Payroll secrecy may be draining employee productivity

For modern recruitment firms, maintaining payroll confidentiality and ensuring employee information is kept secure is an essential part of maintaining compliance and the faith of candidates.

That's a big part of the reason why payroll software that offers user ID and password security functionality can prove to be such an invaluable investment.

However, new research has suggested that too much secrecy surrounding payroll details can actually have a negative impact on productivity, casting doubt on the long-held belief that varying wages should not be disclosed amongst employees.

The study – published in the Academy of Management Journal earlier this year – was conducted by members of Tel Aviv University's Recanati School of Business and Cornell University's School of Industrial and Labor Relations.

280 Israeli university students were offered payment in return for spending one hour playing a computer game, with half being told exactly how much they and the other study participants would earn from the experiment.

The other half of the group was given far less information. They were only told how much their individual performance bonus would be, and were also ordered not to discuss payment with other participants.  

According to Tel Aviv Professor Peter Bamberger, the results showed "only a negative effect of secrecy on individual worker performance".

"Secrecy has a negative effect on worker performance, but not for the obvious reasons. Trust and fairness may be part of it, but we found from our experiment that most of the effect is explained by a reduction in the perceived expectation of additional pay for better performance – for trying harder," he said. 

"When the economic gap is imagined to be so minimal between good and bad performers, the employee thinks that working harder just isn't worth the effort."

While there will always be limits to just how much information employers should disclose when it comes to payroll and financial bonuses, these results clearly highlight that secrecy is not always the best option, and that there could be significant productivity benefits in maintaining a more open working environment. 

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