guess within 5% of their coworkers' actual average salary. Despite this, 56% of the respondents thought their guess was within the 5% range. In actuality, most guesses were off by about 16%.

    Even so, some experts are urging employees to share their salaries

    Despite the hesitation that so many people feel about sharing their salaries, research has found that salary transparency can actually help women and minorities increase their wages, Passy writes.

    Lydia Frank, VP of content strategy for PayScale, said, "Women face a 'social cost' that men do not when they initiate salary negotiations, regardless of the gender of the person with which they're negotiating."

    But that doesn't mean that salary transparency is an unmitigated good for employees, the Harvard and UCLA researchers wrote. "If an employee reveals to a coworker that she gets paid more, her peers may stop treating her well," they wrote, "or if her manager finds out, the manager may deny her a raise."

    As such, the researchers suggest that companies wishing to create policies around salary transparency should allow employees to report their salaries anonymously (Passy, MarketWatch, 10/16).

    Advisory Board's take

    Micha'le Simmons, Senior Consultant, HR Advancement Center

    Employees are increasingly being encouraged to talk about their salaries, not only via articles in publications such as MarketWatch but also through popular websites such as Glassdoor and Payscale, as well as through state-based pay transparency initiatives.

    “Simply ignoring the trend toward transparency isn't a viable option”

    Salary transparency is likely a boon for employees—especially for women and minorities, who may be better able to discover and resolve unfair pay gaps. Employers, however, often worry about pay transparency, fearing it could create discord between higher- and lower-paid employees.

    That is, admittedly, an uncomfortable prospect, but simply ignoring the trend toward transparency isn't a viable option. Rather, employers need be prepared to talk with employees about the factors that influence their pay.

    Two particular issues are likely to arise:

    1. How do you address staff who discover they're paid less than their peers?

    Ideally, if you're differentiating pay based on performance, employees should know where their performance stands relative to their peers—and how they can improve. This requires you to have clear performance standards that clearly spell out what differentiates between different levels of performance. Any discrepancies in pay should be justified, whether they're based on tenure, performance, or other factors. If you're looking to ensure that performance expectations are clear and that leaders can rate staff accurately (and back up those ratings) see our report on Must Do Steps for Trustworthy Performance Evaluations and our toolkit, The Manager's Guide to Accurate Evaluations.

    Even more importantly, you want to make sure that staff get feedback on where they stand more than once a year. To learn more about how providers can shift from the traditional, annual review approach to a continuous feedback model, check out our research report on how to Shift from Annual Performance Management to Continuous Feedback.

    2. How do you respond to high performers who feel they should be paid more?

    While health systems may offer pay-for-performance incentives in theory, in practice, pay increases are usually not meaningfully differentiated based on performance. That lack of differentiation can be discouraging for high performers who discover they're getting paid the same as low or average performers.

    This is often due to limited budgets which inhibit many HR departments from giving top performers outsized rewards. However, in order to move closer to true pay-for-performance with these limited funds, organizations will have to ensure there's a more normal distribution of staff across the performance ratings—with most staff not receiving the highest rating.  And they'll have to decide to not reward the lowest performers. (See our report on the Best Practices for Ensuring Individual Performance Goals Motivate Staff Year-Round to learn more.) Because of limited merit pay budgets, some organizations are even looking to get rid of merit increases all together, and instead are looking to provide rewards for strong performance throughout the year.


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