Salary secrecy or the taboo of talking about your compensation among colleagues is slowly falling by the wayside as younger generations embrace pay transparency in the workplace.
“Younger workers are rewriting the script here,” Bankrate.com analyst Sarah Foster told CNBC last year. “The workplace landscape is much different for these younger workers, and all this is adding up to reshape the workplace environment.”
The generational divide when it comes to wage discussions in the workplace is huge with a Bankrate.com survey finding that the percentage of workers who shared salary information with a coworker or other professional contact had a great disparity by age:
- Gen Z (ages 18-25): 42 percent
- Millennial (ages 26-41): 40 percent
- Gen X (ages 42-57): 31 percent
- Baby boomers (ages 58-76): 19 percent
Since many companies are managed by baby boomers, it is not surprising to find unwritten company policies of not discussing wages at work, or even written policies in place, but it may surprise some employers to learn that these tactics could land their company in legal trouble.
Employees’ Rights to Discuss Wages under the National Labor Relations Act
In the modern workplace, discussions surrounding wages and compensation are topics of increasing significance.
As an employer, it’s essential to understand the rights and limitations surrounding these discussions to maintain a positive work environment and comply with labor laws, especially the National Labor Relations Act (NLRA).
The NLRA, enacted in 1935, protects employees’ rights to engage in “concerted activities” for collective bargaining or other mutual aid or protection.
The Act extends to discussions regarding wages, benefits, and working conditions, explicitly safeguarding employees’ rights to discuss these topics, whether orally or in writing.
“Policies that specifically prohibit the discussion of wages are unlawful,” says the NLRB. “You may have discussions about wages when not at work when you are on break, and even during work if employees are permitted to have other non-work conversations. You have these rights whether or not you are represented by a union.”
The bottom line is that employers cannot legally prohibit employees from discussing wages, even if there is a written policy forbidding such discussions. The NLRA supersedes any internal policies that restrict or discourage wage discussions.
Attempting to prevent employees from discussing wages can lead to legal trouble, including charges of unfair labor practices and potential penalties.
Some big-name companies have been tripped up by the “compensation discussion in the workplace issue: including:
- Chipotle Mexican Grill: In 2015 the NLRB upheld an administrative law judge ruling that found a Chipotle Mexican Grill restaurant in violation of labor laws for threatening and interrogating employees who discussed their pay. The case involved an employee who was fired in 2014 after participating in strikes demanding higher wages and discussing his pay with coworkers. Chipotle was ordered to offer him his job back and to compensate him for lost earnings and benefits.
- T-Mobile: Also in 2015, an administrative law judge held that T-Mobile’s email policy, confidentiality policy, and wage and hour complaint procedure, along with the threat of discipline for failing to adhere to any of these policies or procedures, were illegal under the Act because they restricted the employees’ ability to disclose or discuss basic workplace issues, such as wages and hours.
- Lowe’s: In 2018 the home improvement retailer Lowe’s was found to have violated the NLRA when it forbid its workers from discussing their pay.
Proactive Measures to Foster a Positive Relationship with Employees
To foster a positive relationship and open communication regarding salary issues, employers can take proactive measures, including:
- Transparent Compensation Practices: Communicate the company’s compensation philosophy, pay scales, and benefits packages to employees. Maintain open lines of communication with employees regarding compensation-related matters. Utilize multiple communication channels, such as regular team meetings, newsletters, or company-wide emails, to provide updates on compensation policies, changes, or adjustments.
- Regular Salary Reviews: Conduct periodic salary reviews to ensure employees’ compensation remains competitive and fair.
- Anti-Retaliation Policies: Establish policies that protect employees from retaliation when discussing wages and encourage reporting of any concerns.
- Training and Education: Provide training sessions to educate managers and HR personnel about labor laws, including the NLRA and employee rights.
- Performance Reviews and Feedback: Provide employees with constructive feedback on their performance, acknowledging their achievements and areas for improvement. Linking performance evaluations to salary discussions can help create transparency and understanding.
- Employee Surveys and Feedback Mechanisms: Conduct regular employee surveys to gather feedback on compensation-related matters. Allow employees to anonymously share their thoughts, concerns, and suggestions regarding compensation.
- Training in Salary Negotiation and Financial Literacy: Empower employees with the knowledge and tools to effectively negotiate salaries and understand their total compensation packages. This contributes to a more informed workforce.
- Employee Recognition and Rewards Programs: Establish a comprehensive employee recognition and rewards program that acknowledges exceptional performance and contributions. Recognize and reward employees through non-monetary incentives, such as public appreciation, certificates, or additional professional development opportunities.
- Collaboration and Employee Involvement: Involve employees in decision-making processes related to compensation, whenever feasible. Seek their input and feedback on matters like pay structures, benefits, or performance metrics.
Fair Compensation Strategies are Crucial to Workplace Harmony
Employers that have created a fair compensation strategy for their company are less hesitant to have their workers discuss pay in the workplace.
Creating a fair compensation plan requires careful consideration. Some strategies to ensure equitable compensation include:
- Market Research: Conduct regular market research to determine industry standards and ensure competitive wages.
- Job Evaluation: Implement a comprehensive job evaluation system to assess the value and responsibilities of each position objectively.
- Pay Equity Analysis: Regularly review compensation data to identify and address any gender or minority pay disparities.
- Performance-Based Pay: Incorporate performance-based pay structures to reward employees for their contributions and achievements.
“It is important to understand the significance of a well-defined compensation strategy. A good compensation strategy can help build a competitive and effective organization, while a poorly developed strategy can lead to decreased performance and unfulfilled employee potential,” says the HRM Handbook.
Best Practices for Salary Decisions and Discussions
Rather than embracing a culture of “salary secrecy” in the workplace, employers should look toward best practices for salary decisions and discussions.
Here are five important building blocks for a company’s HR policy and procedures to help with this important workplace issue:
- Clear Compensation Philosophy and Structure: Establish a well-defined compensation philosophy aligning with the company’s goals, values, and market competitiveness. Clearly outline the principles, criteria, and factors that guide salary decisions, such as job responsibilities, performance, skills, and experience. Create a transparent and consistent salary structure that provides clarity on pay ranges, progression, and growth opportunities.
- Objective and Fair Evaluation Methods: Develop objective and fair evaluation methods for determining salaries. Implement job evaluation processes that assess positions based on factors like skills, qualifications, responsibilities, and market benchmarks. Utilize standardized criteria and evaluation tools to ensure consistency and fairness across the organization.
- Market Research and Competitive Analysis: Conduct regular market research to stay updated on industry trends and salary benchmarks. Compare the company’s compensation packages with those offered by competitors or similar organizations. Use market data to inform salary decisions and ensure the company remains competitive in attracting and retaining top talent.
- Performance-Based Compensation: Incorporate performance-based compensation structures that link pay to individual and/or team performance. Implement clear performance metrics, goals, and evaluation systems that objectively measure and reward employee contributions. This approach incentivizes high performance, motivates employees, and provides a fair basis for salary differentiation.
- Transparent Communication and Guidelines: Establish clear and transparent communication channels and guidelines for salary discussions. Communicate the company’s policies, procedures, and criteria for salary decisions to employees. Provide employees with access to information on salary ranges, advancement opportunities, and performance expectations. Encourage open dialogue and ensure that employees understand the factors that contribute to their compensation.
Remember, these building blocks should be incorporated into a comprehensive HR policy and procedures document that is regularly reviewed and updated to reflect the organization’s evolving needs and comply with relevant labor laws. By implementing these building blocks, companies can create a fair and transparent salary framework that promotes employee engagement, retention, and satisfaction.