When I graduated from college, I took a job as an entry-level employee at an R.R. Donnelley production facility. I worked hard, climbed the shop floor ladder, and a series of promotions later, I became a manufacturing supervisor.
I loved the job, the benefits, and the salary. Until one day, I found out a much less productive supervisor earned a lot more than I did.
Now, I felt underappreciated and underpaid.
Employees discussing salary at work
My boss noticed the dip in attitude. (While he failed to recognize outstanding performance, he quickly spotted even the smallest decreases in productivity.)
“I know it’s wrong,” I said, “but I can’t get over the fact that Bob makes that much more than I do.”
He pursed his lips, then nodded.
“For one thing,” he said, “you shouldn’t be having those conversations. Employee guidelines strictly forbid discussions regarding employee pay.”
But is that policy allowed?
Can you tell employees not to discuss pay?
In a word: No.
Many employers actively discourage the discussion of wages and benefits with other employees. Some employee handbooks explicitly forbid salary discussions.
But know that if you create a similar policy, you can’t enforce it.
The National Labor Relations Act (NLRA) protects your employees’ rights to collective bargaining and discussion of conditions of employment, like
Pay
work hours
Safety
The National Labor Relations Board (NLRB) considers conversations that help employees “take action for their mutual aid or protection regarding terms and conditions of employment” to be “protected concerted activity.”
In short, the NLRB favors transparency: Disciplining or firing employees for discussing salary at work is unlawful.
Additional Pay Equity Laws
There are several federal laws, including the above and the Equal Pay Act of 1963, that you must follow carefully to avoid unfair labor practices.
Pay secrecy policies regarding the discussion of work conditions, including pay, violate federal labor laws. But many states have additional, stricter rules regarding employment rights, including
Pay transparency
Non-disclosure agreements
Rights to sue
Backpay for unfair compensation
Review your state’s employment laws or work with an employment law firm to ensure you’re not violating any rights of employees.
Can managers discuss employee compensation with others?
Though you cannot prohibit employees from discussing compensation, that’s not the whole story. Managers should respect employee confidentiality and refrain from discussing their salaries with others.
Being intentional about compensation
Ad hoc, one-off decisions are hard to explain and even harder to justify—especially where employee pay is concerned. That’s why many companies openly share how they determine pay rates.
Some, like Buffer, the social media management company, provide a calculator that shows how employee salaries are determined. The formula factors in job type, experience, seniority, and location (Buffer employees work remotely) to determine final rates of pay. It’s available to existing employees and candidates.
While you don’t have to create a calculator, you should have company policies in place to objectively determine starting pay—here’s a handy guide—as well as your process for raises and promotions. Adopting objective criteria for making pay decisions will help you defend yourself against unequal pay claims.
What to do when employees have questions about team pay
Small business employees are smart. They know your business has financial constraints, that competition is stiff, and that revenue is rarely stable. (If they don’t, it’s your job to keep them informed.)
They understand why you might not be able to pay market-leading salary ranges. But they will never understand pay inequity.
Here’s what you can do if an employee comes to you with questions:
1. Take a deep breath.
Don’t respond defensively. Here’s a great response you can use.
“I’m happy to discuss that with you. In fact, I want to give the conversation the time and attention it deserves. Let’s meet this afternoon.”
Pressing pause allows you to…
2. Be as prepared as possible.
Review how their pay was calculated, your pay practices, and the employee’s recent performance and career goals. When you have difficult conversations with employees, work with human resources to facilitate a positive conversation. You may want to seek legal advice from an in-house or employment lawyer to ensure you stay compliant with employment law.
3. Don’t compare employees.
Evaluate the employee’s pay and performance in comparison to company pay practices, standards, goals, and targets. But refrain from comparing them to others.
4. Detail a path to a higher salary.
Ultimately, your employee wants to earn more. Unless you made a mistake in determining their compensation, agreeing to a raise on the spot—especially if the employee is threatening to leave—implies you paid the individual unfairly in the past.
Instead, describe how the employee can earn more in the future through increased performance, taking on more responsibility, gaining additional skills, or assuming a leadership role.
5. If you can’t afford to pay the employee more, say so.
Be empathetic, but don’t apologize. Explain why. Use facts, figures, and logic to help the employee understand. Lay out what you’re trying to achieve, what you hope and plan for your business, and how that will impact your employees.
Be genuine and transparent. Most employees will understand.
Bottom line: open communication wins the day
In the end, a workplace built on trust and cooperation is always better than one built on secrecy and fear. Fostering trust begins with management. Ensuring your employees know their rights—and that their rights are fully respected—is an essential step here.
Salary transparency also poses a huge opportunity to set yourself apart from competitors. Sharing salary ranges in job postings, outlining clear paths to better compensation, and delivering on salary promises will help you attract and retain top talent.
If you’re ever unsure about whether your company policies violate state or federal law, consult a professional. It’s easier and cheaper in the long run to ensure you’re compliant with the law than face a lawsuit. Not only does this hurt your bottom line, it hurts your company’s reputation.
Frequently asked questions
How do I stop employees from discussing salary?
You can’t forbid employees from discussing salary information. This violates federal employment law.
Do I have to disclose salary ranges to job applicants?
While there isn’t a federal pay transparency law, wage transparency rules differ by state. Some states, including New York, Colorado, Illinois, and Hawaii, require employers to disclose compensation to job applicants. Meanwhile, in California, employers have to list salary ranges in job descriptions.
Are there exceptions where employers can restrict pay conversations?
The short answer: no. Employers ultimately can’t control what their employees discuss among themselves about pay, nor can they enforce rules limiting pay conversations. Employers can, however, discourage managers from discussing their direct reports’ compensation with other managers.
Do pay secrecy or confidentiality agreements prevent workers from discussing their pay?
No, workers are legally allowed to discuss their pay. Federal law protects their rights to do so.
How should employers respond if employees complain about unfair pay after discussing wages with coworkers?
If one of your employees comes to you with complaints about unfair pay after talking with their coworkers, your first step as an employer is to listen without judgment or defensiveness. Pay inequity is real—and your business’s compensation structure may have some gaps you could address to improve your employees’ pay and overall satisfaction at work. After that initial conversation, do your best to assure your employee that you’ll take their feedback into consideration and do your best to assess the situation. From there, review your compensation structure for any errors or inequities, or see where you could make improvements. Once you make a realistic plan (whether it’s bumping up someone’s pay immediately or informing them about an upcoming cost-of-living salary increase), relay the information to your employee.
