The role of pay secrecy policies and employee secrecy preferences in shaping job attitudes

Abstract

Although pay secrecy continues to garner attention in human resource management, little research examines how these policies impact employees. Research inconsistently links secretive pay policies to unfavourable outcomes but has yet to consider that employees may have varying attitudes toward these policies. We examine how employee preferences modify the effect that organisational pay secrecy policies have on employee attitudes in a sample of 431 employed adults. To accomplish this goal, we create measures of pay secrecy policies and pay secrecy preferences that each differentiate two facets of pay secrecy: distributive pay non‐disclosure and communication restriction. Polynomial and moderated regression analyses indicated that disparities between employee preferences and organisational pay secrecy policies can reduce job satisfaction and perceptions of informational, interpersonal, and procedural justice under certain circumstances. These results simultaneously highlight the importance of employee attitudes toward pay secrecy policies and the challenges human resource practitioners face in managing employees with diverse preferences.

What are you hiding? Employee attributions for pay secrecy policies

“…Pay secrecy policies . We measured distributive pay nondisclosure (e.g., “My employer publishes pay information”), and pay communication restriction (e.g., “My company has rules against discussing employee pay with others”) with the 4‐item scales developed by Smit and Montag‐Smit (2018). A new 4‐item scale measuring procedural pay nondisclosure (e.g., “My employer has clear guidelines for how pay is allocated”) was developed for this study (see Appendix C in Data S1).…”

“…This study is among the first to examine multiple dimensions of pay secrecy simultaneously (cf. Smit & Montag-Smit, 2018). Additionally, previous pay secrecy research has occasionally observed inconsistent relationships between policy and outcomes (e.g., procedural justice), and a more nuanced conceptualisation and measurement of policy, along with individual differences measures, may help resolve these inconsistencies.…”

“…Drawing from previous research (Marasi & Bennett, 2016; Smit & Montag‐Smit, 2018), we examine three aspects of pay secrecy: (a) distributive pay nondisclosure – restricting the amount of information the organisation shares about employee pay levels, (b) pay communication restriction – inhibiting communication about pay among employees and (c) procedural pay nondisclosure – restricting the amount of information the organisation shares about how pay decisions are made (Colella et al, 2007; Day, 2011). While organisations may limit the dissemination of pay information using all three mechanisms, they operate as independent decisions which may elicit unique reactions from employees.…”

Employee responses to pay transparency

“…This trend has naturally made some employers and human resource (HR) practitioners nervous that greater transparency could expose pay inequalities, cause reputational damage or increase costs (Zenger, 2016). These potential impacts remain understudied in the academic literature, as do the potential impacts of pay transparency on various organisational outcomes such as job turnover and employee satisfaction (Smit & Montag-Smit, 2018;Trotter, Zacur, & Stickney, 2017), making it harder for employers and HR to know how to handle pay transparency.…”

“…Even studies that have engaged with people in their role as employees tend to focus on the employer's pay transparency policy (e.g. Marasi et al, 2018;Smit & Montag-Smit, 2018). Smit and Montag-Smit's (2019) later work exploring employee preferences with regard to pay transparency and Scott et al's (2015;Scott, Antoni, Grodzicki, Morales, & Peláez, 2020) studies of global pay transparency preferences are the only research studies, to date, that take an employee-centred stance, and even then, employees' views are assessed through quantitative surveying.…”