If you have a truly fair system for determining salary, would there be harm in making all salaries at your company—from entry-level employee to CEO—public? There would be anger and resentment from those who feel they have been shortchanged, but if you have a mathematically based system in place for determining salary, wouldn’t their anger and resentment be easily answered?
I ask myself this because I often wonder about my boss’ salary. All I can assume is that it’s more than mine. But how much more? Slightly more, two times more, three times more? As is often the case, his higher rank doesn’t necessarily translate into greater work output, or a more significant contribution, than my own, so it’s a troubling question.
Similarly, I wonder what others who are at the same level as me in the company hierarchy are earning. It’s not proper etiquette to ask, so there is no way for me to know if I’m being given exactly what I deserve, am being taken advantage of, or am lucky. I imagine a comical scene in which I storm into the office of an executive, and demand to be paid what others at my level are being paid, get what I asked for, and then find it’s less than I have been making.
A Time article, by Samantha Cooney last year, explores some of these questions. There doubtless would be social discomfort if salaries became public knowledge, but otherwise how do people typically discriminated against in pay—women and minorities—know whether their pay is appropriate? The only way to know for sure is to know what all those, regardless of race and gender, are making. The article quotes startling pay gap statistics: “While white women in the U.S. on average earn 79 percent of what white men make, black women earn 63 percent of what white men make, Native American women bring in 57 percent, and Hispanic women 54 percent, according to a 2018 report from the American Association of University Women.”
It’s still rare for companies to publicly release salaries, with only 17 percent of private companies doing so. Nevertheless, some well-known companies, such as Whole Foods, do make at least some salary information public. Cooney reports that Buffer, a social-media startup, publishes all employee salaries publicly on its Website.
In addition to letting employees know if their salary is fair compared to what others in the same position are earning, making salaries public lets employees know if their salaries are fair compared to what the top executives are earning. I marvel at the cosmos-sized gulf between the salaries of the CEOs of major retail chains such as Walmart and the salaries of those working in these retailers’ stores. According to CNN Business, Walmart CEO Doug McMillon’s total compensation in 2018 was $24 million. By comparison, the CNN article notes that: “Walmart increased its starting hourly wage in the United States to $11 an hour and paid nearly $800 million in bonuses to hourly workers based on stores’ performance. It also added new maternity and parental leave policies. The company says its average hourly total compensation and benefits come out to more than $17.50 an hour.”
The progress in Walmart’s hourly wage, and benefits is encouraging, but that’s still a huge gap between those on the front lines with customers—arguably those doing the most important work—and the CEO. The information about this disparity is available to Walmart employees, so you have to wonder if this widespread knowledge, and the threat of adverse publicity, is part of the reason wages and benefits modestly improved.
With most companies still keeping such information private, could similar small improvements take place? How can you fight for something when you don’t know what that something is?
The first step to making salaries public is to set up a salary formula that would be used for all employees. That formula could include: level in company hierarchy, years with the company, deliverables, outcome of deliverables from previous year (done on time and how well?), and how directly the employee’s work is tied to revenue generation. The most subjective of these factors is how well the employee’s deliverables from the previous year turned out, but if the manager keeps records of feedback given to the employee about assignments, there will be materials to back up that subjective judgement.
Once you have your salary formula in place, and it is consistently used, you have an easy response to questions—and anger—from employees who feel they are not being paid enough based on what a colleague is being paid. Creating and enforcing a formula to determine salary also may open your company’s eyes to unconscious discrimination. You may be surprised at how much your employees’ salaries are based on arbitrary “factors.” It may be more about who’s liked the best, and who has the loudest voice, than on who is doing the most important work.
How do you determine salary at your company? Is every negotiation unique, or is there a consistent formula you enforce? Are salaries public? How much do employees need to know to feel secure that their pay is fair?
