Is “Pay Secrecy” Ethical...?

PAY SECRECY – Is it Ethical...?

Should SALARY and PERKS be kept CONFIDENTIAL...?

Musings on Business Ethics

By

VIKRAM KARVE

Sometime ago – at a social gathering – I met a young man who works as an investment banker.

I had heard that investment banking is a lucrative profession.

In my usual loud voice – I asked him how much salary he got.

He looked at me aghast – as if I had committed sacrilege.

Everyone around us looked at me in disbelief – as if I had committed a great faux pas.

To whet my curiosity – I repeated the “indiscretion” – by asking whoever I met – his or her salary.

I was surprised to see that today’s youngsters are very secretive and unwilling to disclose how much they earn.

I observed this secretive nature – and reluctance to disclose salaries and compensation packages – across professions – ranging from nerdy IT “Techies” – to Street Smart MBAs of all hues.

I just do not understand this “cloak-and-dagger” obsession with pay secrecy.

In the 1970’s – after getting our B. Tech degrees in Engineering – all of us in our class took up a variety of jobs – in the government – and in the industry – in public and private sectors – in MNCs and PSUs.

Whenever we met – we discussed our new jobs – and we freely discussed our pay, our salaries and what perks we got in our respective jobs. 

There was nothing to hide.

In those glorious “pre-liberalization” days of “socialism” – it was considered ethical to be equitable – and that is why – salaries were comparable – whether you worked in the private sector or public sector.

Yes – though the private sector paid slightly more – there was no excessively disproportionate disparity in pay – for the same type of work and level of posts – between one place and another.

How things have radically changed – with the advent of liberalisation and globalisation...!!!

Today the concept of “equal pay for equal work” seems to have been forgotten – and we see an obscene imbalance in compensation packages.

Those days – in the 1970’s – Salary Structures were simple – you got a Basic Pay, Dearness Allowance, some well-defined perks – and – in some cases – publicly declared incentive and bonus.

Everything was transparent – and – to the best of my knowledge – such “Machiavellian” concepts – like “Cost To Company” (CTC) – ESOPs – other “secret” allowances – and “hush-hush” incentives and bonus – such clandestine things did not exist.

I feel that “pay secrecy” is a concept which is alien to conventional Indian Ethos.

It looks like this “secretive” Human Resource Management Philosophy – comprising elements like “confidential salaries” – all this has become prevalent in India after 1991 – post-liberalization – with the entry of foreign companies – who have brought along with them their own distinct organizational cultures.

Can somebody please tell me what is the need for you to keep your pay secret...? 

Or – what is the need for your employer to keep the salaries of employees confidential...?

Even today – as far as government jobs are concerned – pay, salaries and allowances are public knowledge. 

There is total transparency in pay scales, increments – and all payments made to employees in government and public sector jobs. 

I think that there is pay transparency in some large industries – especially in traditional Indian organizations of the “old mould” as well.

Then – why have this obsession with pay secrecy in some firms – especially in companies with foreign organizational cultures like MNCs and IT Companies?

It is said that an Ethical Human Resource (HR) Management System must have three attributes:

1. It must be FAIR

2. It must be JUST

3. It must be TRANSPARENT

The concept of pay secrecy violates all these three tenets.

Let me give you an example.

I have a friend whose son migrated abroad to the USA many years ago for his studies and he continued to live and work in America and he became a US citizen. 

He was “posted” to India by his company (an MNC).

Though the boy is of Indian origin – since he is based in America – he is considered to be an Expatriate (Expat).

I was told that – because he is an “expat” – he gets a much higher salary and attractive compensation package – for doing the same job as compared to his Indian counterparts.

In fact – he also joked – that had he remained in India like his brother – or had he come back to India after his studies abroad and joined the same firm in India – he would have been paid much less for doing the same job. 

Whereas in India – foreign expats are paid more than Indians – the reverse may be true in America – where Indian “expats” are probably paid much less than their local American counterparts.

Is this fair...?

A fair system will ensure equitable compensation and will provide equal pay for equal work.

What is the justification for paying different salaries to employees of the same company for doing the same work...?

This blatant discrimination based on nationality – is it ethical and moral...?

In such a scenario – you may have a ridiculous situation – where a junior gets more salary than his senior – just because he belongs to a different country.

Is this absurdity not akin to racial discrimination...?

I feel that openness is always better than secrecy – particularly in HR Management Systems – which must be Transparent.

It has been my personal experience that – a Transparent and Honest HR Policy nurtures a sense of Trust and Loyalty in employees.

Secrecy breeds distrust – and creates an negative atmosphere of intrigue and suspicion in the workplace.

Such unhealthy and undesirable vibes create a sense of insecurity and disloyalty – which in turn cause a feeling of stress in employees.

If there is workplace stress – people may not enjoy working in such an insalubrious environment – and this is not conducive to friendly and open interpersonal relationships as well.

I feel that Compensation Management Systems must be ethical and non-discriminatory.

A candid, sincere, fair and transparent HR Management System will inspire a sense of justice and harmony by ensuring equitable, fair and transparent compensation mechanisms for all employees.

Dear Reader: 

Do you agree...? 

What are your views on pay secrecy...? 

Should salary and perks be kept confidential...? 

What are the pros and cons...? 

Why has pay secrecy become the norm in most organizations...?

Please comment. 

I eagerly look forward to your views. 

VIKRAM KARVE

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Revised repost of my article PAY SECRECY – Is it Ethical...? posted online earlier at url: http://karvediat.blogspot.in/2013/04/pay-secrecy-is-it-ethical-should-salary.html