Several days ago Buffer revealed its freshly improved salary formula they had been working on for last two-three months. The article is worth reading not for the formula itself but the reasonings behind it.
The folks from Buffer mentioned how thrilled they are to see a growing number of startups using their formula. Indeed a salary formula is a great idea. It brings transparency, clarity and fairness into one of the most tedious process — a salary negotiation. It has only one disadvantage — it’s very difficult to install in an existing company with more than 100 people.
If you’re a leader in a medium-size organisation and think about more transparent salaries, then there’re many questions you need to answer. What should you do with people on similar positions but having very different salaries? What should you do with teams where one member has a salary twice bigger than another one? How could you make a transition process as painless as possible? What if some employees are not ready to share their salaries with colleagues?
Let’s take a look at the examples from several IT companies and try to find some common rules. We start with LunarLogic, a service provider from Krakow. The company is quite small but their articles about a transformation process are a great foundation for further examples.
Some time ago Pawel Brodzinski shared a detailed description of how they moved to transparent salaries at LunarLogic. The process consists of four stages starting with a preparation one. During the preparation stage Pawel sold the idea of open salaries to his colleagues and tried to prove that an existing distribution of salaries was fair. On the second stage the salaries were opened and anyone could propose a raise for anybody, including themselves. The proposal is publicly discussed and everyone’s opinion matters but a final decision is made by Pawel. The third and fourth stages will move a decision-making power from Pawel to everyone else. It’s also important to mention that an open salary program is an optional one. If an employee doesn’t want to take part in it, the discussion of salary raise stays the same — one on one.
I highly recommend to read the whole series by Pawel including his answers to multiple comments. They reveal interesting practical nuances. Right now I want to highlight these three things:
- Pawel infected some employees with the idea of transparent salaries. He had a small group of supporters from the very beginning.
- He made sure that the distribution of salaries was fair enough.
- Opening a salary was an optional step. You got some advantages for participating in the program though.
Larger organisations made very similar steps. For example, Vincit.
About two years ago the leadership team of Vincit realised the importance of open salaries for the company. It aligns with their values and a strong desire to be a workplace where Mondays don’t suck. They sold the idea to some employees and invited everyone to reveal their salaries. They did it by sending a simple Google form asking if the employees gave their permission to make their salaries public. Only 10% of Vincitizens said “Yes”. Not a big number, it was a good launch nevertheless.
Twice per year the employees at Vincit have two weeks period to discuss a salary raise. It was logical to ask for a permission at the end of that period. Since the beginning the form was sent four times and a number of participants has grown from 10% to more than 90%. The salaries are published on an internal webpage and create a good reference system to compare your own salary with others.
Futurice doesn’t ask its people to open salaries. It suggests to share their experience/seniority level. Each level has a lower and upper salary limits. On one hand Futuricers don’t know exact salaries of their colleagues. On the other hand they still have some relevant data to make a salary discussion more objective.
Company-wide experience levels with defined salary range is a good starting point to make sure that people with similar experience and similar role won’t have unfairly different incomes. They also help you to build a professional growth path which is clear for employees. For example, at Netlight a salary on each experience level is defined by a salary formula. The formula has no individual-dependent parameters except the level itself. All employees on one experience level get the same salary.
Based on previous examples there are few steps you can do to bring more fairness and transparency in your company:
- Consider introducing experience levels with salary ranges. They give you a better understanding how fair your current salary distribution is. You may decide to increase salaries in some cases. Of course, it won’t give your instant answers what to do with the employees whose salaries are higher than the upper limits. For now you can keep them as they are.
- Find employees who support the idea of open salaries. They will help you to make the change happen.
- Make an open salary program a voluntarily one.
- Start with yourself. Salaries is one of the most sensitive topics (maybe THE most sensitive one). Leading by example in such sensitive area is the only way to reach great result.