Wether it’s when receiving a job offer, asking for a raise or between employees, discussing pay is uncomfortable and often taboo.
Lack of transparency often leads to an imbalance in compensation. Startups are particularly vulnerable to this. Immature or non existent compensation policies can lead to early employees receiving less than later joiners or better negotiators scoring vastly better compensation.
One solution to this is to drive towards greater salary transparency. This doesn’t mean publishing everyone’s exact salary (although in the case of Buffer it does). There are different levels of salary transparency.
Six levels of salary transparency
Company tells an employee what their salary is. Each employee negotiates this at offer stage and during reviews.
Company shares some information with an individual on how their salary is derived. This may include market data or be tied to specific experience or achievements.
Company shares a compensation plan which includes different salary bands according to different criteria. Employees can see where they fit on the compensation plan.
Company shares salary ranges with all employees. An employee knows which band or salary another employee is on.
Company shares all employee salaries internally.
Company shares all employee salaries externally.
Is salary transparency a good thing?
On the whole greater transparency can help reduce inequality, reduce office politics, level the playing field and simplify salary negotiation.
Implementing greater salary transparency
Salary transparency must be carefully implemented and should be done in alignment with company values. Established companies may have a history of salary imbalance which can be expensive or politically difficult to correct. Companies may want to pay high performers more which can be difficult to justify in a transparent model. Salary and compensation policies have to account for these nuances and more.
The compensation policy should be compared to actual compensation to highlight any gaps. The policy should determine what level of transparency the company is aiming for and allow the company to start moving towards that goal.