Maintaining salary secrecy is important in any company as it promotes a fair and harmonious work environment. It helps avoid unnecessary competition, jealousy and potential conflicts among employees. However, it’s still very common to see people discussing their salaries with fellow co-workers. Such conversations not only ruffle a lot of feathers the wrong way, but create a lot of negative disruptions within the workplace. Can penalising employees involved in such disclosures be the only way to stop them? Can employers penalise employees for discussing their salaries with fellow colleagues?
Rights: “Penalising individuals involved in salary discussions may not be the most effective or fair approach to addressing the issue as salary discussions are a natural part of workplace dynamics,” points out Rajeev Singh, CHRO, Solara Pharma. Employees have the right to discuss their compensation openly and advocate for fair wages based on their skills, qualifications and contributions. Penalising individuals for engaging in such discussions may have negative consequences.
Work contracts: Nihar Ghosh, senior HR leader, clarifies, “Employment contracts do not include any strict provisions that prohibit employees from engaging in discussions about their salaries or compensation. These conversations often occur during employees’ personal time and are typically informal in nature, making it impractical for companies to take punitive actions in response.”
“Employment contracts do not include any strict provisions that prohibit employees from engaging in discussions about their salaries or compensation. These conversations often occur during employees’ personal time and are typically informal in nature, making it impractical for companies to take punitive actions in response.”
Nihar Ghosh, senior HR leader
Singh opines, “Companies may have rules against employees discussing their salaries with colleagues, but enforcing these can be tough. Such discussions often take place casually, like coffee talk, and it’s challenging to hold anyone accountable for what they say”.
Ultimately, it’s difficult to make a conclusive statement about this phenomenon, feels Singh, as “it’s not something that occurs frequently and may not warrant much attention.”
Moreover, since employment agreements do not explicitly prohibit employees from discussing their salaries, it becomes challenging to establish whether such conversations have taken place or not.
“Penalising individuals involved in salary discussions may not be the most effective or fair approach to addressing the issue as salary discussions are a natural part of workplace dynamics.”
Rajeev Singh, CHRO, Solara Pharma
“As there are no strict rules regarding non-disclosure of salaries in employment contracts, it becomes difficult for companies to take drastic action against employees for engaging in such discussions, as there’s no evident that an employee can’t discuss it,” enunciates Ghosh.
Employee levels: Additionally, salary discussions are akin to a peer market or comparison, where individuals benchmark their salaries with the market rates. Some processes are in place within companies for salary discussions and agreements. However, it’s challenging to determine who is discussing with whom and the specific outcomes of these conversations. “This phenomenon extends beyond lower-level employees to those at the top, including board members who serve on multiple companies’ boards. Their salaries and compensation details are publicly available in annual reports or elsewhere, making it common knowledge for everyone involved,” states Singh. For instance, one can’t ask the managing director about their salary since it’s regulated and disclosed to everyone.
Culture: Employees have the right to advocate fair compensation and penalising them for engaging in salary discussions could create a culture of fear and hinder open communication.
What can be done?
“Salary discussions are ingrained in the culture of Indian organisations, fostering an open and candid environment. Employees frequently share salary information with colleagues, reflecting the cultural value of transparency and the desire for equitable compensation,” explains Ghosh. Such discussions help address wage disparities and encourage fair remuneration practices.
Openness: Therefore, “Instead of penalisation, organisations can focus on implementing transparent salary structures and policies that promote fairness and equality. This includes establishing clear guidelines for salary negotiations, providing training and resources for employees to understand their worth and negotiate effectively, and conducting regular salary reviews to ensure equitable compensation,” opines Singh. Creating an open and inclusive environment where employees feel comfortable discussing their salaries can help address disparities and promote fairness.
Sensitisation: “Sensitisation training can be instrumental in addressing salary discussions in a constructive manner, suggests Ghosh. “Through this training, employees learn about the importance of privacy and confidentiality when discussing salaries, as well as the potential impact of such discussions on workplace dynamics” feels Ghosh.
Organisations should focus on open discussions about salaries, which will help employees understand the value of their contributions and foster a sense of unity. When employees feel free to share information about compensation, it can lead to a better understanding of the organisation’s compensation practices and promote a fair work environment.