Pay fairness and high earners: why publishing salaries is not the answer
If we all knew what everyone else was earning, in theory, we would be able to tell whether someone was being paid in proportion to their experience and ability. We would instantly spot unfair discrepancies, and those imbalances could then be remedied. Knowledge is power, so they say.
Except it isn’t. Because while publishing salaries seems like a simple solution to solving discrimination, pay decisions are not a quick, one-dimensional process. As a result, complete transparency is problematic. Not least because measuring performance, skills and behaviours in a corporate environment can be difficult and often subjective.
Fine for footballers
When it comes to pay, footballers expect to have their earnings bandied about by the global press. Barcelona’s star forward Lionel Messi, for example, earns around £500,000 a week. He is the highest paid footballer in the world, earning significantly more than his teammates.
Does this rile and demotivate them? It does not. On the contrary, Messi’s team appreciate his unique skills and experience, and they all reap the benefits. His fellow players also understand that if Messi was not compensated in line with his abilities, he would likely move to another team, which would jeopardise all of their future success.
Accepting that others will get paid more – much more in some cases – is expected in the world of professional football because there are clear performance indicators informing salary decisions. Goals, assists and clean sheets. The number of passes and tackles.
Corporate environments, however, are a different ball game altogether.
Within most organisations, it is not only difficult to measure individual contributions, it is subjective; two managers may have wildly contrasting views about the performance of the same person, for instance. Employees also form different opinions about their colleagues based on short interactions or gossip.
Todd Zenger, Professor of Strategy and Strategic Leadership at University of Utah, carried out a study of 700 Silicon Valley engineers. He asked each individual to rate their performance relative to their peers and discovered that an astonishing 92 per cent believed they were in the top quarter while 40 per cent felt they were in the top 5 per cent.
This illustrates that office employees usually don’t react well to learning that they earn significantly less than a colleague as measuring performance is far more nuanced than it is on the pitch. While footballers and other athletes understand that high-calibre performances directly correlate to a higher salary, in a corporate environment, our work is simply not scrutinised or on-display in the same way. This makes calculating pay a much more complex process.
Taking a fair approach to pay
Pay is a complicated and emotive topic. And when it is not easy to measure individual contributions, publishing salaries is clearly not the answer; in fact, it may do more harm than good. So how can an organisation show that it pays people fairly while keeping individual salaries private?
- Be clear about your reward principles. Do they align with your business strategy and have you communicated them to all employees?
- Clarify the pay process. Explaining how you make pay decisions is often more important than the actual figures. Be transparent and clearly articulate how pay is determined and how it progresses, while ensuring you stick to your reward principles.
- Define and honour organisational values. Challenge employees who disregard organisational values, regardless of their level.
- Demonstrate your commitment to equal pay. Carry out an equal pay audit and share the results with your employees celebrating any adjustments made.
- Educate and guide leaders. Give managers the knowledge, confidence and conviction to have honest pay and reward conversations with their teams.
Pay is determined by several factors such as the skills and competencies of the role, individual performance or the external market value. There will always be pay differentials to reflect these factors, as well as high earners in key roles. Ultimately, we need to equip our leaders with the tools and data to make more informed pay decisions and convince employees that the way pay is managed in our organisation is fair and robust.
This article is provided by 3R Strategy.
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