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

• Published date: 01 April 2018
• Date: 01 April 2018
• DOI: http://doi.org/10.1111/1748-8583.12180
• Author: Brandon W. Smit,Tamara Montag‐Smit

ORIGINAL ARTICLE

The role of pay secrecy policies and employee

secrecy preferences in shaping job attitudes

Brandon W. Smit

1

|Tamara Montag‐Smit

2

1

School of Business and Economics, Indiana

University East

2

Department of Management, Ball State

University, Miller College of Business

Correspondence

Dr. Brandon W. Smit, School of Business and

Economics, Indiana University East, 255 Hayes

Hall, 2325 Chester Blvd., Richmond, IN 47374,

USA.

Email: smitbw@gmail.com

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, interper-

sonal, 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.

KEYWORDS

job satisfaction,justice, pay secrecy, person‐environment fit

1|INTRODUCTION

Every organisation that paysits employees must decideif, when, and how to communicatepay information (e.g.,salaries,

and raises) to them. Within private organisations in the United States, there are vast differences in the amount ofpay

informationcommunicated to employees.Whole Foods, for example,has a transparent policy whereall employees have

access to compensation informationfor every member of the organisation(Marquis, Besharov, & Thomason,2011). On

the otherhand, most privateorganisations in theUnited States tend to embracepay secrecy (Institutefor Women's Policy

Research(IWPR) and RockefellerSurvey of Economic Security,2014), which is definedas “a restriction on the amountof

informationemployees are provided aboutwhat others are paid”(Colella,Paetzold, Zardhoohi,& Wesson, 2007, p. 56).

Received: 31 August 2016 Revised: 23 August 2017 Accepted: 18 October 2017

DOI: 10.1111/1748-8583.12180

304 © 2018 John Wiley & Sons Ltd Hum Resour Manag J. 2018;28:304–324.wileyonlinelibrary.com/journal/hrmj

Extant research shows that these pay policies can influence employee attitudes and behaviours (e.g., Belogolovsky

& Bamberger, 2014; Belogolovsky, Bamberger, Alterman, & Wagner, 2016), especially employee satisfaction (Day,

2007, 2011) and justice perceptions (Bamberger & Belogolovsky, 2010). Both satisfaction and justice percep-

tions are important to examine because they capture distinct attitudes that are relevant to pay‐related phenom-

ena (e.g., Cropanzano, Byrne, Bobocel, & Rupp, 2001; Judge, Piccolo, Podsakoff, Shaw, & Rich, 2010), and

previous research supports the discriminability of these constructs. For example, individuals may be dissatisfied

with their circumstances but still perceive procedures as fair (Greenburg, 1990). The effect of pay secrecy

policies on these employee attitudes is unclear, however, because empirical research on the topic is both scarce

and occasionally inconsistent. Some research finds that secretive pay policies reduce pay satisfaction (Futrell &

Jenkins, 1978; Sweins & Kalmi, 2008), but other evidence suggests that pay secrecy is unrelated to pay satis-

faction (Day, 2007). Additionally, secretive pay policies seem to have inconsistent effects on employees' justice

perceptions. Whereas some evidence indicates that secrecy negatively impacts fairness attitudes (Day, 2011),

other evidence fails to observe these effects (Bamberger & Belogolovsky, 2010).

We identify and examine two possible contributing factors for these inconsistent effects. First, employees may

react to pay secrecy policies differently because they have varying pay secrecy preferences (e.g., Lawler, 1966).

Preferences seem to have this effect in other workplace domains. For example, employees that oppose affirmative

action are more pessimistic about future promotion opportunities when working in an organisation with an affirmative

action policy (James, Brief, Dietz, & Cohen, 2001). Applying this same logic to the context of pay secrecy, the negative

effects of pay secrecy policies on job satisfaction, for example, may only hold true among employees that prefer pay

transparency. Overall, very few pay secrecy studies examine how individual differences alter employee reactions to

pay secrecy policies (cf., Bamberger & Belogolovsky, 2010). However, individual differences in employee preferences

are important to consider because they likely play a crucial role in determining if and when pay secrecy policies impact

employees and organisations.

Second, researchers have posited multiple pay secrecy policy dimensions (e.g., Colella et al., 2007; Marasi &

Bennett, 2016), yet empirical research on the topic typically examines pay secrecy as a unidimensional policy. In this

paper, we hypothesise and find unique effects when examining pay secrecy according to two distinct dimensions:

distributive pay non‐disclosure and pay communication restriction (Marasi & Bennett, 2016). We leverage theory

on person‐environment fit (Edwards & Shipp, 2007) to determine how alignment (and misalignment) between pay

non‐disclosure policies and employee preferences impacts employee attitudes. We find that congruency in this case

plays an important role in increasing job satisfaction and justice perceptions. Using a different lens, we examine

communication restriction preferences as a moderator of the relationships between communication restriction

policies and employee attitudes (i.e., job satisfaction and justice perceptions). Our research yielded asymmetrical

effects for communication restriction, where only employees with preferences for transparent communication

policies experienced negative job attitudes working in secretive environments, whereas employees with secretive

preferences were unaffected by transparent communication policies.

1.1 |Pay secrecy policies and preferences

Pay secrecy policies range on a continuum from completely transparent to completely secret, with varying grada-

tions in between (Colella et al., 2007). Additionally, as outlined by Marasi and Bennett (2016), there are two

methods through which organisations use policies to restrict pay information. Organisations can institute secretive

policies that (a) regulate the amount of information shared about the distribution of employee pay (i.e., distributive

pay non‐disclosure) and (b) restrict employees' ability to communicate with one another about pay (i.e., pay commu-

nication restriction). The low end of distributive pay non‐disclosure reflects complete transparency where organisa-

tions publish employee names with associated pay information at regular intervals. Under completely secret

non‐disclosure policies employees only have information about their own pay, whereas at moderate levels, organi-

sations may provide aggregate employee pay information (e.g., ranges). Although organisations can choose to

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