Having a transparent salary policy is a frightening idea for most organizations. After all, salary has always been considered a private matter between an employee and an organization.
But like everything else around us, workplace culture is also changing fast. Employees and job seekers are more informed thanks to platforms like Paysa that already report the average salaries of some of the top tech companies in the world.
This change also reflects in the way organizations and decision makers are now actively discussing the merits and demerits of an open pay policy where every employee knows how much his colleagues are earning.
Contrary to the popular belief, several studies suggest that an open and transparent pay culture results in more productive and motivated employees. Which is perhaps the reason we’re seeing a rising number of tech startups that are pushing the boundaries of transparency and introducing policies that are hard to imagine in a conventional corporate set up.
Here’s a look at some of the companies where employees are aware of each other’s salaries and are still happy about it.
Buffer is a fast growing social media management platform that considers transparency a key part of its business values. With more than 80 employees around the globe, it was one of the first well-known tech startups to adopt a completely transparent salary policy.
Buffer’s CEO, Joel Gascoigne, strongly believes that transparency reduces communication gaps and increases employee productivity.
In an unprecedented move, Buffer publicly listed the salaries of all its employees on its official website along with a salary calculator anyone can use to see how much they can make while working at the company.
Such openness, of course, comes with several risks like employee demotivation and a high turnover rate.
But to the surprise of Buffer’s top management, most employees reacted positively to this policy and the company saw a significant increase in productivity. Plus, Buffer saw a surge in job applications from candidates around the world who were attracted by their openness.
Joel believes that developing a formula to calculate salaries is crucial to the success of a transparent pay policy. When there’s a fixed formula in place that anyone can use, employees know exactly where they stand and what they need to do to reach the next level. Plus, it leaves little room for gossip and workplace politics.
2. Career Foundry
Career Foundry is an online learning platform with a wide range of interactive courses related to web development, UX, UI and mobile development. Because of the high quality of their courses, it has quickly grown into a popular destination for people to looking to acquire digital skills to improve their career prospects.
In 2016, inspired by Buffer’s transparency, the cofounders of Career Foundry, Raffaela Rein and Martin Ramsin, introduced several drastic changes to improve their company’s productivity and to make it a more inclusive workplace.
They completely flattened the hierarchy, introduced a unique peer based performance review system, and publicly revealed the salaries of all their employees. They created different salary levels and developed their own salary formula based on the overall industry experience of an employee, experience at Career Foundry, and role at the company.
Plus, they laid down clear expectations and objectives that an employee needed to meet in order to move from one salary level to another.
According to Raffaela, this brought greater equality and resulted in much better bonding between cross functional teams.
They did, however, identified several improvement areas in their peer-promotion system which seemed to reward extroverts and cross functional employees more.
But after working more than a year with a flat hierarchy and transparent salaries, Career Foundry has no plans to go back to its old ways.
Founded by tech entrepreneur Dane Atkinson, SumAll , a social analytics company, was one of the very first tech startups to embrace an open pay policy. Everything from the company’s financials to employee salaries is completely transparent and can be accessed by anyone working at SumAll.
Naturally, transparency is one of the core values of SumAll also listed on official website.
“We’ve extended our beliefs on data transparency to every aspect of our company. From employee salaries to business strategy, everyone in our organization is able to question and contribute to the administration and future of SumAll”
Dane believes this openness has resulted in a much stronger bonding between his employees and their managers. On multiple occasions he’s had employees coming to advocate a pay raise for a colleague because he deserves it but too shy to ask for it. They also have a rigorous grievance management system to listen to any dissatisfied employees and address their genuine concerns.
As a result, the employee turnover rate at SumAll has fallen below 10% which itself is a testament to the effectiveness of their policies.
But above all, making employee salaries public has allowed Dane and his employees to focus on their jobs instead of indulging in workplace politics.
Squaremouth is a search engine of travel insurance programs. But more than its product, it’s the company’s work culture that has won it accolades from around the world.
Like the other companies on this list, Squaremouth employees know exactly what their peers are earning. But that’s just one part of the unique work culture of Squaremouth which was recently declared as one of the best places for women to work by Fortune Magazine.
Along with transparent salaries, the company follows a peer based promotion system which allows employees to get a raise any time of the year as long as they get the majority vote from their colleagues.
Because of this openness, Squaremouth employees, women in particular, feel they have a level playing field where performance is the only criterion for progress.
Chewse (pronounced as Choose) is an office catering startups that delivers family style meals from top restaurants to companies in Los Angeles, San Francisco, and Oakland.
Founded by Jeff Schenck Tracy Lawrence, who was recently featured in Forbes 30 under 30, Chewse is another startup where all employees are aware of each other’s salaries.
Tracy and her co-founder decided to follow an open pay policy when the company had just 18 employees. Nearly 2 years later, their workforce has more than doubled and the employee turnover rate has fallen from 21% to below 10%.
When Chewse initially disclosed the salaries of its employee, including the co-founders, more than 70% of the team members believed they were paid fairly. This, in comparison with the national pay satisfaction rate of 20%, is a pretty high number.
The jury is still out as far as the effectiveness of pay transparency is concerned. Most organization still do not seem to be ready for it. But as some of the startups listed in this post have shown, it’s a concept that is finding more advocates in the tech industry than anywhere else. With stiff competition for talent and high employee turnover in most startups, a transparent salary policy might just prove to be an additional incentive for employees to stay.