Transparent pay: Could it work in your company?

 

Profit margins may suffer, but accountability is likely to increase.

 

Few issues provoke as much ire among colleagues as a gaping pay discrepancy. When Pimlico Plumbers made staff salaries public as part of a reality show for Channel 4, communications manager Karl Plunkett says the topic blew up “like a landmine”. Historical contingencies led to “all sorts of little inequalities, hidden from view”, and the atmosphere changed irrevocably when all of this was out in the open. It’s no wonder most managers see transparent pay merely as a short-cut to staff revolt.

 

But a growing number of firms (mostly tech startups, including app developer Buffer and data analytics company SumAll) are now touting the benefits of the public payslip, claiming that it can improve accountability and morale in the long run. So is the final frontier of workplace secrecy about to be breached?

 

There are good reasons for keeping remuneration secret. First, from a financial perspective, transparency dilutes the bargaining power of the employer. Blissfully unaware of their future colleagues’ pay, most new hires expect only a small increase on their previous job – a smart HR move like snapping up underpaid talent from a competitor helps keep margins wide. Knowledge of future peers’ pay drastically improves a job applicant’s hand, meaning salaries edge up to the level of existing staff. 

 

And, as Pimlico Plumbers found, current employees are no less likely to use knowledge of peer pay to their advantage. Plunkett says that managing director Charlie Mullins was quickly faced with around £150,000 of pay rise requests after the new regime was introduced.

 

For SumAll chief executive Dane Atkinson, such issues are a matter of poor implementation rather than a faulty concept. At his firm, salaries are accessible by all through the staff intranet, and employees also meet to vote on the remuneration of each new hire. He recently told Inc.com that this improves accountability and productivity over the long run. “Because it’s so transparent and we have this structure, people understand the threshold to get more money.” Friction is inevitable, but ending the cloak and dagger approach to salaries means everybody knows where they stand, he argues. Difficult conversations over pay come up more frequently, but they’re dealt with immediately, rather than fuelling resentment for years.

 

A strong case has been made by equal pay campaigners. Discrimination is easy to detect under an open pay policy, and is less likely to occur in the first place. It’s even been argued that government should mandate transparent salary polices – listed companies and public bodies typically have disclosure requirements already for very senior positions. 

 

There’s no doubting that the public payslip places a heavy burden on finance and HR departments. But with levels of privacy in the workplace already in decline, it’s something increasing numbers of firms may look into.

 

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