No, you can’t stop your people talking about pay (and that’s OK)
Money can be a touchy subject. Many of us are brought up to believe that asking someone about their salary is rude, awkward, and maybe even a bit vulgar.
And for HR teams and managers, there are other reasons to discourage money talk. It’s long been held that employees sharing information about their salaries is a recipe for resentment, awkwardness and demands for higher pay.
But is it such a bad thing if your employees discuss their pay with each other? And, more to the point, is there actually anything you can do to stop them?
Let’s dive in.
What the law says in the UK
We’ll start with the big question: can you legally stop your employees from discussing their salaries in the UK? The short answer is, not really.
The slightly longer answer is set out in the Equality Act 2010 — Chapter 3, Part 5, to be precise. The law says that the following three acts are protected:
- Seeking a disclosure that would be a relevant pay disclosure
- Making or seeking to make a relevant pay disclosure
- Receiving information disclosed in a relevant pay disclosure
Translation? As long as we’re talking about a ‘relevant pay disclosure’ (we’ll get to that in a minute), employers can’t stop their employees from:
- Wanting to tell someone about their salary
- Actually telling someone about their salary
- Letting someone else tell them about their salary
What is a ‘relevant pay disclosure’?
According to the law, a conversation about salary is a ‘relevant pay disclosure’ if you’re doing it to find out ‘to what extent there is a [...] a connection between pay and having (or not having) a protected characteristic’.
Basically, this means that you can’t stop an employee from disclosing their salary (or asking someone else about theirs) if they’re doing it to identify an equal pay issue.
And here’s where it gets tricky: an employee can always claim that this was their reason for talking about pay, even if it wasn’t. In practice, this means it’s not possible for employers to ban their employees from disclosing their salary to others.
Are pay secrecy clauses enforceable?
Despite this, many employers do include pay secrecy clauses in their employment contracts: A survey from 2020 found that as many as one in five UK employees are banned from discussing their pay with their colleagues. But the Equal Pay Act 2010 is clear on this, and specifically says that such clauses are unenforceable.
Why do employees want to talk about pay, anyway?
Here’s the thing: all employees want to feel that they’re getting a fair deal from their employer. And if they think a colleague might be getting paid more for the same work, it’s only natural that they’d want to find out.
Of course, not all employees want to discuss their pay — but there’s some evidence that it’s becoming more common. A recent survey in the US found that 37% of Gen Z respondents (those aged between 18 and 24) had asked their close friends how much money they make, compared to just 15% of Gen X and 4% of over-65s.
There could be a simple explanation for this: Deloitte’s 2023 Millennial and Gen Z survey found that the cost of living was a top concern for 35% of Gen Z, up six percentage points from last year.
Gen Z are more concerned about money than older generations — so who can blame them for chatting salary with their colleagues if they might be able to use that information to negotiate a raise?
The dangers of pay secrecy (for employers and employees)
While you can’t stop your employees from talking about pay altogether, there are certain things you could do to limit these discussions.
For example, according to a legal expert quoted in Metro, employers are within their rights to prohibit discussions about pay during work hours. You can also suggest that your employees refrain from discussing salary altogether, even if you can’t discipline them for going against your suggestion.
Here are some reasons why that’s not a good idea.
Real or perceived inequity
From the employee’s perspective, the most obvious disadvantage to keeping salary info secret is that it makes it easy for companies to get away with unfair pay practices. When employees are too afraid to discuss what they’re making, unscrupulous employers can pay people different amounts for the same work — and the employees will be none the wiser.
But even if you are paying everyone fairly, pay secrecy can lead to perceived inequity. Look at it this way: if you ask your employees to keep their salaries secret, it really looks like you’ve got something to hide. It’s easy for employees to come away with the impression that they’re not being paid fairly, even if they are.
Damage to motivation and morale
When employees feel like they’re being fairly compensated, they’re much more likely to be engaged and put effort into their work. But when they feel they’re not getting fair treatment, they may end up feeling like they’re not valued by their employer.
Naturally, this can lead to a drop in motivation (and productivity) across the organisation. And remember, this can happen even if you actually are paying fair salaries, just because employees think you’re not.
Impact on company culture
Over time, these feelings of discontent can have a big impact on your company culture. Think about it: employees who think they’re not being paid fairly are likely to feel disrespected by their employer. And any efforts you make to remedy the situation will just look like window dressing unless you actually address your compensation practices.
Plus, instead of supporting each other, employees in this situation might grow to resent their colleagues and see them as competitors. This is a long way from the positive, supportive and collaborative culture that most organisations want to build.
The alternative: Pay transparency
As we’ve discussed, being overly secretive about your compensation policies can have some disastrous effects for your company. But even putting those aside, the reality is that pay transparency is no longer a nice-to-have for European companies.
We’ve talked a lot recently about the EU Pay Transparency Directive, which will require companies to be more transparent in their approach to pay. For example, they’ll have to report regularly on their gender pay gap, and put in place corrective measures if they’re found to have a gap of 5% or more. Employees will also have the right to request certain information about their pay and average pay levels for workers doing the same or similar work — and employers will have to provide it.
But before you panic, pay transparency doesn’t necessarily mean publishing every one of your employees’ salaries for all to see. For example, you could use salary bands to ensure that everyone has a good idea of what each role pays, without disclosing the actual figures on an individual basis.
Put simply, when employees understand some of the reasoning behind pay decisions, they’re more likely to believe you when you say they’re being paid fairly. And pay transparency comes with a bunch of other advantages too: it can help you attract and retain top talent, and boost morale and productivity in your organisation.
Here are some other best practices if you want to be more transparent about pay:
- Develop a compensation framework
- Conduct an internal salary audit
- Include salary ranges on job descriptions
- Conduct regular, objective salary reviews
- Create a succession plan with clear progression paths
- Create a compensation communication plan
Learn more about pay transparency
Want to learn more about the advantages of pay transparency for both employers and employees? Check out our full guide!
And if you need more help getting ready for the EU Pay Transparency Directive (which is set to come into effect in 2024), we’ve put together a comprehensive checklist to help you get started.
