Alexander Kjerulf posted some time back about how secret salaries are a bad idea. Here are his major reasons:

1. It frustrates employees because any unfairness (real or perceived) can’t be addressed directly.
2. They’re not secret anyway. People talk, you know.
3. It perpetuates unfair salaries which is bad for people and for the organization

I have been involved in situations that were complicated by people not knowing how much those they work with made and, in addition, not understanding how certain people/positions contribute to company success. In many cases the speculation and perceived injustice is much worse for people than coming to grips with the fact that someone might be more valuable in their current position than they are.

A couple benefits to being open and honest are:

1. People don’t gossip as much
2. Bad feelings about salaries do not linger and fester, they come to the fore sooner.
3. There is greater trust in “management”.
4. There is a thought that effort, skill and knowledge are rewards.
5. A greater effort may be given because people feel that effort and good performance are fairly rewarded.

I think the idea of open salaries is a great idea and one that I would put in place were I to run a company.

[source: SuccessFactors Blog]