Pay Secrecy as a Part of Business Strategy

Running Head: Pay 0
Human Resource Management
4/1/2019

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Pay secrecy as a part of business strategy
The pay secrecy refers to a general workplace policy that restricts employees from discussing
their pay. It is defined as policy, which exists when the management in a planned manner
withholds from the personnel concerning information about the distribution and
compensation in the organization. It can influence employee efficiency, productivity and
optimal decisions of the employee concerning their career opportunities at the extent of the
national economy. It is a significant part of the business strategy as it prevents employees by
managing a peaceful workplace, avoiding conflicts, and reduces claims of discrimination
(Calvasina, Calvasina and Calvasina, 2015).
Pay secrecy can be profitable as it can avoid the perception of unfairness when pay inequities
do occur and reduce other wrongdoing of organization. It would permit the organization to
regulate its employees and on the other hand, let the employers feel good as they are
evidently working in the best interest of their personnel. It is stated that by imposing pay
secrecy, provides benefits to the organization as well as employees in the manner that it can
protect their privacy rights. Regardless of the influence on targets, paternalism is commonly
seen as an organizational benefit. It is expected to be the enhanced privacy that comes from
having one’s own pay kept secret from others (Breza, Kaur and Shamdasani, 2017).
In today’s environment, it is stated that privacy is a major concern and in an age of
technology, employees become more sensitive towards getting information without facing
troubles. Additionally, in North American culture, a strong norm is to be followed against
determining one’s pay. Several people prefer not to have their pay discussed their other
employees and they are more comfortable in giving answers concerning personal matters
involving religion, sex, family issues despite their salary. The distress of discussing pay
might tend from another person revealing too much information about them. Some people
may be more curious in learning the information regarding the pay of others and later willing
to trade some secrecy about our own pay in respect to learn something. It can provide benefit
to the organization concerning employee market immobility. While, the employee market
inefficiency resulting from pay secrecy might be an advantage to society and other employers
by decreasing the mobility of their productive employees (Belogolovsky et al., 2016).
Danzinger and Katz (1997) contended that pay secrecy policy prevents employees from
comparing their salary with others in the organization. It is stated that such a comparison is

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required to switch their jobs when they find better opportunities in the future. Therefore, pay
secrecy decreases the source of information and protects employees from identifying better
employment opportunities. So, net benefit can be generated in the company requiring pay
secrecy, which facilitates the organization’s capability to keep competent employees so that
the organization can decrease the extra cost associated with employee transitions i.e. training
and recruitment. It is not required that the employees feel positive about the organization as
an employer need to develop continuance commitment towards them. Pay secrecy prevents
“poaching” from other organizations due to the reason that it keeps competitors from
identifying what they deliver to lure good employees away (Scheller and Harrison, 2019).
Others contend that the organization utilizes the pay secrecy in maintaining a business
strategy to retain the employees. This can be done by carefully communicating pay and
organizational strategies to the employees. It is stated that if the employees have less
information can be easily controlled by the administration (Belogolovsky and Bamberger,
2015). They can suppress the information and providing just the required information, which
is the main ways of handling through which the administration can lead the employee in their
own manner. The pay secrecy leads to efficient control of both the employee interaction and
behaviour among them and generates interpersonal processes in the company. The
compensation distribution is the most common sources of conflict in the company as the
secrecy of pay distribution decreases conflicts, which is the main issue. This can be illustrated
when personnel does not have information about salary and the management restricted to
give, ask, or discuss pay then they have no point of debate and conflicts (Georgellis et al.,
2017).
This leads to the positive ambience that administration prefers without conflicts as this can
divert the concentration from the organization’s to personal objectives, problem
personalization, disturb the normal operations, and mental as well as physical health. As
positive aspects are also considered, which involves managers tends to avoid conflicts and
encouraging change. Pay secrecy assists largely the difference between effective and
inefficient employees based on compensation. If the management rewards effective
employees through compensation and incentive payments, can leads to a negative reaction
among inefficient employees. It is quite evident that conflicts among the employers and
employees and conflicts also occur between the employees themselves (Bennedsen et al.,
2019). When pay secrecy is adopted then no conflicts will be merged, as those employees
who would respond do not have the information on rewards & recognition being received.