Why publishing salaries is not the answer to fair pay

Rameez Kaleem, Director of Pay and Reward Consultancy, 3R Strategy explains why publishing salaries is not a magic bullet for achieving fair pay.

It’s often said that publishing salaries is the answer to fair pay.  The theory goes that if we all knew what everyone else was earning, we could easily determine whether someone’s pay was commensurate with their experience and ability.  Increased visibility would highlight any unfairness or bias and those imbalances could then be remedied. Knowledge is power, so they say.

Except it isn’t.
Publishing salaries seems like a simple solution – but pay decisions are not a quick, one-dimensional process, there is no ‘one rule fits all careers’ and identifying the high flyers is not always obvious.  Measuring performance, skills and behaviours in a corporate environment is challenging and often subjective, making transparency problematic.   

What about footballers?

Footballers are very well compensated – and their earnings are widely discussed.  Footballers will almost always have their earnings bandied about by the global press.

The highest paid footballer in the World, Barcelona’s star forward Lionel Messi, for example, earns around £500,000 a week. Contrast that with the £5,300 per match that top international Rugby stars will earn in next weekend’s Six Nations tournament.

Messi earns significantly more than his teammates, but his teammates are not shouting about unfairness on social media.  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.

Office politics

In a corporate environment, it is harder to measure individual contributions – and performance reviews can be hugely subjective.  Two managers may have wildly contrasting views about the performance of the same person, for instance. Similarly, staff will hold different beliefs about each of their co-workers based on short interactions or gossip.   They also may have perceptions of their performance against their peers which may not be accurate.

A study of 700 Silicon Valley engineers, carried out by Todd Zenger, Professor of Strategy and Strategic Leadership at University of Utah, revealed that an astonishing 92 per cent perceived themselves to be in the top quarter of their peer group, while 40 per cent felt they were in the top 5 per cent.

It is therefore unsurprising that office employees usually don’t react well to learning that they earn significantly less than a colleague – and publishing pay can be problematic and divisive.

While footballers and other athletes understand that high-calibre performances directly correlate to a higher salary, the same cannot be said for a corporate environment.  Work is not scrutinised and contributions to overall performance of the company cannot be measured 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 in corporate environments,  publishing salaries can do more harm than good. So how can an organisation show that it pays people fairly while keeping individual salaries private?

As a pay and reward specialist, this is the advice we give our clients:

  1. Be clear about your reward principles. Do they align with your business strategy and have you communicated them to all employees?
  2. 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.
  3. Define and honour organisational values. Challenge employees who disregard organisational values, regardless of their level.
  4. Demonstrate your commitment to equal pay. Carry out an equal pay audit and share the results with your employees celebrating any adjustments made.
  5. 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.

 

About the author

Rameez Kaleem is a Director for specialist pay and reward consultancy 3R, and has worked with a wide range of companies across a number of sectors; recent clients include Vitality, Arriva Rail London, London Business School and Paysafe.  Rameez previously worked as a consultant for Willis Towers Watson, with clients from the media, financial services and hi-tech sectors. He began his career at a global mobility consultancy where he worked closely with several public sector and governmental organisations.

Rameez has extensive experience across a wide range of reward projects, including job family design and implementation, bonus and sales incentive design, pay structure and progression and equal pay audits.

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