Many years ago when I read Dr. Ed. Lawler's book "Pay and Organizational Development" I had discovered this research based theoretical construct. Ever sine then I have seen the validity of this concept in real life.
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The more employees know about their pay - how the pay determination process works and how the individual Pay Decision that affects them were made, the more satisfied with pay the Employee will be. Transparency with everything about pay is a crucial step in the effective design of pay systems. The more secret the pay system is the more ineffective it will be.
This is simply because employees are not necessarily concerned about what they get paid but with how their pay decision was made. They judge the "fairness", the "appropriateness" and the "simplicity" of the pay system more than anything else.
Thus "pay secrecy" needs to be eliminated if the system is going to be an effective one.
Thus the key I have found is open communication about everything about the organization's pay system.
