‘You make how much?’

At Whole Foods, salary information is readily available – but is that too much information?
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 04/07/2014

When it comes to money, Whole Foods has nothing to hide. The 80,000-employee grocery chain — which touts healthy, organic living — has an open-book policy that allows any employee to see the compensation of another.

“This is just another avenue where we can share information with our team members that we think engenders trust and transparency and, in a sense, levels the playing field for everybody in that we have nothing to hide,” said Mark Ehrnstein, Austin-based executive director of team member services at Whole Foods.

A curious employee can request the report — which includes information on the organization’s 2,025 Canadian employees — from an in-store HR representative and, once given access, can take notes but can’t copy or take the report home.

“The wage disclosure report can promote conversations between team members and their team leader about their compensation and where they fit in the team,” said Ehrnstein. “That team member may be motivated to do better in their job or to get another job to earn more pay.”

It’s impossible to say how many organizations follow this philosophy but it’s fair to say it’s rare — especially in Canada. However, more organizations could — and should — hop on the pay transparency bandwagon, according to Peter MacLeod, principal and co-founder of public consultation firm MASS in Toronto, which adopted an open compensation policy several years ago.

“To me, (a closed policy) just erodes that kind of esprit de corps that you want to have as an organization and it reinforces bad habits of hierarchy and makes what should be a common enterprise a sharply divided field of winners and losers within the company itself. That doesn’t make sense to me.”

As a startup, MASS’ open compensation policy made sense, he said.

“I wanted to make it really clear that I had as much skin in the game, that I wasn’t going to take a penny more myself to make sure that I could pay everyone closer to what I thought they were worth. So really it was about morale and it was about fostering a sense of a team… and it just stuck, in part because I’ve maintained pretty close parity amongst the salary levels.”

At six-employee MASS, all staff with one year of service earn $67,500 per year while first-year staff earn $55,500 and part-time staff earn either of the two rates on a pro-rata basis, according to the website.

“Maybe it limits who we can actually recruit… but it also makes for a very straightforward salary negotiation,” said MacLeod.

Compensation is an issue people often dwell on or grouse about, he said.

“So why not get rid of any of that anxiety that comes from people’s salaries being private?” he said. “As a society, we have a huge taboo around talking about money, about not only what we make but what we owe and what we spend, and there are costs and consequences to that taboo.”

Refreshing or awkward?

People find the open policy refreshing, said MacLeod.

“Most businesses would probably benefit from a dose of sunshine when it comes to internal compensation rates,” he said. “The funny thing is people would shout and scream initially, then it’s like anything — you get used to it and it doesn’t seem like such a big deal.”

In the 15 years Ehrnstein has been at Whole Foods, he hasn’t heard of any complaints, he said.

“It’s something that we talk about as an important cultural practice so I think people are surprised but usually it’s in a good way — you know, team members say, ‘Wow, that’s pretty cool that you aren’t hiding behind confidentiality with respect to compensation,’” said Ehrnstein.

“Pay can be a very sensitive topic for employees and for companies and I think there’s a lot of fear in providing this level of transparency. But not for us… it really engenders a sense of egalitarianism and community.”

But it’s not certain the average employee wants other people to know what he makes, said Claudine Kapel, a principal at HR consulting firm Kapel and Associates in Toronto.

“That could lead to some awkward conversations or tensions, potentially,” she said. “The reality is very few organizations share compensation information to that degree.”

But it’s an issue that is going to get more attention in upcoming years because the younger generations, especially those heading up smaller organizations, consider transparency to be really important — and salaries are an open subject, according to Janet Salopek, president and senior consultant at Calgary-based HR consulting firm Salopek & Associates.

There are some really good things that could come out of an open compensation policy, such as greater transparency and consistency, she said.

“It makes it quite clear, if it’s managed properly... what success looks like for that organization. So there are benefits to moving to that type of model.”

However, there are problems too. For instance, how could an employer focused on succession planning reward its rising stars without people wondering what those raises are based on? In addition, in hot markets such as oil and gas in Alberta, companies often have to offer high salaries to attract people, said Salopek.

“I don’t think people internally or externally would understand it because they don’t necessarily have the information that would allow them to make a judgment as to whether a particular position is a hot position and, as a result, a premium needs to be paid.”

Privacy concerns

San Francisco-based Buffer, a software application designed to manage social networks, introduced open salaries in December 2013 as part of its adherence to “radical transparency.” In addition to showing its salary formula, it lists on its website the current salaries of all employees, including CEO Joel (US$158,800), engineer Sunil (US$137,600) and designer Brian (US$94,000).

But it’s unlikely this kind of approach could be taken in Canada because of privacy laws, according to Tamara Hunter, associate counsel and leader of Davis’ privacy law compliance group in Vancouver.

While the public sector can allow for such openness because it involves taxpayer money, the private sector is different. Federal and provincial jurisdictions vary but generally would consider a person’s salary and benefits to be personal information, she said.

“The definition of personal information is quite broad, it’s just information about an identifiable individual, and it doesn’t have an explicit exception for salary and benefits like the public sector statutes do.”

Generally, the statutes would say a person’s consent is needed to disclose that kind of information, so employers would need to ask for that permission when hiring someone, said Hunter. And even if a company only gave information for particular roles — not naming names — that could still pose a problem.

“Privacy legislation talks about information about an identifiable individual and if you know the person who’s in that role and then you know what the amount is for that role, it’s more or less information about that individual,” she said.

There’s a reasonableness requirement that overlays everything, said Hunter, so in PIPEDA (the Personal Information Protection and Electronic Documents Act), for example, an organization can collect, use or disclose personal information only for purposes a reasonable person would consider appropriate.

If, for example, a job candidate isn’t OK with his salary being revealed, and the employer then declines the job offer, that person could complain to the privacy commissioner — and the commissioner would decide if it’s sufficiently reasonable, she said.

On the other hand, the employee might agree to such consent because it benefits him too, said Hunter.

“They may in their mind think, ‘That’s a fair tradeoff. If I can get that information about other people that work in the organization, I’m willing to have them receive it about me.’”

There would also be issues around consent from existing employees if an employer decided to adopt an open salary policy, and what happens if a consenting employee later decides she does not want her salary information disclosed, said Hunter.

Tips for employers

What’s most important is that employees fully understand what they are agreeing to in signing the documents, said Hunter.

“You’d need both some evidence from the employer about why they consider it to be, from a business purpose, a useful practice and you’d also need the fact that the employee understood what they were agreeing to and was agreeing.”

Communication would be key, said Salopek, and a Canadian organization would need to move away from individual salaries, because of privacy concerns, and instead connect the pay to a particular position and make it formula-based.

If an organization wants to become transparent with pay, it needs to make sure its house is in order, said Kapel.

“Otherwise, you’re going to expose issues that there are internal equity issues or unfair practices,” she said.

“You need to make sure there’s some rationale for how people are paid and why people who are doing the same type of work or in the same job, why there are differences in how they’re paid.”

The question is how far down the continuum of sharing do you want to go? said Kapel.

“I would suspect for many organization, sharing to that individual level, the juice might not be worth the squeeze because it could create more questions and potentially be a distraction versus gaining you points.”

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