Personal Finance

Should You Tell a Co-Worker What You Make?

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One of the more commonly touted tactics to combat wage inequality is to advise people to openly discuss their salaries with co-workers and perhaps even friends.

Last week President Barack Obama signed an executive order banning federal contractors from retaliating against employees who discuss salaries at work. In an article discussing the move, Fortune magazine suggested that we all break the American taboo of discussing our salaries. The idea is that if we are more open to discussing our salaries with friends, family and co-workers, it will pave the way for greater wage equality in our society, because people who are paid less can “ask for a raise” or at least advocate for themselves.

While I don’t dispute the notion that transparency can prevent people from being underpaid, the chaos that can be caused by people sharing their salaries suggests that there needs to be a better way to share that information.

Several years ago I was a junior executive at an IT services company. In a nutshell, Fortune 500-sized companies would outsource a portion of their IT operations to us. This could mean running a global data center operation for a client, providing infrastructure support for a video game studio, managing infrastructure for a financial services company, etc.

While we were a part of a multi-billion dollar company, we were a small subsidiary that operated more like a smaller company than the multinational conglomerate we were part of. As a result, the phrase “everyone knew everyone else’s business or at least thought they did,” was a pretty accurate statement. Needless to say, this sort of gossipy transparency translated to salaries.

A Real-life Example

One of the first things I had to do when I first stepped into the role was fix one of our operations in California, which suffered from a combination of morale and operational quality issues. On the morale side, one of the biggest gripes was salary; people were angry because salaries were all over the place. You could have an instance where someone made less than an employee they managed, or other resources had inexplicably high salaries that didn’t make sense given their responsibilities.

It was one of the more chaotic and unhappy work environments I’ve ever stepped into. The transparency didn’t lead to people getting paid fairly; instead, it was a source of jealousy and envy, not to mention outright accusations around why person X made more than person Y.

Ultimately it’s not so much whether people know how much their co-workers make, it’s whether management is invested creating a work environment where people are paid fairly.

My solution to the problem was to clearly define roles and levels within each role (e.g. you could be a level 2 engineering lead), and pay bands for each. Next I had my management team evaluate each worker and slot him or her into a level; if they made less than the appropriate pay band we gave them a back-dated raise. We’d also talk to them about how and why rated them at a certain level, and give them a plan (we’d pay for any necessary training) to help them advance to the next level and get a raise.

Finally, I published the pay bands so that people knew what the requirements were for each pay level and what the pay range was.

This only partly solved the problem. Everyone still knew what everyone else made, and jealousy often overruled logic in terms of people deciding who did and didn’t deserve to make more than they did. Over time I began to realize that it wasn’t so much salary inconsistencies that made people angry, as it was the idea that someone was being paid more than they were, regardless of the reason.

Admittedly, sexism drove some of the envy in that workplace (the one woman on a team of 60 was one of the highest paid), but overall, it was mostly people griping over the fact that they didn’t think someone else deserved a higher salary, even if that person had qualifications they didn’t.

At other locations where management had always encouraged people not to disclose their salaries (it was never a policy, just a suggestion), we never ran into the same problems. As we started to encourage people to do the same in California, as the team turned over, etc., the problem eventually went away.

A lot of people shared their salaries at our corporate office and we had similar issues with jealousy, with no impact on wage equality, especially when it came to women.

Motivation to Be Fair

When I took over the IT services business unit, I noticed that one of my most productive managers (in terms of the dollar value of the business she ran for me) was being paid similar to men who worked for her, and earned $10K-$20K less than her peers. When I put her in for a raise the amount was questioned by my superiors “this is a big increase, isn’t she already doing the job, does it matter if her peers are being paid more?” It took me sharing with them that she was looking for another job to scare them into pushing the increase through.

Knowing she was being screwed over salary-wise didn’t exactly help her, having a manager who knew it was wrong and who was willing to advocate for her did.

The other aspect of openly discussing salaries is that it leads to a rumor mill, and misinformation always trumps the truth. The proverbial “world around the campfire” with respect to the salaries of several people (myself included) was flat-out wrong, which led to all sorts of unnecessary internal tensions, including resignations.

I’ve been a consultant since the early ’00s for a variety of companies, and I’ve yet to see a situation where open disclosures of salaries doesn’t generate a lot of envy and hurt morale. I’ve suffered through a couple of pretty bad situations that started with someone accidentally putting the team’s salaries or consultant billing rates on an internal website.

I call it the “bigger piece of cake syndrome”, where the logic around why someone is getting paid more is trumped by something similar to the feeling a child has when they get upset over their parent giving a sibling a slightly larger piece of cake.

All that being said, situations where I’ve noticed wage transparency not hurting the work environment, friendships, etc., were the low-wage jobs I worked in college and high school, and the first jobs my friends and I had coming out of college. However, where I think those situations differ is that those work environments aren’t as competitive, people are in the same boat and/or the stakes aren’t as high.

Why I Stopped Revealing My Income

Higher wage, professional environments, and/or situations where your co-workers have families to support can change things significantly. I can’t tell you how many times I’ve heard someone invoke the fact that they have a family as a reason they should get more than someone else, while completely ignoring the fact that someone else had more responsibility, was more productive, etc. It’s the type of response that taught me to stop disclosing my own income.

A better solution to sharing wage data is one that’s employed by my current client: different roles have levels assigned to them, the levels have pay bands assigned to them and based on those two data points you can estimate your co-worker’s salary range.

But no one talks about their salaries or levels, UNLESS something comes up where say only people a certain level and above can do certain things, approve certain activities, etc. But even in that case, people only disclose their level.

Despite all that, I still regularly hear people express irritation at someone else’s level, that it’s not fair that someone else is the same level as they are, etc. I’ve seen it at other clients too, because even if people aren’t openly discussing salaries, people often have a pretty good idea of who makes what.

While I don’t support implementing policies that punish people for discussing their salaries, if someone who worked for me were to ask my opinion on the topic I would suggest keeping that information private due to the chaos it could cause. I think a better approach is for a company to publish the pay bands for various roles, and for each group to anonymously disclose the range of bands for the various positions in that department. This solution provides the transparency that people need to advocate for themselves, while sidestepping a lot of problems.

As for me, the only person I’ve shared my current salary with is my girlfriend, because: A) we consider ourselves un-officially married B) we make financial decisions/plans/look at investments and business ideas together C) I do her taxes and help plan her retirement investments, so it’s only fair.

Beyond that, I don’t see the value of disclosing that information to anyone.

This post originally appeared on The Billfold.

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Image: Wavebreak Media

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