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‘Pay Secrecy’ Prohibited For Federal Contractors

“It is a basic tenet of workplace justice that people be able to exchange information, share concerns and stand up together for their rights.” That’s what Labor Secretary Tom Perez had to say concerning the Obama administration’s new rule, centered on the Lilly Ledbetter Fair Pay Act, entitling workers to pursue fair pay claims. The main conclusion: you can now discuss, disclose, or inquire about your and your co-workers’ pay — provided, of course, that you work for a federal contractor.

money lips 

(Photo Credit: kevin dooley/Flickr)

Supporters of the rule argue that it’s an important step toward transparency, and assists workers who otherwise may be discriminated against by receiving lower wages. As evidenced by PayScale‘s existence, it’s clear that there has already been a high demand for this kind of transparency and a desire for freedom of information — especially when it comes to salary data.

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So what are some potential implications of imposing rules for this sort of thing? Let’s take a look at two areas this would dramatically affect if the rules extended to the private sector.

How a Company Sets Salaries

It’s plausible to imagine a world of workers who never understood so-called pay secrecy — a generation demanding the right to know what everyone is being paid. What may get lost, or what would certainly have to change, is the way that the back office discloses policy on how a salary is determined.

Right now there are all sorts of smoke and mirrors surrounding exactly how an employer arrives at a number. There’s the general market of similar positions at other companies, years of experience, and to some extent how much money the company has to give. But once salaries start getting disclosed, those systems are going to have to tighten up dramatically, as nearly every single worker who’s not paid as much as the person in the cubicle over is going to cry foul.

“The Startup Appeal”

This one is already out in the open, because of sites like PayScale. When you start seeing that a larger company pays more for the same position at a young startup, it can cause some clear division in appeal. Companies won’t be able to get away with saying “we offer a very competitive salary,” because applicants will know exactly how it compares to competitors.

Instead, my hope is that salary will become a less appealing factor for companies. Rather than competition simply driving firms broke with numbers they can’t afford, recruiters will have to appeal to other parts of their business (e.g. culture, opportunity, creativity) that will draw people in.

We all have to earn a salary, and it’s often in young students’ best interests to take a job that’s going to help them realistically pay down their debts. But hopefully as we experience a shift toward transparency, our focus will turn away from salary, and toward pursuing the careers that make us excited to get out of bed in the morning.

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Tell Us What You Think

We want to hear from you! Are you covered under this administration’s new rule? Have you felt the conversation about salary and equal pay changing? Tell us what you think in the comments below or join the conversation on Twitter.

Peter Swanson
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