The pros and cons of keeping compensation information confidential

The pros and cons of keeping compensation information confidential

A lot of companies, especially in the Middle East, like to keep a lot of compensation information strictly confidential.

The kind of compensation information which may not be shared :

  • Salary ranges (and sometimes allowances) are not communicated, sometimes even to HR Business Partners or recruiters
  • Incentive rules are not explained, either in writing or verbally
  • Promotion criteria are fuzzy and look random
  • Pay for performance principles, if they exist,  are vaguely described
  • Performance ratings and how they are decided (for example, is there a moderation/calibration system in place ?) are not shared with employees
  • Eligibility rules to various schemes, allowances or benefits are also not communicated.

There are numerous possible reasons for that lack of communicating pay rules to employees :

  • Not wanting employees to compare themselves to others and creating a “competition” environment
  • Wanting to keep an opportunity to change or adapt programs should circumstances change or require it, without any legal restriction
  • Maybe the organisation, in effect, has a lot of issues with internal equity : people in similar roles may be paid quite differently andmanagement does not want that fact to be known
  • Another advantage : strict confidentiality means no need to make any communication effort
  • It could also be that the company does not want to make public some of its pay and benefits practices. In the GCC, some examples could be :
    • different salary ranges for different nationalities
    • eligibility to benefits that could be different/lower for females vs males or Nationals vs expats.

I believe that respecting confidentiality is totally normal, and mandated, but not for all aspects of the compensation philosophy. Long-Term Incentive Plan eligibility, actual salaries and bonuses, and programs targeted at very small populations like high potentials (so that you don’t raise expectations from employees) should all be kept confidential.

I am however a big believer of communicating as much as possible in the area of pay approaches.

There are many disadvantages to not communicating pay information :

  • Not knowing means employees “make it up” – creating rumours and unnecessary frustration
  • Not knowing means employees go to their managers and HR one-on-one to ask questions – it translates into a lot of time spent repeating the same things to different people, as well as loss of productivity, rumours, lost focus
  • And no official central communication means employees may be given potentially inaccurate information especially if managers are not highly aware, themselves, of the programmes or don’t have the maturity to answer some of the tough questions
  • No coherent, overall communication means messages are not consistent and it creates confusion amongst employees
  • No written rules means that if you need to investigate a case later on, you will have difficulty to figure out what happened and why – you expose yourself to the risk of employee complaints, or worse, potential legal action or reputational damage to your organisation
  • Last but not least, not knowing how bonus is calculated, or salary increases decided, or the criteria for promotions, means that the programs lose :
    • a lot of their motivational effect on existing employees, who discard them as they fail to understand the logic – so they think that things are random, unfair or even driven by favouritism
    • a lot of their attraction on candidates and potential hires, who discount them (especially bonus information) and therefore negotiate higher base pay in order to “compensate” for the perceived uncertainty of the pay system, even if in reality, there are rules and some form of stability in the payment.

Of course, communicating around pay and benefits means more work upfront for the HR community to design and explain the rules, train managers as needed and try to convey information appropriately.

However, the benefits are important in terms of perceived coherence + fairness in the system and process. It reduces the time spent correcting misperceptions about pay. It signals to your employees that you find them mature enough to understand that not everyone can be paid the same, and that things can change. It supports a culture of openness and trust.

So next time you design an incentive scheme, remember the operative word is “incentive”…. and consider transparency and open communication.


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  1. Dear Sandrine,

    Great article, I must say.

    I am writing for your permission to include this article in our monthly emag, Guild of HR e-Mag for our July 2012 edition.

    Kindly drop me an email if you’re keen for us to take this forward



  1. […] is discretionary ? June 7, 2012 By Sandrine Leave a Comment One of my recent posts covered the pros and cons of keeping compensation information confidential. There are positives to each side of the coin, but my view is that we should communicate as much as […]

  2. […] a previous article, I listed the pros and cons of keeping compensation information confidential, but once you accept that at least some degree of transparency will be useful to your organisation, […]

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