PERFORMANCE AND THE INCENTIVE AND SORTING EFFECTS OF PAY SECRECY

Pay secrecy adversely impacts individual task performance because it weakens the perception that an increase in performance will be accompanied by increase in pay; Pay secrecy is associated with a decrease in employee performance and retention in pay-for-performance systems, which measure performance using relative (i.e., peer-ranked) criteria rather than an absolute scale (see Figure 2 on page 5); High performing employees tend to be most sensitive to negative pay-for-performance perceptions; There are many signals embedded within HR policies and practices, which can influence employees ’ perception of workplace uncertainty/inequity and impact their performance and turnover intentions; and When pay transparency is impractical, organizations may benefit from introduc-ing partial pay openness to mitigate these effects on employee performance and retention. Pay secrecy continues to be a contentious issue among scholars and practitioners alike, with both theory and empirical evidence regarding the implications of pay se-crecy remaining equivocal. As noted by Gomez-Mejia et al. (2010), signaling theory suggests that employers may use pay-for-performance system attributes to signal t