Salary Transparency: To Share or Not to Share?

Entrepreneur.com explores the issue of employee compensation transparency in a recent article weighing the related pros and cons.

As a business grows, making case-by-case salary decisions may no longer make sense, and may « cause employees to speculate, often inaccurately, and gossip about who earns how much. This dynamic can distract them from doing their jobs. »

Some entrepreneurs are adopting an open stance on what everyone’s earning, while others consider this « crazy. »

Core issues regarding employees’ views of their compensation package:

• Employees perceive salary decisions as arbitrary and presume they’re unfair.
• Employees view their performance differently than you do.
• Employees are confused about how the performance and compensation system works.

Strategies to address these issues include:

1. Define every position in the company and develop a salary formula for each.
2. Regularly communicate to employees about performance expectations and where they stand in living up to them — both officially in an annual review and informally on an ongoing basis.
3. Educate employees on your performance and compensation system, department by department, whether they ask or not.

« Once you’ve followed these three steps, you’ll have an objective, systematic and well-communicated approach to inform your company’s performance and salary decisions. At that point, whether or not you make salaries transparent will be a moot point because you’ll have effectively eliminated the underlying issues. »

Read the full post here. In a separate post, Entrepreneur shares five ways startups can attract rock star employees on a budget.

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