Should You Allow Your Employees to Discuss Pay?
The Growing your Team Podcast: Episode 156
As a small business owner, what should you do when your employees start discussing their pay with each other? Should you allow your employees to discuss pay, or should you put policies in place to discourage the behavior?
We have been trained to think of pay as a highly sensitive topic, and most business owners would prefer their employees not to discuss their paycheck amounts. But what should you do as a business owner? The answer might surprise you. Find out how to handle the discussion of pay between employees in this episode of the Growing Your Team podcast.
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This podcast episode transcription might be edited for clarity and conciseness.
Hello! Jamie Van Cuyk here, and welcome back to the Growing Your Team podcast. Today, let’s talk about employees discussing pay with each other.
I was recently talking to some business owners, and they asked me how to discourage this. I kind of had to bring them into reality and share with them why this isn’t something that I’m going to give them tips on how to discourage, and this is what I want to discuss today.
You should not be putting policies in place or getting mad or anything like that to restrict your employees from discussing pay with each other. The truth of the matter is, if you don’t want your employees discussing pay, it is because you have something you want to hide, and that’s the problem.
It’s not employees discussing pay themselves. It’s whatever you’re trying to hide that is the problem. So, let’s look more into this.
00:04:48 – Why employees don’t want employees to discuss pay
Most of the time, when employers don’t want their employees discussing pay, it’s because there’s some sort of pay discrepancy going on. This could be because they don’t want people to find out that what they’re making is not close to what other people are making. Maybe you thought you could bring in someone for really cheap because they were making less at a previous position and what they’re making here is $2.00 an hour less than someone else who came in with the exact same skills. So, now there’s a pay discrepancy between your two employees that are doing the same job and are at the same level of proficiency. You know that if they discuss pay, the person who’s making less money is going to be upset, and they’re potentially going to ask you for more money. This means higher costs for you, and you don’t want to increase their pay t because you’re looking at things at a budget level versus a pay equity level.
If that’s what’s going on in your business, you have to ask yourself why you are paying people differently when they’re doing the same roles and have the same skills.
We’re not talking about people where one’s really junior, and one’s really senior. We’re talking about people that are comparable. And if they’re really comparable, why aren’t they getting paid the same?
If that is going on in your business, don’t discourage the pay conversations. Do what is right and increase your lower employee’s pay to match the pay the higher-paying employee is receiving because that is the right thing to do.
00:07:04 – Pay issues are sometimes a hard lesson to learn
If you’re sitting there and saying, “But I shouldn’t be paying employees in this position that amount. The higher wage person is being paid more than they should be,” I also want you to take this as a lesson learned. You need to learn that you should not be going out of the top of your threshold for a position when you go to hire.
Yes, there are people who are going to be over your budget. Guess what? If they’re over your budget and you realistically cannot pay someone comparable that same amount, that means you should not be bringing that person in, and you have to pass on them because that is not good for your budget. Having a pay difference between the employees that are the same is not good for your business, just so you can hire someone who is over budget.
00:08:02 – How the hiring market impacted pay rates
Now let’s talk about the other reason why you might not want your employees discussing pay. This is something that I know has happened a lot recently. Newer employees are being brought in at a higher rate than seasoned employees, and a lot of this is happening because people, when they’re out there looking for jobs, are not going to take a lower than a certain amount. The job market got competitive, and you had to offer higher pay rates in order to attract talent. The problem is now that you have done that, your new employees are being paid more than your senior employees, and you do not want your senior employees finding. Maybe you don’t have the money in your budget right now because your extra padding in the budget went to those newer employees.
And that might be the reality of what’s going on. But guess what? It still doesn’t make it right. That is still not a reason to create policies that discourage employees from talking about their pay. Once again, it’s not that the employees are doing anything wrong discussing their pay. It’s that you have pay practices in your business that are hurting your senior employees while rewarding your junior employees. What happens when your senior employees find out and you can’t give them the raise they want? They are then going to go elsewhere, which means you lose team members. You lose those people who have that knowledge that you could only get from working on the job. You do not want to lose your employees because you’re paying your senior employees too little.
00:09:56 – A client example
What can you do in this case? A client of mine from earlier this year was in this position. They needed to raise their entry-level pay in order to attract good talent, but this meant that their entry-level team members, who were at the lowest level of their employee hierarchy, were making more than the next level and very close to even more senior team members. They recognized that they needed to increase the pay of their current team members in order to be fair and equitable across their company. The problem was they couldn’t do it all out at once. So what they did was they gave everybody part of a raise and then came back a few months later and gave them the rest of the raise.
00:11:04 – The problem is not your employees discussing pay
If you do not like your employees discussing pay because you don’t want them to find out that there are pay discrepancies and things that are going on that are going to make them upset, the problem’s not them discussing pay. The problem is what you are paying.
It’s the same thing when people don’t want their employees discussing pay with employees at other companies. It is typically because what they pay is different than what that other company pays, and they don’t want their employees to go and see that the grass might be greener if they go over there, that they might get a pay raise for going someplace else.
But guess what? The reality is most workers get the best pay raises when they go elsewhere. So, if you’re not going to reward your employees correctly internally with pay, why shouldn’t they go elsewhere? Money is what keeps a roof over people’s heads and food on the table. It’s what helps pay for the transportation that they use to get to work. It’s what pays for all the things that go into someone being able to afford to live where you are located and afford to work for your business. So you need to make sure you’re paying people appropriately, and restricting discussions on pay does not change that.
We shouldn’t make it so pay is a taboo subject.
00:12:56 – Pay discrepancies and societal issues
The one last thing that I want to discuss before we wrap up this episode is the fact that I know we’re making a lot of improvement here, but one of the other reasons in the past why companies didn’t want people discussing pay was because there was a lot of discrepancy in pay between men and women and white workers and minority workers. When we discouraged the talk on pay, that stuff was getting swept under the rug.
And once again, there are a lot of factors that go into what individual team members should earn based on skill and experience. But what we’re talking about here is people of equal skill in the same position, and people would pay people differently between women and men. And so, pay should be one of those things that’s discussed.
We know that certain roles pay better than other roles. When we look at our society as a whole, we know that a doctor or a lawyer is going to make more money than a janitor. But I believe as a society pay should be something that’s discussed all the time. We should know if we’re being paid what we’re worth as workers. We should know that someone’s not trying to take advantage of us.
As a society, we might be better off and be more open-minded to people when we really understand that the person who’s working 40 hours a week makes under a livable wage in this community. But because we see pay as a taboo subject, people sometimes are ashamed and scared to talk about their pay because they don’t want any repercussions that might come their way. But we need to change that.
00:14:59 – Pay should be fair and equitable
We need to not look at it as we need to stop our employees from talking about pay, but rather are we taking actions to be fair and equitable with our pay structure? Because if you’re not, that is what needs to be solved.
I encourage you to look at your pay structure. Are you paying your team members appropriately for the roles, responsibilities, and authority they have within your organization?
As you bring in new positions, look at your pay structures to really understand where you should be bringing people in at appropriate pay levels for the work that they’re doing and also for the impact that they’re going to make on your organization.
Once again, let’s not discourage the conversation of pay. I’m not saying you need to lead the discussions, but build pay structures in your business where if your employees decide to discuss pay internally or externally with friends and family, you have nothing to be ashamed of as a business owner because you know that you are paying your employees fairly and correctly.
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