There’s a major controversy around the issue of whether pay information should be totally transparent or whether there are sound business reasons why pay information should be kept confidential. It appears that there is no right or wrong answer.  It depends upon the situation, context, rationale and implications.  Let me explain:

Internal Transparency – Pay policies should be openly available to employees within the organization, but NOT the pay of the individual.  The pay factors for jobs should be clear, consistent and fair. That means a job’s grade (where it sits in the hierarchy of jobs), range (what is the high, low and mid-point for a job), and whether the job is eligible for an incentive program should be readily available.  Why?  Because the factors for pay should be directly tied to the marketplace, the educational level needed, the skills and experiences required, the level of responsibility, and the level of decision-making.  Eligibility for incentive programs should be tied to the impact on revenue, cost, profit or budget responsibilities.  Once all of these factors are valued and established, job pay should be obvious.

Individual’s Pay Transparency – Each employee should be given the information to understand where they are within the grade level, the range of their grade, and how their performance affects advancement within their grade.  Companies that hide their pay policies and systems damage the trust and performance of their people.

Marketplace Transparency – This is where the question of pay transparency gets tricky.  Why?  Because differences between organizations are too great to compare one to the other:  Size, profitability, responsibilities, expectations, competitive environment, industry practices, job complexities, domestic versus international work, and so on.

New York City and California will soon require jobs that are advertised to provide a pay range, with the minimum and maximum base salary.  Sounds good until you realize that a national search may one day require 50 or more different approaches to laws from each state, city or locality.  In addition, if the work is remote and a person is living in Mississippi, but the job is based in New York City, should the job be paid in New York dollars or Mississippi dollars?  How is overtime handled, which may be different from state to state?  What if the job isn’t advertised, but is offered through contacts of current employees? What if the job is not advertised, but rather is given to a recruiter to find a candidate through their extensive files?

An employer many times will find the pay scale is not in line with the job market and will adjust the advertised pay range up or down.  What happens when the marketplace is very tight and a company needs to raise the new employee’s pay higher than a current employee with less skill but more time on the job?  These new laws may cause a spiraling inflation of pay that will affect the economy as a whole, and inflation.

Final thought:  There are always unintended consequences when different state or city laws are passed around a national issue that affect productivity, performance, inflation and the economy.

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