Public Salaries: Is Transparency Right For Your Company?

Pay transparency is an important issue.
Pay transparency is an important issue.

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Disclosed company revenue and monthly progress reports; shared self-improvements; internal emails between two employees sent with the team cc’ed. Buffer, a social media sharing solutions company, functions with this level of radical transparency. Buffer finds power in the vulnerability, openness and accessibility of transparent ideas and workflows. Transparency empowers and inspires. It establishes trust, the foundation of efficacious teamwork.
Buffer shares that it even applies its philosophy of “default to transparency” to compensation. CEO and co-founder of Buffer Joel Gascoigne tells that being open and public about salaries feels like an emerging movement with great rewards. For Buffer, the sharing salaries methodology elicited an influx of talented applicants who were also a good cultural fit — thus successfully growing the company.

Secrecy of Salaries

Salaries have always been private matters. Open salaries, especially if shared among coworkers, can create employer-to-employee and employee-to-employee contention. It can replace gratitude and empathy with jealousy and entitlement. Co-workers can talk about personal travails during water cooler chatter and over-share feelings on Facebook, but discussing salaries and raises is considered taboo and poor etiquette.

Employer & Employee Benefits

Exposing salaries may be uncomfortable, but it can actually improve a company’s productivity and employee decision making. For a company, as in Buffer’s case, salary transparency generates trust and investment. It breaks down barriers, which encourages the agility of new ideas and directions. For an employee, salary transparency can drive someone to achieve better pay or get paid more fairly, internally or externally. Closeted salary information can worsen pay inequalities, explains Daniel Indiviglio, a contributor for The Atlantic. For example, employees can be underpaid compared to their colleagues without even knowing it.
Economic researchers from Princeton also exclaim that wage transparency can improve the labor market’s efficiency and identify worker satisfaction. Employees who can see that they’re lower wage earners within their peer group are more likely to experience work dissatisfaction. Sure, it makes sense that employees who earn below average feel unsatisfied, but it also motivates them to look for a different job. Indiviglio explains that theoretically, employees paid less than their peers are more likely to under-perform comparatively. Following this theory, these employees can boost personal work performance by more suitably applying their talents and skills to a new job that subsequently offers better pay.

Open Salary Setbacks

Although transparency can help foster team trust, break workplace barriers or alleviate wage inequalities, it can disrupt the ebb and flow of a company. Making top-level information company-wide and public information can trigger resentment over a sense of accountability. Adopting salary transparency could create a more competitive environment, but a high-tension one as well. Loss of control costs, employee privacy, the strategy of trade secrets, and threats of a lawsuits are also concerns.

Open Salary 101

To adopt an open salary structure, your company may need to modify your current salary scale and payroll process. Buffer uses a complex transparency formula to calculate open salaries — salary = job type X seniority X experience + location (+ 10K is salary choice). The formula is broken down in detail on Buffer’s post blog about open salaries.
After you draft individual salaries based on job type, seniority and experience, for example, your company can then just rely on a payroll software system like Intuit to handle issuing payments, thus simplifying the compensation process. Buffer reiterates that its formula is a “living document.” For example, Buffer added career progression and expresses that updates will continually be made. As a benefit, an open salary model also invites companies to share feedback to help improve one another’s compensation structure.
Gascoigne adds that companies curious about salary transparency should experiment with transparency in small ways. Rather than post everyone’s salaries on the company website, test a transparent email policy or practice with visible progress reports. Measure the success of those transparency tactics and build from there, recommends Gascoigne.

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