Best not to know: Pay secrecy, employee voluntary turnover, and the conditioning effect of distributive justice

Summary

This paper, "Best not to know: Pay secrecy, employee voluntary turnover, and the conditioning effect of distributive justice," by Alterman, Bamberger, and Wang (2021), investigates how and when pay secrecy influences employee turnover intentions and firm voluntary turnover rates. Building on uncertainty management theory, the authors propose that employees assess organizational trustworthiness by triangulating perceptions of pay secrecy (a procedural justice cue introducing uncertainty) with their own or others' perceptions of distributive justice. Organizational trustworthiness, in turn, is posited as a significant predictor of voluntary turnover behaviors. The study employed two distinct investigations: an individual-level study (Study 1) examining turnover intentions and a firm-level study (Study 2) analyzing actual voluntary turnover rates. Across both studies, the core methodology aimed to test the moderating effect of distributive justice on the relationship between pay secrecy and turnover outcomes. Pay secrecy perceptions were measured using five author-developed items focusing on process and communication transparency, rather than outcome transparency. The key finding reveals that the relationship between pay secrecy and turnover is contingent upon perceptions of distributive justice, rather than being a universal effect. The implications of these findings are substantial for both theory and practice. When employees perceive a high distributive justice climate—meaning they believe pay is allocated fairly—pay secrecy can paradoxically lead to higher voluntary turnover. This is because the uncertainty introduced by secrecy can "muddy" employees' perceptions of fair treatment, despite an otherwise fair system, leading to doubt and potentially higher turnover. Conversely, in contexts where distributive justice is perceived as low, pay secrecy can actually be negatively linked to turnover rates, suggesting that employees might prefer not to know if they suspect unfairness, as transparency in such situations could exacerbate negative feelings and increase departures. The research suggests an important extension to organizational justice theories, indicating that when procedural justice cues (like pay secrecy) are confounded with uncertainty, the typical compounding interaction with distributive justice may be replaced by an antagonistic one.