According to a recent 15-country study of performance and reward practices conducted by Towers Perrin, companies are getting better at communicating overall award objectives and details about pay ranges and performance ratings. But, there is continuing discomfort with open discussions about many aspects of pay and performance, particularly the pay determination process.
There is little indication that there will be much change in this situation in the next three years. As a result, employee understanding of key aspects of the pay process is quite low.
Compared to their European counterparts, US companies rank lowest overall. Over 80% of European respondents say their company are communicating with employees (or will within the next three years) about compensation procedures, job/role evaluation methodology, merit increase budget, employees' performance ratings, and the value of their total rewards package. Whereas US respondents, on average, never achieve the 80% level on these, or other measured items.
Approximately 75% of US companies communicate employees' performance ratings. Less than 60% of US companies currently communicate program objectives and procedures; approximately 75% plan to do so within three years.
Forty percent or more of US respondents (currently and within three years) communicate (or will communicate) job/role evaluation methodology, merit increase budget, salary ranges, employees' own range, employees' performance ratings, and value of the rewards package. The data shows considerable secrecy about competitive market data and average merit increase for US companies.
In short, for all of our efforts to reduce pay secrecy during the last quarter century, only modest progress has been made. A quick glance at the participants list indicates that study results pertain to major corporations. One can only assume that a random sample of US employers would reveal a considerably higher level of pay secrecy.
The irony is that there has been so much effort to make pay packages attractive to employees, and so much emphasis on employee communication, yet most companies seem to be keeping their employees in the dark. That secrecy has to work against companies efforts to achieve a competitive advantage.