Is pay secrecy disappearing in the private sector?

by Michael Haberman on October 22, 2014 · 2 comments


Has pay secrecy finally met its end?

Has pay secrecy finally met its end?

There has been an ongoing debate about pay secrecy versus pay transparency for some time now. The old way of doing business versus the new way of doing business. The old way said that what you made was your business and no one else’s. The new way says that transparency is more egalitarian and helps eliminate discrimination. The tide appears to be in favor of pay transparency winning the battle.

Prime drivers

There are a couple things moving the world away from pay secrecy toward pay transparency. The first of these is just the general feeling that being open about pay will help eliminate discrimination. In a world where the argument is that women only make 75% of the pay men make pay transparency would reveal if indeed in any particular organization that were true. If it was true pay transparency would force companies to clean up their acts. If it were not true it would bolster the company’s reputation as being a “fair” place to work.

A second driver is the recent effort of the National Labor Relations Board to enforce the provision of the National Labor Relations Act that prohibits companies for acting against an employee covered by the Act for revealing what he or she makes. It is against the Act to discipline a covered employee for violating a prohibited company policy. Many companies run afoul of the NLRA by having such a policy for covered employees. You can have a policy but it can only apply to employees, such as supervisors, managers and HR people, since they cannot organize under the NLRA.

The third driver is the effort of the Office of Federal Contract Compliance Programs. According to the law firm Ford HarrisonOn April 8, 2014, President Obama issued Executive Order 13665 to address the apparent lack of transparency in employers’ pay policies and practices.” Recently the OFCCP has issued proposed rules for this executive order that will have a significant effect on pay secrecy.

E.O. 13665

According to Ford Harrison “Executive Order 13665 amended Executive Order 11246 to include a provision prohibiting covered entities from discharging or discriminating against employees or applicants for inquiring about, discussing, or disclosing their compensation or the compensation of another employee or applicant.  In plain terms, Executive Order 13665 would prohibit covered entities from maintaining what are sometimes referred to as “pay secrecy” policies.” In this order the definition of a covered entity is any business that holds a contract or subcontract worth $10,000 in a 12 month period. The hurdle for being a federal contractor is not a high one and this will force many companies to be open about their pay policies.

The definition of compensation in the proposed rules is pretty broad and includes just about any type of pay an employee might receive. According to Ford Harrison, “A non-exhaustive list of examples from the NPRM include salary, overtime pay, shift differentials, bonuses, commissions, vacation and holiday pay, allowances, insurance and other benefits, stock options, profit sharing, and retirement contributions.“

Philosophical adjustments

If you are in a company doing business with the federal government, or even many state governments, pay transparency is going to be a way of life. For companies that are not covered by federal rules you may still want to take a look at transitioning. A new generation, growing up in a much more open society, is not all that keen on pay secrecy. It may keep your from getting talented employees or at least cause you problems in court as they reject your philosophy.

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net


Be Sociable, Share!

Sign up for free HR Solutions updates via email

Omega HR Solutions, Inc. uses creative human resource solutions to provide answers to time, money and service issues with employers and their employees. Visit our Products and Services page for more information or contact us to learn how we can help your organization.

{ 0 comments… add one now }

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: