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Dear Workforce Our Management Insists on Keeping Pay Changes Secret. How Do I Argue for Transparency?

Out of the blue, our company has decided to change the way salaries are structured for exempt employees only. The new program places each employee with a market reference point. The starting point will be the employees' midpoint salary, or an approximation of it. However, the company will not allow employees to know where they stand with regards to pay. This is a stunning development and I'm worried about the fallout. How could I make a compelling case to get management to be more transparent?
August 13, 2009
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Related Topics: Compensation Design and Communication, Ethics, Policies and Procedures, Dear Workforce, Compensation
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Dear Shell-Shocked:
Your management team should seriously consider being more open about the company's pay system for two reasons. First, you are converting to a new methodology for administering base pay (banding) that is more complex and challenging. Open communication about reasons for the change and the impact on employees drives understanding and acceptance by supervisors and employees. Second, you'll want to avoid the appearance of a "secret" pay system, which will damage your employee relations.
Open and proactive communication about your pay philosophy, your exempt pay structure and how market rates are determined is an important component of employee engagement. Employees want to know whether they are paid competitively, relative to the marketplace. If you don't tell them, they'll go to Salary.com, Monster.com or other sources to obtain the information. Whether or not the information they receive is correct, however, isn't important. What is important is that you will have relinquished control of the conversation. Employees also want to know where they stand relative to the market rate of their next job. They want to know where they are going, and pay advancement opportunities are part of the calculation.
Employees will piece together a puzzle, however inaccurate, of how pay is administered in the organizations. Some supervisors may end up sharing the information with trusted staff members, thus creating extra animosity. All this adds unnecessary stress at review time, as managers must obfuscate about the reasons for pay changes and "market rates of pay." A pay-banding system such as you propose makes this task even more difficult, as it is a complex system.
For employees to offer full commitment to your company, they must sense a level of trust both with supervisors and your management team. Indeed, companies in which managers willingly share market data and pay information tend to have higher rates of employee engagement and retention.
Being open about pay does not mean that you have employees running around sharing details about their paychecks. Paychecks are still confidential data; however, the process for determining employee pay levels is not.
You should also ask your management team why it no longer is open about the structure and administration of company pay. Remind them that most employees will support any changes—as long as you help them understand why they are being made.
SOURCE: Bob Fulton, the Pathfinder's Group, Chicago

LEARN MORE: Please read how some companies have soured on pay-for-performance plans.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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