Salary Issues in an Organization Harvard Case Solution & Analysis

Pros and Cons of Transparent Salary

            It is up to the will of organizations about whether to make salary transparent or keep the salary secret among employees. Transparent salary has various advantages for an organization, it builds “trust” among employees and they see their organization as one that is working in their best interest while focusing on the ultimate motive of profit making. As a result of this initiative, employees work more than their potential and capabilities as there is no deficit of trust between employees and the organization. Trust is the one of the major drivers of employee performance and commitment even though it is difficult to build this relationship among employees but once trust has been established then it favors the organization a lot in the long run (Gittell, 1999). If the salary data structure and appraisal criteria is provided to employees then it can create more competition among employees as all of them want to achieve maximum out of it and it will further motivate and encourage them to perform more than their potential. Transparent salary policy also builds a culture of transparency and it is also helpful in reducing gossips and other unnecessary discussions among employees.

            There are some drawbacks of the transparent salary as well, it may affect an organization’s policies and procedures negatively because employees will know the compensation criteria so the organization cannot play with them or keep things hidden in best interest of the organization. When employees have an access of salary compensation, transparent salary system will restrict employers to give favor to all employees equally. If there are any changes in the organization’s HR policies regarding pay scale, compensation, benefits, and other allowances then it will be difficult and time consuming for the organization to brief and make employees understand it every time especially when the organization is in a private sector business and consist of a large number of staff. Another issue that may arise while keeping salary information open is the “Jealously Factor” among employees even if they are close friends (Modells, 1998). When an employee gets to know that the other employee will be getting a top performer award it may in the next month, then it may discourage and de-motivate.

Hence, these are few positive and negative factors of transparent salary system that needs to be considered by the organization because its mismanagement will create a negative impact the success of an organization in the long run.

Pros and Cons of Salary Secret

            Many organizations in the world keep their salaries secret due to various issues that can create a negative impact on their performance. Keeping salaries secret is necessary and it is a common practice that is being followed at global level as it has some positive consequences like in most cases a company’s employees are getting different compensations and benefits subject to their actual performance, experience and education. For instance, if there are a lot of engineers working in the same organization and they are getting different pays, then it is better to keep their salaries confidential in order to prevent potential “unfairness issues” among them because they may not be able to understand that why other employees are getting more salary than them. The other benefit that an organization can get by adopting a secret salary policy is the “flexibility in the HR policies” as they will not be answerable to employees and responsible to make them understand the compensation and allowance criteria of the organization.

            Like the transparent salary policy, secret salary policy also has some drawbacks for the organization and it can adversely affect the organization. One of the major disadvantages of keeping the salary secret is the “frustration” among employees because they cannot understand the compensation criteria and procedure. It discourages the people for doing more work and when they know that employees are getting more salary without any achievement, so they may take it as a “discriminatory” factor and if that message has spread among employees then the overall performance of the organization will be affected negatively in the long run. People become less motivated to work in this environment and avoid late sittings as well as do not prefer to come to the office in holidays as required by the organization because their trust level has shattered...................................

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