My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a tax partner and the managing partner of Cunningham LLP in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog do not reflect the position of Cunningham LLP. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Monday, May 13, 2013

Should You Discuss Your Salary with Friends, Co-Workers or Family?

I have written several blogs on various money taboos; from discussing your will with your family to planning for inheritances. I enjoy writing or discussing these sacred topics because I like to challenge some of our financial conventional wisdom's. Frankly, I find some people just so uptight on these topics that I enjoy watching their reactions and/or reading their comments on my blog.

A major taboo is discussing your salary with friends, co-workers and family. Although I am personally fairly open to discussing many sacred money topics, I think discussing your salary is generally not a prudent action. However, are there any situations in which a discreet discussion of salary may be advantageous to one or both parties?
  

Friends


Personally, I see few if any circumstances that would ever merit discussing your salary with your friends. The one possible exception may be where your friend is in the same or similar profession. I will discuss that exception in detail below. Otherwise, I see only risk in discussing this topic with friends. Some may lack discretion and inform others of your salary, while others may be jealous or harbor resentment. 

Co-Workers


In the case of co-workers and friends in similar professions, I can see at least 2 reasons why someone would divulge their salary. The first reason being to ensure equality of salary. Many people want to know they are being paid equally, especially in industries where there may not be gender equality. The issue becomes what you do with that information? Do you run to your employer and tell them Don down the hall told you he is making $2,000 more? You put Don at risk with your employer (which is why Don may be hesitant to discuss the issue in the first place), and if you confront your employer you risk your own job, whether your employer is legally entitled to dismiss you or not.

On the other hand, if an employee is discreet, they can use their knowledge of wage inequality in salary discussions to know how far they could try and push for a salary increase, assuming they feel
confident they are a valued employee. Both the above situations involve risk to the employee and their co-worker which is why I would suggest many co-workers do not discuss their salaries (Although, I may have employer bias; as I would not be pleased if someone told me during a salary review that they deserve to be paid as much as Mary or Sam).

Another reason for discussing your salary amongst friends and co-workers in the same profession would be if you or they are job shopping. If you know Jane makes $70,000 working for an engineering firm and your engineering firm only pays you $60,000, you may wish to consider applying for a job at Jane’s firm if all other employment variables are equal. Alternatively, this information may be helpful in pushing for a raise at your current firm, as knowing what other firms are paying and what your firm really needs to pay to compete would be valuable knowledge.

Family


I would think that most people share their salary with their spouse. However, I know there are spouses who try and keep that information private or provide partial disclosure. In some cases they think the information is private, in others they feel their spouse will spend more money if they know what they earn, and finally, many spouses are not forthright so their spouse will be in the dark should there ever be a marital breakdown.

I see no reason to provide such information to siblings, unless it would be useful information for their own careers. Even the most well intentioned sibling could say something by accident and we all know about sibling rivalry and jealousy.

How about younger children? I found a couple of articles on this topic, specifically this New York Times Article titled “Daddy Are We Rich? and Other Tough Questions”. The author, Ron Lieber, discusses ways to handle the question without providing specific income in various situations. The article puts forth an elegant solution by Gary Shor, a financial planner, where he suggests parents turn the question upside down by detailing the expenses they incur to live their current lifestyle. This provides their children with a sense of how much salary would be needed to afford those expenses and what kind of professions could provide such income for their children in the future.

For full disclosure, the reason I wrote this blog is that I recall as a university student considering following in my father’s footsteps. He was a baseball player (a left handed pitcher who was asked to try out for a Cleveland Indian farm team when younger) and I asked him how much do major league pitchers make? 

Just joking about asking him how much pitchers make, but he was asked to try out for a minor league team and believe it or not, in the late 50’s accountants made more than baseball players. Then there was my grandmother who forbade him from trying out for the Indians, so in the end my father decided against baseball and he became an accountant. I have digressed as I often do, however, I do remember having a frank discussion with him about what he made as an accountant that I found very enlightening in making my career choice. In retrospect, I would have preferred it if he had framed our discussion based on what accountants make per hour they work (given the hours I have worked over my career), instead of on a gross annual basis.

Anyways, as I stated at the outset, I would generally dissuade anyone from disclosing their salary, other than where that information provides them or someone they trust, with knowledge to leverage a greater future salary. And in those rare cases when you do disclose your salary, always understand you are taking a huge risk with that information being leaked – intentionally or unintentionally.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

11 comments:

  1. Sometimes I get asked about current salary when interviewing for jobs. I understand that I am not obligated to disclose it, but I feel that doing so most often works against my chances of getting the job. This applies to full time and contract positions, especially when dealing with recruiters.

    Would be great to hear your thoughts and other comments on how to handle this situation effectively.

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    1. Hi Anon:

      I can only comment from the employers perspective. We love when someone tells us what they are making (assuming they are not lying). However, if it was me, I would only tell the potential employer or recruiter what I want to make.

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  2. Another interesting situation - slightly off topic, but related, is banking. When a friend, family member or relative works at the same bank you deal with, and you feel somewhat obligated to work with them, they have full access to your assets/debts at that institution.

    Would be great to hear your thoughts on this also.

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    1. I would ask for someone else to handle your business or move your account elsewhere. YOu need to feel comfortable. While I have many friends or people I know as clients, there have been people I know that dont use my services because they dont want me to know what they make. You should always ensure your comfort level comes first

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    2. My salary is $40,000.

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  3. In Ontario civil servants making above 100k have their salary published. In unionized positions you know the wage grade of your coworkers so you know they are somewhere in that grade.

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    1. Hi Anon

      Thx, yes there are various other situations and countries that provide such info. I guess I was looking at situations where the information is not available, but in retrospect I should have had a paragraph discussing situations where your salary is known.

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  4. What can go against you if you tell your siblings what your income is.

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    1. Nothing until you have to share the costs of something and one sibling says why does'nt money bags pay or there is a huge dust-up and one of the siblings decides to tell everyone what you make. In some familes not much of an issue, but in some, a huge issue.

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  5. I'm going to have to disagree with you. I think that times are changing. We live in a time where data is a valuable commodity. Discussing your salary with co-workers, friends, family, and strangers gives you more information and allows people (employees and employers both) to make better decisions.

    Imagine if you went to buy a car and didn't know how much similar cars sold for. Or if you didn't know the break down of how much the options were. You walk into a store and make an offer on a vehicle with no other information besides the test drive (interview).

    Not making as much as your co-worker? upgrade your skills. Is your brother making more money then you? ask him to help you figure out why and what you can do different. Is someone paying more money for the same job down the street? Use it as a negotiation tactic.

    For an employer: Employees demanding more wages? offer higher wages, or make your company a better place to work.

    In the end, a job or a career isn't just about salary anyways. It's about benefits, work/life balance, opportunity, and the people you work with AND salary. All of which are important to discuss!

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    1. Thx Masterpresenter

      I appreciate your comment and perspective. Although I am generaly for breaking any money related taboo, this is one area I still think people have to be careful. There are too many vindicitive and irresponsible people out there and that includes family and friends. Thus, I would still be somewhat cautious in providing the info, but I respect we can agree to disagree in this case.

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