You may recall a news item from April 2014 when President Obama raised the issue of the gender wage gap between what working men and women earn for the same job. He announced the signing of two executive orders promoting the ideal of “equal pay for equal work” and creating more transparency in the workplace. But, this month’s installment is not about the pay equality debate. Of course, people-regardless of gender-deserve to be compensated equally for the same job. No argument there.
But, get this: The first executive order encouraged women to find out if their male counterparts are earning more, and, if so, what they ought to do about it. For that to become reality, people in the know would need to reveal personal salary details, and then allow an open, apples-to-apples comparisons to be made. The second executive order flatly prohibits federal contractors from retaliating against employees who talk about their salary or other compensation with any other person.
Funny thing is…Under an 80-year-old law-the National Labor Relations Act of 1935-employees already can talk to whomever they want about their salaries at work and employers are generally prohibited from imposing “pay secrecy” policies, whether or not the company does business with the federal government. Talk about not even being aware of long-standing employees’ rights, huh? Maybe it’s high time we set the record straight and offer some constructive advice about how business owners and managers should address compensation issues with employees.
Shhh…It’s (not) a Secret
Does the following company policy look familiar?
Confidentiality of Salary and Benefit Information
Employees are prohibited from discussing their salary, wage levels and/or company benefits with other employees. Such information is confidential and may not be discussed in the workplace. Any employee violating this policy will be considered to have committed a breach of confidentiality and will be subject to disciplinary action, up to and possibly including termination of employment.
Hopefully, that’s not one of your shop’s policies, but the above was taken-verbatim-from a major U.S. employer. Many employers cut and paste into their employee handbooks sample policies that they find on the Internet or in collections of policies in generic human resources (HR) software. Some employers simply draft their own policies. Concerning pay and benefit discussion policies, though, it is not a good idea at all to “roll your own.”
A survey of private-sector employers from 2001 found that more than one-third had specific policies that banned workers from talking about their compensation with their co-workers. A 2011 survey from the Institute for Women’s Policy Research found that about half of employees polled “report that the discussion of wage and salary information is either discouraged or prohibited and/or could lead to punishment.”
The aforementioned National Labor Relations Act (NLRA) contains a provision, Section 7, that gives all employees the right to “engage in concerted activities,” including the right to discuss their terms and conditions of employment with each other. Section 8(a)(1) of the same law makes it an unfair labor practice for an employer to deny or limit the Section 7 rights of employees.
The courts, in civil suits, have uniformly supported this law. Moreover, those particular sections of the NLRA apply to all non-supervisory employees, so there is no exception made for companies where the employees are non-union. Granted, employers can insist that those “discussions” be held outside of hours the employees are expected to be working, however singling pay discussions out for prohibition-while allowing other types of conversations unrelated to work-might be evidence of intent to violate employees’ Section 7 rights. So, employers should be careful in that regard.
One other area an employer can restrict the content of such discussions is when the benefits of a particular worker contains information that should be held confidential under certain laws, like ADA and HIPAA. For example, take the case of two employees talking about an uninvolved third party’s medical condition. Allowing this could potentially lose the gossiping employees’ protection otherwise afforded under the NLRA.
There are certain employees who are exempt from the law or restricted as to what information they can make public. Supervisors do not qualify as “employees” under the NLRA, nor do people who work as independent contractors. Also, people who work in HR or accounting, and have access to a company’s payroll could be prohibited from sharing other employees’ private salary information. Finally, the law doesn’t protect “mere griping” about pay, which would not rise to the level of “concerted activity” as outlined by the law.
So, what happens to employers found breaking the law? Typically, businesses that are judged in violation of the NLRA have to offer certain “remedies”-which, for some larger companies, may not be very serious and is relatively easy to absorb. For a small company, the same penalty can be devastating, if the National Labor Relations Board orders that employer to provide back pay to wrongfully terminated employees and offer former employees their old jobs back.
Discussing Pay with Employees
Talking about money with your employees can be uncomfortable. Even when you’ve got good news to share-such as a generous bonus or a well-deserved promotion-assigning a dollar figure to the value of someone’s work is tough. It’s especially difficult if you’re not the one calling the shots, but you are the messenger. Many managers don’t set their own compensation budgets. Whether it’s your decision or not, one thing is certain: it’s a critical part of a business owner and manager’s job to have frank and open discussions with employees about pay.
According to a recent PayScale survey, 73 percent of business leaders don’t feel “very confident” in their managers’ ability to have tough conversations about compensation with their employees. This is in part because many owners fail to provide the managers with the information they need to do so effectively. Moreover, managers don’t practice the skill frequently enough. Often, supervisors skirt their responsibilities in this area by writing the new salary or bonus amount on a piece of paper and simply handing it to the employee.
These could be some of the most important and meaningful conversations you have with employees throughout the year and, in some cases, during the worker’s tenure with your company. Here’s how to master them:
- Talk early and often. When you sit down with one of your people to talk about salary, there shouldn’t be any surprises. The more frequently you have such conversations, the easier it becomes.
- Do performance evaluations separately. True, compensation should be linked to performance, but discuss the two topics separately. If you talk about money in the shadow of performance, it will sound like white noise and your employees will just fixate on the compensation. Instead, deliver the formal evaluation first-focusing on personal growth and development-then wait several weeks to deliver news about raises or bonuses.
- Prepare for the conversation. Rookie supervisors often make the mistake of walking into these conversations without a plan. Even if you’re a seasoned manager, it’s helpful to practice what you’re going to say ahead of time. Write down your main points and rehearse them. Think through how you’re going to represent the company while also being yourself.
- Communicate their value to the business. In most cases, this conversation is an opportunity to tell employees how important they are to the organization. You’re in a partnership with every worker and you have to let them know that you deeply value their contributions. Don’t just let the bonus or raise figure speak for itself. Make it clear that you appreciate their work.
- Be ready for a reaction. Even if you think you’re delivering great news, be prepared for some emotion. These can be perceived to be loaded conversations. If an employee gets upset, make sure you hear them and recognize their emotions but don’t cave. If there’s a way to address their concerns-perhaps you can see if something can be done-offer to get back to them in a few days. If you feel it’s warranted, it’s your obligation to go to bat for the employee. But don’t leave the door open unless you intend to take action.