It’s long been accepted that you shouldn’t share your salary with colleagues.
But a growing number of businesses are breaking the taboo. People in the UK generally don’t discuss their salaries – it’s just not done. However, some companies are trying to change all that, believing transparency is really beneficial for businesses and employees.
One of the early advocates of salary transparency was Whole Foods, whose co-founder John Mackey made employees’ salary data available internally as long ago as 1986.
Other companies have followed suit, and some have experienced measurable benefits. For example, the social media management platform Buffer decided to publish its staff’s salaries in 2013, along with an explanation of how wages were calculated. A month later, it saw a 50% increase in job applications, according to business publication Fast Company.
Bosses at US marketing firm SumAll say salary transparency has boosted productivity, while a survey of 71,000 workers by PayScale found that a person’s “intent to leave” a company was directly related to a lack of knowledge about their pay.
More output fewer politics
More recently, Jason Trost, founder and CEO of online betting exchange Smarkets, has taken the idea of transparency a step further, allowing staff to choose what they get paid, with the figure being reviewed by colleagues and a committee before being finalised.
The system is designed so the individual worker gets the final say. “We’ve been doing it for four years. It was a crazy experiment but I think it works quite well,” he says.
Today Smarkets has 120 staff in the UK, Malta and Los Angeles. It only had around 30 staff before it switched to its transparent system.
A positive impact on productivity
The benefits noticed by Trost largely align with the arguments typically made in favour of salary transparency. He says employees trust the company more as “it’s less like you’re working for this anonymous organisation and more like you’re part of it”.
He adds: “There’s a very strong notion that you’re in control, more so than in a traditional company.” Trost agrees that salary transparency has a positive impact on productivity. “You can concentrate more on your job, which is what the company wants,” he says.
“It makes people focus more on output and less on politics.” Having a transparent system also represents, Trost believes, a “great step” towards closing the gender pay gap.
It means there’s “no hidden agenda or surprises”, he says, citing the shock felt when the BBC published its broadcasters’ salary information last summer – the top 12 earners were all men.
Humanising the salary process
Trost also believes his company’s system allows organisations to “humanise” the salary process. If someone needs a few thousand pounds more to get a mortgage or if they have children, that can be taken into account by those reviewing the salary request.
But, in a closed company, Trost says, “you want to pay people as little as possible to get them to do the job that you need them to do”.
Trost admits there are drawbacks. Initially, Smarket staff could have a salary review every month, but this proved too disruptive.
Now it happens twice a year, and a committee speaks for the organisation. It pushes back when people want to pay themselves too much, “but we let the person make the final decision”, Trost says.
There have been a few cases where the committee told an employee to pay themselves more, but mostly people are too aggressive with their salary requests. “Sometimes people ask for too much because of game theory, thinking: ‘I’ll go high and get knocked down,’” Trost explains. The market for software engineers is also part of the problem, as “some salaries are going up by 20% to 30% a year, which is insane”.
In an ideal world…
There are two things Trost would like to fix.
Firstly, he’d prefer the system to be less disruptive overall. Secondly, he wishes it were simpler to tell how much somebody should be paid.
For software engineers, “there can be a six-figure difference between somebody’s market salary depending on whether they work for a bank or a small startup. Where do you put a person on that spectrum?”
And, while taking children into account can be seen as a humane approach, it also causes problems. “If you take the point of view that you want to pay someone more because kids are expensive, you could be considered to be unfairly penalising people who don’t have kids,” Trost says.
Despite the challenges, Trost is happy that Smarkets has a transparent system. He says it makes for a healthier work environment, adding that “the organisation takes care of itself more than in a top down way”.
And he believes that, as society becomes more transparent, companies will start adopting pay models similar to his – although the change may take a decade or two to become mainstream.
Loulla Smith is a contributor for AAT's members magazine, AT.