Figure out how much you should be paid (and three cheers for transparent salaries)
Do you know the salary of every employee at your company? I think you should.
I mean, who is being protected by secret salaries? Certainly not the employee—the more transparent salaries are, the more accurately an employee can assess his or her value to a company.
You’d think that companies benefit from secret salaries and that’s why they keep them secret, but really, if salaries were 100% accurate—perfectly pegged at the employee’s worth to the company—then the company would have no problem revealing all salaries.
The only people who benefit from secret salaries is the human resources department. If they make an error, they can hide it. No one will know. And then they can make ten errors. Because no one knows if the secret salaries are hiding one error or one hundred.
So large companies keep salaries under wraps in order to hide all the mistakes, making the cost of transparency high. But today smaller companies often make salaries totally transparent.
I haven’t done it quite yet with my own company, but I'm going to. I’ve been giving everyone some data just to get them ready for the big picture. Almost everyone is not happy, because even in my little start-up, I’ve made salary errors.
For example, the person who was underpaid was not so much jubilant about a potential raise, but upset about his current underpayment. The person who's losing the housing allowance mostly for tax purposes does not seem to mind. The person who is making way more than everyone else minds a lot that I’m planning on revealing everyone’s salaries. But honestly, I think that person will work much harder if everyone knows the truth. And it should be that way.
This experience has taught me that you should always try to get to a company that has out-in-the-open salaries, because that means you have more out-in-the-open managers—managers that have so much self-confidence in their ability to value accurately a business contribution that they can set airtight salaries and stand by them.
Of course, most companies are not there yet. Especially the larger ones. Fortunately a bunch of companies have arrived with tricked-out tools for figuring out what you should be getting paid. And what your co-workers should earn as well. Here’s a sampling of the top tier of those companies:
Payscale.com is my favorite. In fact, I like them so much that I was mentioning them in all my speeches and then I asked them to do a sponsorship with me. (And they did.) So, anyway, the reason I like Payscale is that they systematically collect data in very specific categories so you can match your situation—years of experience, geography, education—to get your real value in the market. Bonus: These are the people who bring you statistics on the real cost of corporate meetings.
Salary.com is a good one if you are trying to get a raise. Salary.com is not as thorough as Payscale with its data collection. So employers generally favor Payscale. But Salary.com skews higher than Payscale, so if you have to bring a first number to the negotiating process, use Salary.com. Bonus: These are the people who bring you the statistics on how much a housewife is worth.
But really, if companies are smart, the conversation about salary will go quickly. You tell the company how much you’re worth. You bring very good data to back that up, and the company pays it. Then other factors like company culture become much more important.
That's where Glassdoor comes in. It’s US magazine for the company you are considering—a little gossipy, with first-hand information about companies from the people who suffer in them. Bonus: Glassdoor is a new company and there are not a lot of competing perspectives on the site yet. So if you drop a bomb about the place you work, it’ll hit hard.
I think the idea of salary tranparancy may be OK for the company but what about the employee? There are two things that I consider very personal in my life…my health and my finances. I would not appreciate my company just deciding some day to release information about either topic since it isn’t likely going to add to the value of the organization.
As an at will employee I understand my value to the company and communicate it effectively to the people who impact my income.
I do think there is more value than you let on from having guarded salaries otherwise why haven’t you just sent the e-mail with the list of your staff salaries? I think you will find the jelousy will become an issue and you will spend more time addressing why Suzy gets paid more than Jim because they will know what each makes, it seems like a great way to demoralize a team.
Also are you prepared for your temp staff to know how much the VP of Sales makes? Once the information is public it will be public to even unintended consumers.
I can also tell you from expereince, when I was the managming partner of a company and the partners did all have complete visability to salaries you still get jelousy and complaints. Even in a small group people don’t realize the effort and skills of each team member (for example my partners didn’t realize the effort that went into writing contracts, managing finances, and regulator reporting until I left).
Unless there is a clear plan from the company explaining how it will improve the workplace I would avoid making salaries transparent.
Just an experiment to try for those advocating salary transparency – put a copy of your latest pay stub on your door or above your monitor where everyone can see. Let me know how that goes. For those that say “everyone knows anyway”, you’ve never worked at any of the palces I’ve been. Salary is one of those verboten subjects. Oh sure, you can generally get an idea of salary ranges, but my experience has been that very seldom does the exact figure get out. I certainly never tell people my salary, although I am willing to give a ballpark figure to those I know well enough, if asked…
What a bunch of lazy sods! I did the footwork and research to find out how much I was worth and negotiated my salary accordingly. Why should I let a bunch of freeloaders benefit from my hard work, when they contribute nothing in return for me? Let them do the footwork and research to find out how much they should be paid, and not be such a whiny pansy at having to do some real work to benefit themselves.
Besides, my salary is MY business, the company’s and my accountant’s. Show me why it’s any of YOUR business. Your right to know what I make stops at my right to keep my life private.
Salary transparency always benefits the WORKERS. Salary secrecy benefits the BOSSES.
Yes, it will be hellish for the bosses if we all suddenly know how much our colleagues make. And how much the bosses make, for that matter. There will be great pressure to equalize salaries for people doing basically equivalent work.
In the long run, salary transparency will help create more just and fair pay scales.
This will help with overall societal equity.
(And jrandom42, please keep your homophobia out of your comments!)
I disagree. That would be great if we were all perfectly rational people…but we are not. You need to read Predictably Irrational by Dan Ariely asap.
At the very least, companies should provide a salary range in their job postings or have that discussion early on in the interview process. It’s not as much of a factor for recent graduates or those with limited experience, but once you’re in the workforce and climbing the career ladder for more than five or 10 years, knowing a ballpark range can be incredibly helpful.
If they don’t mention it, you can always ask but that can be incredibly awkward. And, if you do ask and the range is way outside of your comfort area, thank them for the information and let them know you’ll get back to them next day. If you reject it on the spot based on the salary range, it could send the wrong message. I always think sleeping on it overnight makes you appear thoughtful even if you know you’re not going to accept it.
Yeah, I’m going to have to agree that transparent salaries would be a marvelous thing. Impossible, however, in gigantic, old-school, top-down management type places. In my own place, someone on a third-level support team found out that first-level supporties actually make more money than they do because first-level is hourly…with the same dollars/hour as the third-level’s scale (so, for example, both make $30/hour, but the first levels get overtime, and lots of it). Management’s response to the complaints: “It’s company policy that no employee discuss salary with another.” The underlying message, of course, being “you’re violating policy by talking about it, are you willing to risk being fired for complaining about it?”
As a positive, though, all of us got 3.25% raises this year instead of 3%. Woot! Extra $10/month!
Yael, don’t like the term pansies? How about crybabies or wussies or lazy sods? Those would fit just as well.
While this may be an intriguing idea, it made me thing of the Government….and the whole payscale thing. Everyone at the Government knows what people make, or at least can get close. Do we thing this is a good idea now???
Penelope, I am really interested to hear more about how you would go about instituting a transparent salary approach. How would you share that information? How would you handle conflicts that arise because of disputes?
What if you work for a small company (50-70 employees) where there is no concept of HR department, and the owner/founder of the company, who has the final word for salary decisions, is plain stingy !!!
Part of the problem that I see is that salary is only a fraction of the total compensation package. I make just under $40K per year, but my company pays another $25K per year for various benefits, including group medical, dental, and vision insurance, profit sharing, 401(k), etc.
I learned this the hard way, when I was laid off from a job paying $40K, but with perks and bennies that put my total comp package at around $80K. Not realizing the difference that total comp package made, I took a new job at $32K, with no perks and bennies, and ended up deeply in debt despite slashing my discretionary expenditures. And I have known other people who had the same rude awakening that I did.
Ir seems likely that transparent salary would obscure the total comp figures even more, as it would tend to make people even more focused on only the salary number, instead of the whole package. And I definitely do not want my entire comp package revealed. It’s no one else’s business which of the perks and bennies I elect to take advantage of.
Can I propose another theory – people who are unhappy with the place they work would love transparent salaries. Almost like it’s another thing to use to justify why they hate where they work. Those who are content with their work lives don’t seem to really care (and/or have reservations about transparency and other people’s money). I think the problem isn’t the secrecy but the perceived relationship with the employer. Revealing salaries would only exacerbate an underlying problem. Fix the foundation first.
How is this career advice? Reads more like business owners advice. And bad advice at that. TERRIBLE advice.
If one candidate is more desirable then another they have leverage to apply for a better package. Career reality. Their relationship is with the company/their employer in regards to the terms of their employment. I fail to see how this needs to be known by other employees. The reference to HR “making errors” is ridiculous. If the employer makes a mistake then that is up to them to address.
The potential to develop a culture of resentment amongst staff is massive with this idea. In fact, it’s the only direct outcome. If Staff A has worked their way up the ranks to 90k a year and Staff B came from a competitor and negotiated strongly in a period where the company really needed them, and earns 120k due to BOTH factors…. what positive outcome does that really have for both parties to know? If they work on par, but were retained under different circumstances, then that is a reality of business and something that wont foster cooperation amongst the staff. Quite the opposite.
Staff A will feel resentful (and wont appreciate that the company needed Staff B – and that Staff B was a strong negotiator in a unique job market snapshot) and Staff B shouldn’t feel watched by the likes of Staff A. The assimilation of Staff B into the company culture and positive interaction with other staff would be jeopardised.
If Staff B was told Staff A’s salary in the interview, and the company really needed Staff B, then they would have easily said “no” and pursued another offer. Likewise if Staff B heard that Staff A and others earned far less for the same job they could walk as it doesn’t take a genius to predict that this would cause issues. This isn’t genius advice.
The final obvious point is that Staff A would hear if Staff B took the offer but managed to negotiate for 120k. They would then feel cheated and push for 120k, or just walk. No one wins. More terrible advice. Keep it coming.
PS: To summarise the article:
“Blah blah blah LINKBAIT
Blah blah PAID SPONSOR LINK CLICK HERE!!!
Blah blah discuss (hello sycophants)”
deepali: excellent job summarizing the kind of magnificent HR blunders this type of program is designed to fix.
There’s a reason Staff A would feel resentful: you value their skillset at $120k, but are only paying them $90k. How could they not feel resentful? You say you don’t value you it that high? Then, why are you paying Staff B that much? Is it because they would’ve left had you paid them the same as everyone else? Of course it is. But, since you claim you only value the skillset at $90k, you should’ve let them them walk and hired others at $90k. Otherwise, you’re simply screwing the people that have been there all along and helped you to get to where you are.
Sorry, pal, you’re exactly what’s wrong with corporate america these days. You want loyalty from your employees without giving any in return.
Check out the wage disparity debate on Last Chance Democracy: http://www.lastchancedemocracycafe.com/?p=1424
In the stockmarket, available knowledge causes the herd to act in ways that adjust share prices.
Salaries that are hidden, hide information that people can use in their deliberations about where to place their labor resources, given their skill levels and the mandates of the job.
We will never see the wide occurence of transparent salaries because it prevents companies from “profiting” in negotiations with possible hirelings. It also prevents recruiters from being able to pay those they like… etc more than others who are as or more deserving.
It will never catch on.
my 2cents worth
I think this is way way off base! and can’t believe someone in the business world would suggest it. Transparent salaries are counter productive to personal negotiation. Fact is, we live in a harsh world, where frankly, big business doesn’t give a hoot about their employees at the end of the day. At the end of the day, big..and even small business care about the bottom line (in 99% of business as far as I can tell). If a person is being considered for a position that needs to be filled, they know they are in power position to negotiate a better deal for themselves the a normal hire. Its not about being fair, its about doing the whats best for you, the individual. By making salaries transparent, you take away the individuals ability to get what they can out of a company that will drop them like a hot potato the second things go south. You’d then make them the center of hate in an office space, merely for having more negotiating saavy then anyone else.
No Dice on this…its ridiculous to even think it would work in the long run. What your really saying is that you want to give more power to the corporate entity by allowing them to keep everyone in-line with eachother…pitting employee against employee to cap themselves.
Based on most of your theories about working and life, isn’t its more appropriate that we start worrying more about our personal bottom line!
I think its a great idea. As shown in the Lilly Ledbetter case, hidden salaries protect companies, not employees. Hidden salaries hide a lot, like gender bias. A friend of mine found out that she was being paid $20 less than a co-worker with less experience and less education than her (and hired about the same time). The only reason she was told, was that “he negotiated better.” My friend had been told by the company’s recruiter that her salary was X and she could take it or go, she was not even allowed to negotiate.
That was $20,000 less.
BAD IDEA. When I was 27 years old, I made $360,000 at my company, and by the time I hit 30, I made $640,000, frankly because my performance was excellent.
I would feel bad for the people 5-10 years older than me who didn’t make as much and it would cause A LOT of awkwardness
I recently became aware of the fact that my co-worker makes more than me and she has 7 to my 22 years. She is bi-lingual and that is it. I work 2x’s harder than her, I am always at every office event, I come up with new and exciting ideas, I am organized etc…She constantly talks about how she needs more money and does less. She preys on the boss’s feelings about how she is raising her 2 grandchildren and housing her daughter etc…She has been repremanded several times but never gets fired and nobody actually makes her accountable. I think don’t only think it is unfair she is being paid more I think in some way it could be illegal because we are in government positions. What do you think?
See its comments like squaw who make me think this is a bad bad idea.. she works less? According to who? She’s bilingual which holds value but you don’t know how much that is..or how hard it is to find bilingual people. Are you aware of EVERYTHING she does in the office? What if she’s done extra work you aren’t aware of?
In your case, knowing hte salary has only caused discontent and unrest. It isn’t our businesses to decide on how they work and it isn’t your RIGHT to know what others make.
perhaps its just the ad industry, but this crap about women getting paid less is rubbish (from my industry)..women run the business and hold a vast number of high profile, high salary jobs, and guess what..its cause they negotiate!
Everyone knows that most companies publish salary scales within job groups. Why is it I need to know exactly what my peers make? In judging our own worth, each of us will be pretty biased and I really doubt that I can accurately judge the peer’s contributions to the company. Too many variables go into salary treatment for me to be helped by knowing what the others make.
I’m a french citizen who is seeking a high pais salary even in the sea or wherever, risky or not.
if you have anything suitable for me please let me know.
Thank you very much for your time,
Best regards,
Anas Balawi
I would argue that companies do not disclose employee salaries because they question their way of skills/performance measurement. It is really hard to evalue a person’s value to the company and provide hard evidence. A lot of this is based on perception and softer evidence. Might as well keep it confidential to avoid liability.
I like that meeting calculator. I hate meetings, maybe I can convince my boss to not schedule so many meetings.
Kootos to you for making salaries transparent. I have always wanted that.
I agree with the notion of transparent salaries but I am positive that not everyone in a company would. On the one hand it is fair to know what everyone makes but on the other hand it might a negative impact on other things. It might distract us employees from doing our work, create added tension in the workplace. Office politics would take a whole new meaning.
Penelope (not your real name) – I’m a professional compensation analyst. I have my MBA and an alphabet soup of professional certifications in this particular field. I appreciate anything that’s published about compensation programs, because it’s my absolute passion in life.
I’ll be the first to tell you that there are most definitely companies out there that make compensation mistakes and try to keep them covered up. (This is wrong and I don’t condone this behaviour, nor would I continue to work for a company that knowingly violates the law.)
However, what I saw of your business sense on 20/20 this past Friday night, as well as this blog post AND your comments on the above companies *really* frightens me.
You are SOOOOOO undereducated in this arena of HR/business management that I’m confident in asserting that you’re dangerous to your readers. You need to disclaim that you have only a surface level understanding of compensation theory and administration instead of pretending to be some incredible thought leader. Nothing that you said above is new or insightful. Compensation professionals talk about and study this stuff all the time.
I’ve worked with both Salary.com and Payscale.com; neither of them has entirely reliable salary data -basically, their data is NOT TRANSPARENT. (Isn’t this one of your primary arguments above?) Of course, you’d have to have some actual expertise in this arena to understand this and it’s clear you do not.
One of the primary rules of compensation analysis and management is to use data that you can readily understand (not unlike prudently investing in companies with business models that you can understand). Another one is to never rely on only one data source.
I, and other professionals in this field, regular mock these two data providers because so much of what they publish is inaccurate. Sure, they get some common benchmark jobs right, like accountant and software developer, but they get much more of it wrong. In one way I appreciate that the existence of Salary.com and Payscale.com because they get people excited about a topic I love so much. On the flip side, I get to spend a lot of time counseling employees on why the data they bring to me is skewed. –Examples of skewed data include:
– employees improperly matching themselves to survey jobs they found on the interet,
-ignorance about their own development needs to progress to the next professional level,
-a lack of understanding between cost of living and cost of labor,
-incorrect algorithms used used by these internet sites for determining “geographic differentials”,
– litte to no knowledge of their company’s chosen compensation strategy [i.e. lead, lag or lead/lag]
There are so many variables to consider when developing a compensation program that it’s easy to see why a small business, such as yours, can make mistakes.
What’s amusing is that in the 20/20 story it’s noted that you have 8 employees and the spread is $50K to $125k. Unfortunately, 20/20 failed to provide information on what jobs were represented. (The devil is always in the details.) But aside from this, you have no one to blame for this pay fiasco but yourself. …And your solution by posting everyone’s salaries on the white board was nothing more than an ignorant, attention seeking stunt for the cameras. Using peer pressure to solve your compensation problem speaks little to your ability to manage effectively or fairly. Did you learn nothing from your adventures in the corporate world? Have you never had any professional training on this stuff? Shame on you! Stop writing so much and and start listening/learning. In other words, “Seek to understand before being understood”.
Should you actually want to learn information on compensation program development & administration then please check out some respected professional organizations: -Society for Human Resource Management (www.shrm.org) or WorldatWork (www.worldatwork.org). The membership base of these organizations is made up of professionals and academic folks who spend the majority of their time researching these issues and working in the real world.
I agree. It’s nice to have transparent salaries but it will almost certainly mean that people will have big issues with one another about who makes what and people will eventually try to sabotage one another.
Joel Spolsky, president of Fog Creek Software, does a fantastic job of running his company in an extremely transparent manner. They continually reap the benefits of this practice, having their pick of the top world’s top talent.
His article about the compensation system at Fog Creek Software is an excellent example.
I have cataloged several other examples in a related post on my blog.
complete information is the way to go…..no more monetary discrimination in the work place
good article.i totally agree that only HR benefits from this situation.also, companys keep salary a secret and make you sign that you are not alowed to tell others in the office, but once there is a lay off every get hurt excpet the CEO.
i just read this article about getting a raise at :
http://www.theofficesurvivor.com/2010/01/getting-a-raise-6th-preliminary-actions-before-the-battle/
Hope your article and others out there will help us all.
If you actually understood compensation then you would probably not have written this article. HR does not benefit much from keeping salaries hidden or broadcasting them. Competition would be bigger and salaries may or may not become inflated for positions across industries. HR does not often decide on the final number given.
Outside of transparent salaries, who out of anyone reading – or anyone working within a company, would want anyone to know what they make. It is noone’s business.
There are many aspects on the legal side that would make transparent salaries very difficult for any size company. Take a basic Compensation Law course and you may think again. But you may soon understand the ramifications sense you will be posting all your salaries for everyone to see.
ReThinkHR.org
@BenjaminMcCall
Hanna –
HR-101: if you’re in the US it’s a violation of the National Labor Relations Act for a company to prohibit its non-managerial workers from discussing their salary, because it would impact their ability enter into collective bargaining agreements. Uninformed members of junior mgmt try to perpetuate this fallacy, but it’s illegal and a company can get into big trouble for reprimanding or terminating employees over it. If you’ve been impacted by such a practice then I hope I’ve taught you something new today.
http://www.nlrb.gov/about_us/overview/national_labor_relations_act.aspx
HR-101: if you’re in the US it’s a violation of the National Labor Relations Act for a company to prohibit its non-managerial workers from discussing their salary, because it would impact their ability enter into collective bargaining agreements. Uninformed members of junior mgmt try to perpetuate this fallacy, but it’s illegal and a company can get into big trouble for reprimanding or terminating employees over it. If you’ve been impacted by such a practice then I hope I’ve taught you something new today.
I must say I never understood why salary disclosure is such a big deal. I mean what good does it do me to know what my co-workers earn? Yeah, I can see where such-an-such down the hall is always slacking and is late every other day, but what business is that of mine if I were to find out she made more money than I do? Anyhow, this was a great post and comments as well. Cheers.
All I know is what ever I get paid, as I am self eployed it is never enough. you can always find a reason to invest your earnings rather than pay yourself. Part of the game I guess.
Compensation professionals talk about and study this stuff all the time…
Civil
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Salary transparency would a big shocker where I work. I dont what know what the big deal is with revealing how much everyone makes. If the company you work for is paying properly it shouldn’t be a secret. Ive seen first hand the co. I work for bring in two ppl to do the same job, one with experience and one w/o and the person w/o experience was paid more. Senseless on my opinion.
as an employer of 245 people isn’t transparency just an extension of “everyone gets a star for competing”. I hire people for the job i have with the money i have to pay. I will lose people over the years but i have many for whom the job environment, the job itself and the people you work with are as important as the money. And what happens if you pay someone alot of money for a job they did in a previous company when they then have to prove themselves and perform to that level all over again. Very few people deliver their value on hiring. Bottom line is every person is free to take a job or not and an employer should be free from transparency pressures…..the person, the job and the ability to contribute to an effort is all unique.
I’ve never worked for a company with transparent salaries before but it’s generally not difficult to guess who earns approximately. Transparent would probably motivate employees to work harder if they see others in their positions earning more. It can also lead to jealousy and discontent as well as well as questioning from employees as to why so and so makes more.
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