Posted in Small Business Hacks | by: Jeff Haden

The Uncomfortable Secret You Really Need to Share with Your Employees

I once worked for an outstanding supervisor—technically skilled, great with people, down to earth. He was awesome.

And then one day I found out how much he made.

I was shocked.

My manager was making a lot more money than I imagined. But I wasn’t upset by the difference in our pay. He was worth that kind of money. And since someday I wanted to be worth that kind of money, I was inspired to work even harder.

Sharing your salary information can actually make your business more successful. Here are research-backed reasons why—and how to do it successfully.

The dark side of finding out how much someone makes.

Never assume that raises, bonuses, salaries, perks—anything related to compensation—will stay confidential. People talk. (I always did.)

While some companies may try to prohibit employees from discussing their pay, know that doing so is illegal.

Talking freely about working conditions, including wages, is a right granted to every employee under the National Labor Relations Act as a way to support fair and equal pay. That means you never want to tell employees to stop sharing their salary information.

Now fast forward a few years, after my hard work had paid off and I was promoted to supervisor. I was happy with what I earned. While I would have loved to make more, I felt my paycheck was fair.

Then I learned another supervisor, one who was resting on his seniority laurels, made a lot more than I did. $40,000 more than me, to be exact, when I outperformed him on every key metric.

Within seconds, I became extremely unhappy with my salary. I thought it was totally unfair. And yeah, it pissed me off.

Even though nothing had changed. 

What happens to your brain when you find out someone’s salary.

In my case, comparisons and emotions colored my perception of each person’s salary. I’m proud of how I responded when I found out my boss made. Instead of resenting his success, I wanted to emulate his success.

I’m not so proud of how I responded when I found out a fellow supervisor made a lot more than me. I still worked hard… but I no longer worked quite that hard.

  • My salary seemed great when I realized my boss was making a lot more than I thought.
  • My salary no longer seemed great when it was less than what an underperforming peer earned.

And that number remained exactly the same.

Research says I’m not alone. According to one study, when employees find out that they make less than their peers, they tend to work less hard. (Hardly surprising, I know.)

But when employees discover that their manager makes more than they thought, they work harder. They work longer. Their sales figures go up. They volunteer for more projects. Their productivity improves.

In fact, the bigger the difference between what employees think their boss makes and what their boss actually makes… the harder they work.

How salary information changes motivation levels

– Finding out how much a boss makes: Bigger surprise 😮 = More motivated employee 🙂
– Finding out how much a peer makes: Bigger surprise 😮 = Less motivated employee 😔

An author of the study explains, “Employees are motivated rather than embittered by their bosses’ higher salaries. The higher salary is aspirational. Employees have an extra incentive to work hard, so they can be promoted and perhaps one day make their bosses’ pay.”

But on the other hand, “Higher perceived peer salary decreases effort, output, and retention.”

Both situations are exactly what happened to me.

So should you tell your employees how much you make?

Possibly—but only if you do it in the right way.

Talking about your lavish vacations, your second home, or your fleet of expensive cars won’t send the right message.

As a friend of mine (who prefers to be nameless) says, “Leave your Porsche in the garage. I’ve done consulting gigs for a number of businesses, and in almost every instance, sometimes after being onsite less than a day, at least one employee will tell me they resent how ‘good’ the owners have it at the expense of their underpaid employees.”

To prevent that feeling from forming, talk instead about why you believe sharing your salary number could benefit your employees and the business. Simply say,

“I want to be transparent about our company, our goals, our performance… and I also feel that I should be transparent about my salary. Which is why I’d like to tell you what my compensation package looks like.”

You could even go one step further and be explicit that you want your team to use this information to help themselves.

“I think it’s important for you to know how my compensation package compares with yours. And hopefully, this knowledge will help you get closer to what I’m earning. I want that for you.”

Unless you make 1,000 times more than a typical employee (and I really hope you don’t), sharing the number can have another positive effect—it shows that you believe the pay gap between executives and employees should shrink. And spreading that knowledge is the first step in making that happen.

Another way to talk about salaries is to take a page from the Buffer playbook and create your own salary formula. Buffer openly publishes its formula for determining salaries, factoring in a benchmark, cost of living, the role, and experience.

Creating your own formula will also make it easier to explain to others why you earn the amount you earn—and why others earn what they earn. It will take some time, but it can serve as a valuable document to lean on when people share how much they make with others.

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In an age of increasing transparency, your team might appreciate any steps towards greater openness—even if it feels uncomfortable at first.

When you’re humble about your success, and tell your employees how much you make, they’ll be inspired and motivated to work harder to emulate your success—which, in the process, will help you build a better business.

Win-win.

About Jeff Haden

Jeff Haden is a writer, speaker, small business management expert, and Inc.’s most popular columnist. He's the author of The Motivation Myth: How High Achievers Really Set Themselves Up to Win.