The Two Faces of Pay Secrecy: The Effects of Pay Secrecy and the Moderating Roles of Team Climates

Abstract

This study aims to extend the current theoretical understanding of whether and how pay secrecy leads to positive and negative consequences in terms of employees’ work attitudes and behaviors, and also reveal the contextual factors that can strengthen or weaken such effects. From the human resource (HR) practice-as-a- signal perspective, I argue that pay secrecy can be perceived as the organization’s intention to differentiate pay based on individual qualities (i.e., a positive signal) as well as the organization’s intention to hide unfair pay allocation decisions (i.e., a negative signal), and thus employees’ work attitudes (job satisfaction and intention to stay) and behaviors (in-role performance and extra-role performance) should be determined based on which (i.e., either positive or negative) signal employees perceive more saliently. In addition, I also propose that a social psychological environment-a cooperative or competitive team climate- becomes an important contingent factor that determines the direction (i.e., positive or negative) of the pay secrecy effects. I present empirical evidence from a large sample of multilevel field data, obtained from 1,336 employees on 243 teams in 37 organizations in Korea.