Do you think your employees ever ask each other how much money they make? The answer may depend on the size of your company. Small business workers are more willing to trade salary and bonus information, new data shows.
Employees at small businesses are the least likely to feel the office discourages discussions around compensation, according to the latest LinkedIn Workforce Confidence Survey released last Thursday. The survey, which defines a small business as one with fewer than 200 employees, found that 47 percent of small business employees felt their workplace was disapproving of peer comparison of salaries.
Under the National Labor Relations Act, employees have the right to discuss their wages, but that doesn’t always mean it’s easy for people. The larger the workplace, the more likely employees are to report that talk about pay is taboo. At mid-sized companies, half of employees say they discourage coworkers from sharing their salaries. Among large companies with more than 1,000 employees, this number increases to 52%. LinkedIn Market Research surveyed more than 23,000 professionals in the United States between June 4 and August 12.
As policymakers across the country begin to embrace mandatory laws, business owners and their employees should be more willing to talk about pay it. Seventeen states have adopted a series of pay transparency rules. In Colorado, all job advertisements must include a salary or salary range for the position. Similar laws will go into effect in Washington next year and in New York City this November. In other states, such as Connecticut and California, salary ranges are not required to be publicly advertised, but must be disclosed during the hiring process or at the request of applicants.
The largest U.S. city is expected to be closely watched as a test case for the policy. The New York City law, approved by the City Council last year, applies to all businesses with four or more employees and can be expanded statewide. In June, the New York State Legislature passed a similar bill, which is now awaiting Gov. Kathy Hocher’s signature.
This legislative push is to close the gender pay gap. While the survey found that small business employees were the least likely to believe that sharing wages would lead to fairer pay, research shows that pay transparency can significantly reduce the difference between men’s and women’s wages by up to 40%.
Business owners may be concerned about the initial cost of going over the payroll for one night, but wage transparency can yield many positive benefits and cost savings. Research shows that workplaces with clear and open pay structures have lower turnover rates, higher employee productivity and engagement, and a culture defined by a deeper level of trust and fairness.
Heather Shoemaker, founder of The Artificial Intelligence software company Language I/O, tells Inc. that such laws could help close the gender pay gap , which she believes is partly due to her involvement in the hiring process for both men and women.
“Women don’t negotiate higher salaries. If they don’t negotiate, [the company] won’t give them,” said Shoemaker, whose Wyoming-based startup employs about 60 employees. “Unfortunately, I think the government will step in to level the playing field.”
Still, Shoemaker advises other founders not to wait for the government or even their own employees to act. “Even if they don’t ask for it, put pay equity at the forefront of company policy,” she said. Shoemaker admits that adjusting wages can be “a tough pill to swallow, because of course you want to save money,” but warns that any short-term savings from inaction will become a long-term liability for your business.
“In the end, you lose money because people talk,” she said. “Employees talk. They compare salaries.”