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Magazine(/Publications/hrmagazine/Pages/default.aspx)PastIssues
(/Publications/hrmagazine/EditorialContent/Pages/default.aspx)2014
(/Publications/hrmagazine/EditorialContent/2014/Pages/default.aspx)September2014
(/Publications/hrmagazine/EditorialContent/2014/0914/Pages/default.aspx)MakingPay
Public

MakingPayPublic
Vol.59No.9

Ascompaniesmovetowardmoreopenmanagementpolicies,someemployers
wouldliketomakeonethingclear:employeessalaries.
Permissions

ByTamaraLytle

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WhenScottRickworkedintheprivatesector,hegotinformationonotherssalariestheold
fashionedway:bygossipingwithhiscoworkers.
NowheisanassistantprofessorofmarketingattheUniversityofMichigan,andhecanlookuphis
colleaguespayanytimehewants.
Buthedoesnt.
Thepublicschoolisoneofagrowingnumberofworkplaceswherepayistransparent.Itseasyto
getreallydistractedbyit,hesays.Itslikechocolatecake.Itssotempting,butyouhavetogofor
thefruitsaladonceinawhile.Idontlookanymore.
Moreandmoreemployersaregivingpeoplethatcaketohaveandeattoo,iftheywant.Whole
Foodshaslongmadeemployeepaylevelsavailablecompanywide.AndtechstartupBufferistaking
theconceptofpaytransparencyevenfurtherbypostingallsalaries,anditsformulaforpay,online
foralltheworldtosee.
Thetransparencymovementhasbeendrivenbytheexplosionofinformationavailableonthe
Internet,includingthirdpartywebsitessuchasGlassdoor.com
(http://www.glassdoor.com/index.htm),PayScale.com(http://www.payscale.com/)andSalary.com
(http://salary.com/)thatreleasesalaryinformation.TheMillennialgeneration,whichis
accustomedtosharingpersonalinformationthroughsocialnetworks,isalsoshapingthetrend.
Payfairnessisonpeoplesmindsaswell.Tightbudgetsareleavingfrustratedworkerswondering
whytheyarentgettingpaidmore.AndformerNewYorkTimesexecutiveeditorJillAbramson
madenewsherselfwhenshereportedlylostherjobafteraskingwhyshewasbeingcompensatedless
thanhermalepredecessors(althoughotherfactorswerepurportedlyinvolvedinhertermination).
Employersaretalkingaboutpaymorethaninthepast,sayseconomistLindaBarrington,
executivedirectoroftheInstituteforCompensationStudiesatCornellUniversitysSchoolof
IndustrialandLaborRelations.Youregettingmoreemployeescominginsaying,Thisisthegoing
salary.HowcomeImnotbeingpaidthat?
TheCaseforTransparency
AtSumAll(https://sumall.com/),aNewYorkCitybasedcompanythatprovidesanalyticsto
businesses,employeeshaveaccesstopayinformationalongwithothercompanydocumentsand
partnershipagreementsprettymucheverythingexcepthealthdata,accordingtoSumAllsCEO
DaneAtkinson.
Peopletendtohaveahigherdegreeoftrustinanorganizationthatistransparent,saysAtkinson,a
serialentrepreneurwhostartedSumAllin2011.

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Onaninternalfilesharingsystem,employeescanlookupthepayofeveryonewhoworksthere.Like
Rick,manyofSumAlls50employeesknowitstherebutdontlook.
Withtransparency,itbecomesveryclearwhatthecompanyvaluesandhowtomodelyourown
career,Atkinsonsays.Youregettingeveryoneonthesamepagewithwhatishappening.
TransparencyalsohelpsAtkinsoninrecruiting.Theprocessisshorterbecausesalaryisntamystery.
Potentialemployeeslearntherangefortheirjobaswellasthespecificsalariesofeveryonewho
interviewsthem.Manytechworkers,especiallyengineers,findsalarynegotiationsstressful.Forthat
reason,theylikeSumAllsopensystem,whichAtkinsoncomparedtoshoppingforaSaturn,a
discontinuedGMcarbrandknownforitsnohasslepricingpolicy.
Atkinsonfoundthatgoingoutsidetheusualsalaryrangetohiresomeoneprovokesabacklashnow
thatpayispublic,sohedoesntdoit.Inpaststartups,hehadsometimesbeendesperatetogetan
appfinishedandpaidwaytoomuchtogetworkersonboardquickly.Hethenhadtokeeppaying
thematthathighrate,creatinginequitywithothersdoingthesamejob.
NoonehasleftSumAllasaresultoflearningotherspaylevels,thoughthesystemdidprompt
Atkinsontoraisethepayofoneworkerwhowasearninglessthansomeonehewasinterviewing
wouldhavebeenpaid.ThechurnrateforSumAllsemployeesislessthan10percentayear.
Atkinsonalsofindsthat,withallthecardsonthetable,differencesinpaybetweenmenandwomen
dissipate.Salarytransparencyisthesinglebestprotectionagainstgenderbias,racialbiasor
orientationbias,hesays.
Thatswhysomestatesnowrequirethatgovernmentcontractorsreportgendergapsinhowtheypay
theiremployees.Similarly,PresidentBarackObamainApril2014signedanexecutiveorderthatwill
requirefederalcontractorstoprovidesummarydataonhowmuchtheypaypeoplebygenderand
race.
Whentransparencyworks,itmakespeoplefeeltheyarebeingpaidfairly,which,inturn,drives
employeeengagement.
Youwantindividualstofeelconfidenttheyarebeingtreatedfairly,Barringtonsays.Itwillhead
offwatercoolerconversationsandInternetsearching[forcomparativesalaries].
CarolBoyer,SPHR,assistantvicepresident,compensation,atNorthShoreLIJHealthSystem
(http://www.northshorelij.com/hospitals/home)inManhasset,N.Y.,believesthatengagement
stemsmorefrominformingworkershowtheirpayisderivedthanshowingthemwhatthepersonin
thenextcubicleisearning.
IfItrusttheresaprocessandtheprocessisfair,thatdrivesengagementmorethanshowmethe
salary,shesays.

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Organizationswithhigherengagement,inturn,havebetterbottomlineresults,saysMarkA.
Szypko,compensationevangelistatIBMSmarterWorkforceSolutions(http://www
01.ibm.com/software/collaboration/smarterworkforce/)inLittleton,Mass.Transparencybuilds
fairness,fairnessdrivesengagement,engagementdrivesbusinesssuccess,heexplains.
TypesofTransparency
Therearetwogeneralapproachestopaytransparencyathirdapproachblendsthetwo.
Processtransparency.Withthisapproach,peopleknowhowsalariesarederived,whatthe
rangesareforeachpositionandwhatittakestoearnmore.
Szypkosaysreleasingrangesforanemployeesownjobisthebareminimumthatacompanycando
ifitwantstoshowaninclinationtowardtransparency.Butherecommendsshowingrangesforevery
levelwithinajobtypesothatpeoplecanseetheircareerearningpotential.
Fullsalarytransparency.Thisapproachinvolveslettingemployeesandinsomecasesthe
publicatlargeknowexactlyhowmucheveryoneatthecompanyearns.Itistheapproachfollowed
byWholeFoods,SumAllandBuffer.Althoughmanygovernmentsmakeworkerssalaryinformation
available,fullytransparentprivatesectorcompaniesstillarerareenoughtogarnerheadlines.
BarringtonandBoyerbelievethatprocesstransparencyismorevaluablethanfullsalary
transparency.Theimportantquestioniswhypeoplegetpaidwhattheygetpaid,Barringtonsays.
Evenifyoureleaseeverysalary,youmaynothaveansweredthat.
SzypkoaddsthatEmployeescancomeupwithfarmoredeviousintentaroundcompensationthan
wecouldeverdreamofimplementing,sowhynotshare[theinformation]?
Mixandmatch.AtNorthShoreLIJHealthSystem,severalversionsoftransparencyareusedat
once.Fortytwopercentofworkersareinunions,sotheirsalariesaretransparentundercollective
bargaining,Boyersays.Thetop25orsoseniormanagerspay,bonusesandsomeothertypesof
compensationarepublicaspartoftheIRS990formrequiredfornonprofits.
Nearly15percentofthenonunionworkersareinstepplanswheretheirpaygoesupwithseniority.
Theresreallynothingtotalkabout.Everyoneknowswhattherangesare,Boyersays.Wedont
publishit,butwedontputablackcloudoveriteither.

RadicalTransparency:BuffersPayFormula
Buffer(https://bufferapp.com/),atechstartupthatfacilitatessocialmediasharing,hastakena
sweepingapproachtosalarytransparency,publishingallofitsemployeessalariesalongwith
theprecisemethoditusestodeterminethem.BuffercofounderandCEOJoelGascoigne
sharedtheformulaonthecompanysblog:

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Salary=jobtypeseniorityexperience+location(+$10Kifsalarychoice)
Jobtype=base

Experience=multiplier

Happinesshero=$45,000

Junior:1x

Contentcrafter=$50,000

Intermediate:1.1x

Engineer=$60,000

Advanced:1.2x

Designer=$60,000

Master:1.3x

Operationsofficerbase=$70,000
Executiveofficerbase=$75,000

Location=additional
A:+$22K(e.g.,SanFrancisco,HongKong,

Seniority=basemultiplier

Sydney,London,Paris,NewYorkCity)

Senior:+5%baseand$3K/$1million

B:+$12K(e.g.,Nashville,Birmingham,Vienna,

revenue

Austin,LasVegas,TelAviv)

Lead:+7%baseand$4K/$1millionrevenue

C:+$6K(e.g.,Tallinn,Warsaw,Bucharest,

VP:+10%baseand$6K/$1millionrevenue

Santiago)

Clevel:+20%baseand$8K/$1million

D:+$0K(e.g.,Manila,Delhi,Hanoi)

revenue
COO:+20%baseand$10K/$1million

Equityvs.salarychoice

revenue

Employeeshaveachoiceofmoreequityor

CEO:+20%baseand$12K/$1million

moresalarythosewhochoosesalaryreceivean

revenue

additional$10,000.

TheDownsidetoOpeningUp
Abigchallengeofimplementingpaytransparencyishavingtoexplaindifferencesamongsalariesto
headoffperceptionsofunfairness.Asmuchaseverycompanymightwanttobeamodelof
consistencyandequality,therealityisthatpeoplessalariescanvarywidely,andforreasonsthat
maybedifficulttoexplain.
Forexample,fromanHRperspective,itmayseemperfectlyreasonabletoofferahighersalarytoan
externalcandidatewithawealthofexperiencefromdiverseemployersandasteepbaselinepay
requirement.Butthatcanbedifficulttostomachforanemployeewhohasbeenloyaltoacompany
foryearsbutlackstheknowhowthatmightcomefromhavinghoppedaroundmore.
Ricknotesthatsomeoneonhisschoolsfacultymightbepaidmorenotonlyforhavingmore
experiencebutalsobecausethefinancedepartmentearnsmorethanmarketing,orbecausethe
universityisworriedaboutapersonwhoiswellknowninhisorherfieldgettingluredawaybythe
competition.

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Peoplecangetbentoutofshapeoververysmalldifferences,like$300ayearinannualpay,he
says.
Inaddition,paytransparencydoesntalwaysgivethewholestory.Interestingly,whentotal
compensationisconsidered,thesalarygapbetweengendersissmallerthanwhenjustsalaryis
counted,accordingtoBarrington.Sheoffersanexampleofnonsalarycompensation:Whenshetook
ajobwithCornellataNewYorkCitycampus,abigfactorinthedecisionwasdiscountedcollege
tuitionforherdaughter.
Benefitscangetlostintheequationwhentransparencyfocusesjustonpay.Somecompanies
pullbackfromofferingmoregenerousbenefitsmaybedrivenbythefocusonsalaryonsiteslike
Glassdoor.com.Companiesarerealizingthattheymaygetmorecreditwithpotentialhiresforsalary
thanforbenefits,thevalueofwhichishardertodemonstrate.
PossibleConsequencesOfKnowing
Boyer,whosehealthsystemhas16hospitalsand400ambulatorysitesintheNewYorkCityarea,
sayscompanieswithcomplexstaffingstructuresrunahighriskofemployeeconfusionanddismay.
Itsjusttooeasyforpeopletomisinterprettransparentsalariesbycomparingjobsthataredifferent,
shesays.Wehavealotofjobs.Itsoverwhelminginformation.Ifpeopledontknowhowto
interpretit,itcouldleadtoincorrectconclusions.
Ricklaysoutwhathappenswhenpeopledontunderstandpaydifferences.InhispaperCheating
MoreforLess:UpwardSocialComparisonsMotivatethePoorlyCompensatedtoCheat
(http://webuser.bus.umich.edu/srick/CheatingMoreForLess.pdf),whichwaspublishedinthe
journalOrganizationalBehaviorandHumanDecisionProcesses,heandhiscoauthorsgaugedthe
effectofcompensationawarenessoncheating.Heaskedsubjectstoanswertriviaquestionsand
gradetheirownanswers,withanominalfinancialrewardforeachcorrectone.
Whenthelowerpaidparticipantsweremadeawareofwhattheywereearningrelativetotheothers
inadifferentroom,theyweremorelikelytocheat.Andthosewhoweretoldtheyweremakingless
thanothersinthesameroomcheatedmorethananyothergroup.
Forpeopleonthelowendofapaydiscrepancy,iftheresnootherrecourse,ourstudysuggeststhat
theymayverywellturntocheatingtoeventhescore,Ricksays.
Forcompanieswithtransparentpay,thatcouldmeandisgruntledemployeeswhospendtheir
workdayjobhunting,doinglowqualitywork,lyingaboutproductivityorstealingsupplies.
Inotherresearch,Rickfoundthatwhenpeopleweregivenataskcountingdots,theyweresloppier
andgotmorewronganswerswhentheyknewtheywerebeingpaidlessthanothers.
PerhapsRicksresultsgivecredencetothedeepseatedsocietalbeliefthattalkingaboutpayis
taboo.Forbothworkersandcompanies,thereisasquirmfactor.

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AlthoughtheNationalLaborRelationsBoardhasruledthatcompaniescantbarworkersfrom
discussingtheirpay,Barringtonsresearchshowsthatmanyemployeesstillfeelliketheycanttalk
aboutcompensation.AccordingtotheresultsoftheIWPR/RockefellerSurveyofEconomicSecurity
in2010,about23percentofprivatesectorworkerssurveyedthatyearsaidpaydiscussionswere
bannedanother38percentsaidsuchtalkswerediscouraged.
HowtoHandleTransparency
Whetherpaydisparities(orperceivedones)cometolightthroughcompanypoliciesorsurfingthe
Internet,HRprofessionalsshouldseizetheopportunitytobeopenabouthowpayisdetermined.
Szypko,whoworkedasanHRpractitionerbeforeturningtoresearch,saysawomanoncemarched
intohisofficewithamagazinesurveythatsheclaimedshowedsheshouldbepaidtwiceasmuch.He
walkedherthroughthepaydatathecompanyusedtopricethejob,includingfactorssuchas
geographyandcompanytype,themarketpricingstrategy,andthecompensationphilosophy.While
thewomanleftnoricher,shefeltvalidatedbyhavingbeenheard.
WhensomeoneturnsupinHRdemandingtoknowwhytheyarepaidlessthansomeoneelse,the
HRpersonshouldsmile,Atkinsonsays.Theyvejustbeenhandedanopportunitytotalkabouthow
payisdeterminedanditsrelationshiptoperformance.Withouttransparency,peoplejustfeel
disgruntledwithoutawaytoopenthatconversation.
HereshowHRcanbestmanagepaytransparencyissues:
Communicateandtrain.HRhastheopportunitytoshowmanagersandsupervisorshowto
explainthewaythecompanysbusinessstrategyistranslatedintocompensation.Youhaveto
emphasizeverystrongcommunicationaboutthewayperformanceturnsintomoneyandhowthat
performancesystemdrivescompanystrategy,Barringtonsays.
Stayuptodateoncompetitivesalaries.AtNorthShoreLIJandmanyothercompanies,
corporateHRsetspayrangesthatarecompetitiveinthelocalmarketandfairacrosstheentire
system,andlocalHRandmanagerssetsalarieswithinthoseranges.
Streamlinedifferencesasmuchaspossible.Minimizethenumberofpaygradestokeep
thingssimple.Managemicrodifferences,Rickadvises.Trytohaveasfewbucketsaspossibleand
stillbefair.
Providecontext.Workersneedtobeabletomakesenseofwhatthenumbersmean.Thatmeans
organizationsmustprovidemoreexplanationabouthowpayisdetermined.AttheUniversityof
Michigan,facultynowseehowtheyscoredonratingsliketeaching,research,serviceandpractice,as
wellaswhattheaveragesarefortheirlevel.

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Thinkverycarefullybeforerevealingthisstuff,Ricksays.Itssopersonalpeopleseeitastheir
worth.
TamaraLytleisafreelancewriterbasedintheWashington,D.C.,area.

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Morefromthisissue

(/Publications/hrmagazine/EditorialContent/2014/0914/Pages/default.aspx)
Magazinehomepage

(/Publications/hrmagazine/Pages/default.aspx)

WebExtras
Article:TheCompanyWhereEveryoneKnowsEveryoneElsesSalary(NPR)
(http://www.npr.org/blogs/money/2014/07/02/327758712/thecompanywhereeveryoneknows
everyoneelsessalary)
Article:WhythisStartupMadeTheirSalariesRadicallyTransparent(FastCompany)
(http://www.fastcompany.com/3024306/bottomline/whythisstartupmadetheirsalariesradically
transparent)
Article:HeresWhyWholeFoodsLetsEmployeesLookUpEachOthersSalaries(BusinessInsider)
(http://www.businessinsider.com/wholefoodsemployeeshaveopensalaries20143)
Article:DaneAtkinsonofSumAll,onMakingPayanOpenBook(NewYorkTimes)
(http://www.nytimes.com/2013/08/16/business/daneatkinsonofsumallonmakingpayanopen
book.html?_r=0)
Article:ThisStartupJustPublishedAllEmployeeSalaries(andaLotMore)(Inc.)
(http://www.inc.com/jeffhaden/bufferjustpublishedallemployeesalariesandalotmore.html)
Webpage:IntroducingOpenSalariesatBuffer:OurTransparentFormulaandAllIndividualSalaries
(Buffer)(http://open.bufferapp.com/introducingopensalariesatbufferincludingourtransparent
formulaandallindividualsalaries/%27)

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