Exploring Pay Secrecy in Human Resource Management Practices

This essay provides an in-depth analysis of pay secrecy within human resource management, examining its strategic implications and effects on employee performance and organizational management. It discusses how pay secrecy, a common workplace policy prohibiting employees from discussing their pay, can negatively impact employee satisfaction and trust, leading to decreased motivation and hindering the effectiveness of performance pay systems. The essay further explores how pay secrecy can foster uncertainty, encourage reliance on rumors, and create an asymmetrical information status between employees and management, potentially leading to unfairness judgments and decreased loyalty. Ultimately, the essay argues that pay secrecy undermines the autonomy of workers, facilitates unethical behavior, and reduces management's ability to control and direct employee behavior, thereby making the management process less efficient and detrimental to organizational performance. Desklib offers this solution along with numerous other resources to aid students in their studies.

Running head: PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
Pay Secrecy in Human Resource Management
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1PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
Abstract
The primary purpose of this essay is to discuss about pay strategy as a business strategy of an
organization. The essay discusses why pay secrecy acts as a factor of the performance
strategy. The essay also delves into the effects that the pay secrecy has on the management.

2PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
Human Resource Management refers to strategic approach that helps in effectively
managing the people within an organization. It helps a business in gaining competitive
advantage and it helps in maximising the performance of the employees. Pay secrecy is
indicative of common workplace policy which prohibits the employees in discussing
regarding their pay. It talks about how the managers ask the employees not to disclose the
salary (Marasi, Wall and Bennett 2018). This essay argues that pay secrecy can have a
negative impact on the performance of the employees. The essay talks about the fact that pay
secrecy can bear negative influence on the management of the organization. This essay
throws light on how pay secrecy acts as a business strategy of an organization. The essay also
discusses about why pay secrecy acts as an important factor in relation to the performance
strategy. The essay also discusses about the implication of pay secrecy on the management.
The second and the third paragraphs talks about the factor of pay secrecy. The fourth
paragraph discusses about how pay secrecy acts as a factor in relation to performance
management. The fifth and the sixth paragraph talks about the implications of pay secrecy on
that of human resource management.
Pay secrecy refers to withholding of the information from employees pertaining to
compensation of employees. It can be said that there is absolute pay secrecy in the event of
employees of company having no knowledge about the salaries of the other employees of the
company. Pay secrecy exists in various forms that is dependent on the kind of information
that is withheld. According to Fulmer and Shaw (2018), there are some companies that
provides employees all kinds of information pertaining to compensation system like the
salary rates along with the salary calculation methods but they deny information in relation to
individual amount of the salary along with the incentives of the employees. It can be stated
that on the other hand there are some companies that provide various level of the information
to employees in relation to various elements of compensation system.

3PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
The compensation in a company comprises of the direct compensation along with the
indirect compensation. It has been argued by Cascio (2015), that the direct compensation is
indicative of money which is received by the employees in exchange of work and it
comprises of salary along with the incentives. The pay raise that takes place on account of
increase in the cost of the living can also be said to be a kind of the compensation. Salary
refers to compensation that is paid to the employees so that they can perform the work in the
organization and it is not dependent on performance of employees. Incentive refers to
compensation that is dependent on work results of employees. According to Baker and Kelan
(2018), the work results of an employee can be determined based on the performance that is
displayed by them by the application of both the qualitative along with the quantitative
criteria. There is the assumption that the people who are more educated and have more skills
can show better performance within an organization.
Pay secrecy can be said to be a factor in relation to the performance management of
the employees. Pay secrecy can pave the path for pay dissatisfaction whereas the public pay
increases the satisfaction of the employees. It has been brought out by Conroy and Gupta
(2016), the shifting to the open system from that of the secret system can create the path for
the increase in the pay satisfaction of the employees. The pay secrecy prevents the employees
from knowing whether they are being treated in a fair manner that can undermine the
engagement of the employees. According to Marasi and Bennett (2016), absence pertaining
to the pay information creates impression among the employees that the management have
something that they want to hide. The employees cannot understand operation pertaining to
performance pay system and they cannot also verify information which is provided to them
by the management. This helps in the generation of questions in relation to accuracy along
with the truthfulness of information that is provided by the management. Pay openness can
help in signalling integrity that can increase the performance of the employees. It has been

4PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
stated by Rosenfeld (2017), that pay secrecy is responsible for making performance pay
system very unpredictable as the employees fail to predict outcome of system. Pay secrecy
can be said to be related to the lower employee performance and it suggests that organization
does not trust employees. It reduces the motivation of the employees for contributing to the
organization that becomes a crucial factor in determining the performance of employees. Pay
secrecy helps in covering the relationship that lies between the pay and the performance. The
employees within an organization cannot see best performing employee receiving the largest
increase in the salary. On the other hand, the employees can also see the fact that the ones
who are performing poorly are getting small or the no increase of their salary (Bergh et al.
2019). Open pay can play an important role in increasing effectiveness in relation to the
performance pay. The high performing employees become sensitive in the event of
perceiving no link in between the performance and the pay. Pay secrecy can hinder the ability
of an organization of retaining the top talent.
The intention of the human resource management for the pay secrecy has effects on
the management of an organization. Pay secrecy causes the employees to depend on the
rumours and the inaccurate information that has a detrimental effect on the management of an
organization. It can create uncertainty along with the mistrust that has a negative influence on
management of an organization. According to Janićijević (2016), the motivational force is
greatly reduced in an organization that hampers the efficiency of the management within an
organization. The managers make poor decisions in the case of pay secrecy as they do not
have to defend themselves. Pay secrecy reduces the motivation of the managers for adhering
to the corporate policies and making the good decisions. It has been argued by Trotter, Zacur
and Stickney (2017) that the valuable talent in an organization can leave on account of the
fact that they feel that they are getting less as compared to the other people. The managers
make the decisions in relation to pay that may be indefensible that can have negative effect

5PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
on the human resource management of an organization. The decisions of the managers in
getting caught can lead the path for the lawsuits that can act as a problem for an organization.
The pay secrecy provides opportunities in relation to paternalistic policy of the human
resources that can undermine the autonomy of the workers. It helps in the facilitation of the
unfair pay practice and it prevents the organization of the unions. The organizational climate
pertaining to secrecy can protect the privacy of an individual however it can encourage the
employees to behave in an unethical manner.
Pay secrecy deprives management of the tool of controlling and directing the
behaviour of the employees. It helps in making the process of the management less efficient
that can have a detrimental effect on the performance of an organization. It decreases the
loyalty of the employees towards the organization. Pay secrecy becomes responsible for
augment felling of the uncertainty that the employees have within the organization. It paves
the path for the asymmetrical information status in between the employees and the
management of the organization. It can help in the creation of general anxiety within the
workplace that the management may find difficult of controlling. The employees become
more vigilant in the event of pay secrecy and it acts as a cost for the management of the
organization in the event of the fairness judgement being negative. It can create the path for
the judgement of the distributive unfairness that can discourage the employees of an
organization (Bergh et al. 2019). The fairness heuristic theory talks about the fact that the
people base the fairness judgement on the impression of the organizational fairness when
they do not get sufficient amount of information. In the event of the employees of the
organization not getting sufficient information regarding pay, the distributive fairness
becomes difficult of knowing. The judgements regarding the pay are made on the basis of the
judgements pertaining to the other aspect of the fairness.

6PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
Human resource management is indicative of an approach that proves to be useful in
managing the employees. Pay secrecy can give rise to pay dissatisfaction and the public pay
can be instrumental in increasing the satisfaction that the employees feel in an organization.
Pay secrecy prevents the employees of knowing whether they are being treated in a fair
manner in the organization. It has an effect on the performance of employees within the
organization. Pay secrecy causes the employees to be dependent on the rumours that has
negative consequence for management of organization. It gives rise to uncertainty and that of
trust that has repercussion on the performance of an organization. Pay secrecy prevents the
management of controlling behaviour of the other employees. It makes management process
less efficient that has negative effect on organization. It can create anxiety in an organization
that prevents the employees from realizing their full potential in the organization. Pay secrecy
decreases loyalty of the workers and creates uncertainty among the employees of
organization. The aspect of distributive fairness is threatened in the event of pay secrecy that
causes problem for the management of an organization.

7PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
References
Baker, D.T. and Kelan, E.K., 2018. HRM practices to diversity management:
Individualization, precariousness and precarity. In Human Resource Management (pp. 117-
134). Routledge.
Bergh, D.D., Ketchen Jr, D.J., Orlandi, I., Heugens, P.P. and Boyd, B.K., 2019. Information
Asymmetry in Management Research: Past Accomplishments and Future
Opportunities. Journal of Management, 45(1), pp.122-158.
Cascio, W.F., 2015. Managing human resources. McGraw-Hill.
Conroy, S.A. and Gupta, N., 2016. Team pay-for-performance: The devil is in the
details. Group & Organization Management, 41(1), pp.32-65.
Fulmer, I.S. and Shaw, J.D., 2018. Person-based differences in pay reactions: A
compensation-activation theory and integrative conceptual review. Journal of Applied
Psychology, 103(9), p.939.
Janićijević, N., 2016. Pay secrecy: Pros and cons. Ekonomika preduzeća, 64(3-4), pp.225-
238.
Marasi, S. and Bennett, R.J., 2016. Pay communication: Where do we go from here?. Human
Resource Management Review, 26(1), pp.50-58.
Marasi, S., Wall, A. and Bennett, R.J., 2018. Pay openness movement: Is it merited? Does it
influence more desirable employee outcomes than pay secrecy?. Organization Management
Journal, 15(2), pp.58-77.
Rosenfeld, J., 2017. Don’t ask or tell: Pay secrecy policies in US workplaces. Social science
research, 65, pp.1-16.

8PAY SECRECY IN HUMAN RESOURCE MANAGEMENT
Trotter, R.G., Zacur, S.R. and Stickney, L.T., 2017. The new age of pay
transparency. Business Horizons, 60(4), pp.529-539.