Secret Salaries Hurt Worker Performance, Increase Top-Talent Turnover

Released: 2/26/2014 11:00 AM EST
Source Newsroom: Cornell University
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Citations Academy of Management Journal

Newswise — ITHACA, N.Y. — If salaries in your workplace are secret, there’s more at stake than the frustration of thinking coworkers who produce less than you might be getting paid more.

Research by Elena Belogolovsky, assistant professor of human resource studies in Cornell University’s ILR School, indicates that pay secrecy might also hurt your work performance and prompt top talent to look for new jobs.

In a paper published online in January by the Academy of Management Journal, Belogolovsky and Tel Aviv University Professor Peter Bamberger explain why a lack of transparency about pay hurts an individual’s performance.

“Signaling in Secret: Pay for Performance and the Incentive and Sorting Effects of Pay Secrecy,” concludes that secret payrolls weaken employee perception that a performance increase will be accompanied by a pay increase.

Moreover, high-performing workers are more sensitive than others when they perceive no link between performance and pay, suggesting that pay secrecy may hinder a firm’s ability to retain top talent.

Pay secrecy also can lead to negative behavioral consequences, such as decreased performance and increased turnover.

Belogolovsky and Bamberger found that subtle “signals” in the way human resources policies are communicated and put into practice can influence employees’ perception of workplace uncertainty and inequity, leading to poorer performance and higher turnover.

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