13 ms·

The Downside of Full Pay Transparency

148 points by grellas 9y ago

whipoodle 9y ago
> But it can also have the opposite effect, demoralizing employees and driving valuable talent away, especially when it isn’t clear why some people are paid more than others. Yes, if only something could be done about that.
- ch4s3 9y ago
  Sometimes I think that the staff at the WSJ has no understanding of irony.
NateyJay 9y ago
This article says that it's easier and better for companies to keep their unfair compensation schemes private than risk employee unhappiness by making them transparent. Sure, it's easier and better for companies to keep their dirty laundry hidden, but it's better for employees. That's the whole point of transparency: to see the unfairness, and to work to fix it. And if you don't fix it, you won't be able to attract talent.
- pnathan 9y ago
  It is the Wall Street Journal. It's a paper for management and companies optimizing for companies. It's the nature of the beast.
- matwood 9y ago
  Define ‘fair’.
  - whipoodle 9y ago
    People get what they deserve and deserve what they get.
    - krotton 9y ago
      And that's precisely the subjective part. If neither party knows the worth, neither can objectively argue, so we deal with emotions on both sides.
      - whipoodle 9y ago
        Oh no, not subjectivity!!!
        dang 9y ago
        Since you've continued to post plenty of unsubstantive comments after we repeatedly asked you not to, we've banned this account. If you don't want to be banned on HN, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll use the site as intended.
phoobahr 9y ago
So.... Companies used to using information-hiding to manipulate negotiations with employees find that Thierry culture and skill sets aren't well adapted to maintaining the 'house advantage' in a free and open market place for talent. This is my surprised face.
Mitchhhs 9y ago
The problem with pay transparency starts with the problem of determining compensation itself. If compensation could be a direct output of an algorithm that was highly accurate based on attributes of an individual that highly predict their market worth, pay transparency works well because people could agree that this person is being paid fairly. Also, if everyones pay could be dynamically determined it would help too. Basically, people get hired and get their salary set. Then new people are being recruited and market dynamics may have changed and now maybe a higher salary is required to attract this candidate. I'm not being very articulate here, but i'd say the problem with pay transparency isn't the transparency part, but the actual process of determining fair/market-clearing wages for employees.
- abtinf 9y ago
  > If compensation could be a direct output of an algorithm ... people could agree that this person is being paid fairly Nope. Then they would start accusing the algorithm of being racist, sexist, otherist. They would cite institutional bias - bias so pervasive everyone has it even while no individuals do - and demand the algorithm be tweaked for their favored lobbyists. The problem with pay transparency is not that it doesn't work; the problem is that the entire concept is immoral and evil. How much money you make is, properly, strictly a conversation between the parties in the transaction. No one else should care about your income; they should focus on maximizing their own value and find those for whom their services are the most valuable. The kinds of benefits valuable to an individual are unique: everyone has a different in background, life choices, purpose, and capability. There is no way to account for the fact that person A values work that involves travel, while person B is interested in work with a predictable schedule; and it is improper for person B to look at person A's compensation and make judgements about their own compensation, not because it is impossible to analyze all of the factors, but because person B must decide their own purpose and work toward it. This is simply another manifestation of the inequality debate. Equal is Unfair is a great book that unpacks the issues of inequality: https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequality/dp/125008444X https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequ...
  - 09094920394314 9y ago
maxxxxx 9y ago
If you can't explain why someone gets paid less than someone else then you have a problem that shouldn't be solved by keeping people in the dark.
- matwood 9y ago
  On the flip side do people want all the reasons listed out why someone is better than them? Athletes are used to this comparison because it’s happened literally their entire life (well until the everyone gets a trophy crowd kicked in), but I’m not sure the population at large is ready to be explicitly told of their short comings.
  - phil21 9y ago
    Yep. People are horribly fragile when it comes to this, and vastly overestimate their importance in comparison to others. Just this week I had a talk with an employee asking for advice. He was paid $10k under one of his peers, and he was rather upset he got told to go pound sand when he asked to be brought up to that level. My thoughts at the time? Only $10k? The other guy is vastly more valuable in his role than you, sounds like either you're overpaid, or the other guy is underpaid to me! The fact the guy thought it was unfair is the norm for humans. Exceedingly few folks have the self-awareness to step back and say "oh yeah, that guy really is more valuable to the company than I am - maybe I should step up my game". Typically we call those folks high performers, and they aren't generally the ones having issues getting paid well :)
    - maxxxxx 9y ago
      "Typically we call those folks high performers, and they aren't generally the ones having issues getting paid well :)" I know plenty of high performers who suck at negotiating.
      - phil21 9y ago
        True, very good point I didn't consider. This is pretty common actually, as unfortunate as it is.
everdev 9y ago
I've seen team chemistry dissolve when pay information was released. The problem is with egos, Employee A might view themselves as more valuable to the company than Employee B and vice versa. If Employee B gets a raise, Employee A will want one too, or a higher one. A spiral of trying to get a higher salary relative to other team members can begin. Also, Employee A and Employee B might have private salaries that meet or exceed their expectations and everyone is happy. When salary information is public, unhealthy comparing can begin. Even though they're grateful for what they have, they see that more might be available if they ask for it.
- lend000 9y ago
  It only seems weird because it isn't the norm -- like one of the other commenters mentioned, we tend to know the approximate net worth / salaries of family/friends and yet society, on average, continues to run. And in large companies with salary ladders, we know the range of all our coworkers.
- kaosjester 9y ago
  It seems like this could be fairly easily resolved by the management having a rigid "we pay everyone the same, deal with it" position, perhaps up and and including a formula for salary computations.
  - mattnewton 9y ago
    Get ready to see a) people gaming the formula and b) talent leaving because they feel like they are paid the same as people who contribute less. Edit: Not that it isn’t currently gamed and not that this doesn’t already happen: I’m pro pay transparency but there aren’t any magic fixes here, this is a really complicated social issue.
    - trowawee 9y ago
      Something like Buffer's formula (https://open.buffer.com/transparent-salaries/ https://open.buffer.com/transparent-salaries/) isn't really "gameable", as far as I can tell. And the counter argument might be that you'd attract talent that appreciates the transparency.
thetron 9y ago
I work for a company with full pay transparency – well, complete transparency across all parts of the organisation – I can't imagine working in an opaque environment ever again. I love it.
Harkins 9y ago
> And the legal basis for such rules [prohibitions on employees sharing salary information with their peers] is at best murky—indeed, a large number of U.S. states now explicitly ban them. And besides that, the National Labor Relations Board considers employees discussing pay to be protected concerted activity. I'm not sure if just having the rule is illegal, but enforcing it certainly is.
tabeth 9y ago
Transparency aside, I've seen little evidence that employers can properly measure the exact value an employee adds to their organization. The reason for most of these problems lies there. If employers could solve that there wouldn't be any problem. However, since that isn't the case, employees can take advantage of the opaqueness. --- Case and point: if you could measure the value, you could figure out what is valuable, and if you can figure out what's valuable and what qualities it takes to create said value then your organization would already be successful.
- neilwilson 9y ago
  If the information is available to all the function of the labour market will force the value to the correct figure. It's not a matter of individual firms. It is a matter of individual firms interacting with a functional market.
  - tabeth 9y ago
    I disagree. What's valuable, and therefore compensation, is a matter of opinion, not fact.
mankash666 9y ago
No surprise that a Murdoch publication hell bent on proselytizing Reganomics opines against open salary information. Nothing here stands muster - in school, kids freely share their grading information, and seldom do they not understand why an objectively better performance earned someone a better grade
- detaro 9y ago
  Pupils will disagree on what "objectively better" means if at all possible though, despite individual pieces of schoolwork being relatively easy to rank.
dragonwriter 9y ago
> Full pay transparency works well in two settings. One is where pay levels are based simply on rank and tenure, and perhaps location—not on performance. Think government agencies. But, that's not how government agencies work; in the federal general schedule system initial pay steps within a grade can vary based on special needs of the hiring agency or special qualification of the candidate, and advancement in steps within the grade is based not only on longevity but acceptable performance. State and local civil service systems I've seen seem to be generally similar.
- holograham 9y ago
  have you ever worked in a government setting? I would hardly call them the epitome of a highly functioning workforce. Laziness and waste is rampant.
  - ryandrake 9y ago
    Sorry, but laziness and waste is rampant in the corporate world as well.
  - dragonwriter 9y ago
    > have you ever worked in a government setting? Only for a little over 15 years. > I would hardly call them the epitome of a highly functioning workforce A mixed bag, IME, as are private orgs. But, even insofar as your claim is true, it would only be relevant as counterevidence (weak, perhaps, because of potential compounding factors) to the article’s claim that government agencies are an environment in which full pay transparency is not demoralizing and demotivating.
xster 9y ago
Yet another corporate lobbyist type response - You can't have net neutrality, it'll confuse customers - Food origin labeling? Bad, people will realize we have no idea where food came from. - Single payer? But it'll undermine the whole employer paid insurance patchwork. - Close tax loopholes? We'll just push rich people to move money offshore. - Stop bombing the world? Where's all the weapons, oil and mercenary companies gonna make money from? - Share compensation data? People will quit once they realize their pay grading mechanism is subjective and arbitrary.
- colemannugent 9y ago
  >Share compensation data? People will quit once they realize their pay grading mechanism is subjective and arbitrary Do you have an objective and determinite way to set compensation? If you do then you should tell the good folks here at YC that you have a great startup idea, pay gradation as a service, and collect your easy fortune. All pay grading schemes are subjective by definition. A product is worth only what others will pay for it. When you are looking for employment you are selling your labor to an employer, of course your prospective employer can always not buy your product, especially if she can find another product for less.
  - loa_in_ 9y ago
    This implies the problem is lack of understanding on behalf of the payees. You said what you know, therefore I understand you would not expect to be paid 100% "fairly" and you wouldn't get mad if paycheck information was open to your co-employees.
  - xster 9y ago
    I think it's worth taking a step back and looking at the grand scheme. Everything is a non-binary spectrum. As an example, if you temporarily suspend societal norm (which is what I'm challenging here), to think that we have the audacity to pretend that we know how to tax people and objectively rate society's needs and redistribute wealth into various public programs in a way that's objectively fair to everyone is absurd if we try to think of objectivity as a binary thing. But our policies obviously have socialistic elements because we don't dogmatically lock ourselves in a strict dichotomy. And I argue for the same thing in work compensation. Some form of pure cosmic objectivity may not ever be possible but it doesn't mean we should ideologically oppose attempts to approach that end of the spectrum.
kevinmhickey 9y ago
I have worked for a company with full pay transparency and for several with full opacity. I prefer opacity. At the transparent company, I was hired in as one of the highest paid employees at a time that the company was struggling. Everyone ranked higher than me had taken a voluntary pay cut, to the point that some of them were paid less than me. I felt guilty for taking more money than them, but conflicted as the problems were not of my making. I felt some resentment at pay peers that were underperforming. I was able to observe the performance of other employees and knew which ones were being treated fairly and not. It was information that did nothing to benefit me, my peers or those below us in the organization. It led to more bad feelings than good and I am grateful that I do not have that information at my current employer. I prefer sites like Glassdoor where you can get a general idea of what your coworkers might make, without the fine resolution of a name to dollar amount mapping.
- majormajor 9y ago
  A lot of people are paranoid about the malicious case: "the company is trying to screw you over." I don't think it's that hard to identify malicious employers even without knowing everyone's salaries. The non-malicious case then boils down, to me, to: who do I think is less biased in evaluating my value vs my peer's value? Me, my peer, or a third party that is neither of us? The answer to that is pretty obvious, and so what am I going to gain except being overly focused on me against my peers vs me against my past self? I would be very interested to know how many people who want full transparency are managers who've had to deal with things like "there's a mismatch in these people's salary because they came in at different levels but are now performing equally, but if I give a massive raise (say, 30%+) this year am I setting them up to be disappointed when the size of that isn't duplicated in the future vs spreading that across 4 every-6-month slower-paced bumps?" Or with employees who are radically wrong about how valuable they are compared to a peer, because they're focused purely on code and not noticing how their peer laid a bunch of ground work in negotiating with product and other stakeholders to eliminate some requirements that would've made the project take several months longer? You can be transparent about the why: "we're going to be doing some market adjustments to your pay, but here's how many people we've seen get disgruntled and leave in the past if we do it too fast," and "the next step for you is looking beyond the tasks in front of you to see the bigger picture of these projects, and building a relationship with people from the rest of the business," without the gut punch that "here's how much less money you're making" is.
neilwilson 9y ago
So the downside of Full Pay Transparency appears to be that it causes the labour market to function as a market by increasing the information necessary to eliminate sub-optimality. Who knew? It isn't the company that provides you with job security. It is the job market. If everybody who thinks they are being underpaid moves on, it soon sorts itself out.
epx 9y ago
"nearly 40% perceived themselves as performing within the top 5% of their peers.". That's exactly the problem. I've been well paid my whole life, but in comparison with other peoples' productivity, I should have been paid thrice as much. I don't complain; everybody has to eat, everybody has to take care of their families, etc. But I am damn sure all these people would not tolerate knowing even that I got as little as 30% more. This is one reason why I don't have a typical job for almost a decade now. I get interview invitations from big SV companies, but I hardly ever get invitations from local software houses, and when it happened, it went nowhere because they wanted to pay the average ERP programmer salary, citing "internal politics". It also happens when I do per-hour consulting work - my rate is considered high compared to what Dummy Database Consulting charges, so I have to settle for lower values, but at least the values are higher in absolute terms.
- cortesoft 9y ago
  You do realize the irony in quoting the part about how so many people overvalue their performance and then following it up by talking about how you are 3x as productive as everyone else at your previous companies?
- jackgolding 9y ago
  What you are saying is as a top performer it financially was and is better for you to charge based on results? (i.e. as a consultant)
  - epx 9y ago
    Yes.
- sdiupIGPWEfh 9y ago
  Wait, what is the "average ERP programmer salary" in your area? I ask, because I've seen them billed out by consultancies at like $200 an hour. What slice of that makes it back to the devs?
  - epx 9y ago
pjungwir 9y ago
Reflecting on this article brings up a lot of contractions in my own past thinking: I wouldn't want to work somewhere with public salaries, because I suspect that like unions they wind up enforcing mediocrity. I'm confident enough in my own abilities that I want the possibility of out-performing and being compensated for it. On the other hand, as an employee I would want freedom to discuss salary with fellow employees, to get better information when it's time to negotiate raises and promotions. Also, in a professional services firm, which I think is the ideal structure for software developers to capture more of their value, the partners all know each other's earnings (at least assuming the firm is of modest size). What's more, I agree pretty strongly with David Maister's recommendation in Managing the Professional Services Firm that partner profit-sharing should be based on seniority rather than some metric, since that is less likely to distort incentives and cause resentment. It seems like I am all over the place! I'm not yet convinced these are true contradictions, but having them laid side-by-side does force me to ask why not.
seem_2211 9y ago
I think the hardest bit about salaries is that most people bring an intangible amount of value to their companies, with pay usually determined by the local market. For example, I'm not sure how you'd accurately determine how much someone in HR middle management brings over the course of a year, or for someone working in corporate PR. The company I work for has extremely transparent pay - you keep a % of the amount you bring in. It's no great secret how much anyone makes in a given month, nor how much the company brings in. But this only really works in that we're all working sales jobs, so you don't have to justify anything.
throwawaymsft 9y ago
There are numerous thought experiments on how transparent salaries affect team cohesion and go against human nature. Meanwhile, professional sports teams and the military, who rely on team cohesion more than random white collar professionals, have transparent salaries. If teams worked better with opaque salaries wouldn’t these ultra competitive/life-or-death industries have figured it out?
mk89 9y ago
The concept of salary is interpreted by people in all different ways since always, therefore you won't achieve nothing but grudge and dysfunctional teams on long term, unless pays are really fair and people are really the right ones for implementing such a system. Some people see their self worth in their job, some in how much they earn, some mixed, some in how much good they do at work, some in having a family, etc. One fixed component is the salary which can't be the lever among people but it can certainly be interpreted as such, therefore should be private. Also, if I am a better negotiator than you are, why should I be perceived in a negative way? "Oh he works less than me, but he earns more". Maybe he is better at selling himself (?). But it's ok that companies do such experiments, otherwise we would not know the outcome...
kristofferR 9y ago
I like the Norwegian model, full tax/income transparency.
- fastbeef 9y ago
  If it's anything like the Swedish model, it's not as easy as that. You can of course solicit someones tax return from the Tax Agency (as it's a public record) and read how much income they declared, but it's not as easy as typing in someone's name into an API and getting "They make X per month".
  - dx034 9y ago
    The process is quite easy and can be done online [1] but since 2014, the person in question will be informed via email about the request. But as anyone can request salaries, you can just ask someone else to request your neighbour's salary if you don't want him to see it was you. Journalists are exempt from that and can see any tax report without notification. [1] http://www.skatteetaten.no/en/person/Tax-settlement/Search-in-the-tax-lists/ http://www.skatteetaten.no/en/person/Tax-settlement/Search-i...
    - walshemj 9y ago
      I hope that newspapers then publish their hacks salary's
    - Enhanced 9y ago
      There is no e-mail being sent, but I think many people actually believe that the person they search is notified - would explain why so few people have used it in recent years. Everyone who has searched for your name is listed in a sub-section / "tab", listed as a link on the same page where you can search for the information of others. I imagine that very few people are looking at that, especially not a few days after the initial "OMG now you can look up what everybody makes" articles in the newspapers.
kruhft 9y ago
All income should be reported.
andrewclunn 9y ago
High turnover of underperformers isn't a bad thing.
mietek 9y ago
> Surveys done shortly after this found that employees who went to the website and discovered they were paid below the median for their peers were much less satisfied on average with their jobs and more likely to express an intent to depart than those who were paid below the median but didn’t receive the prompt to compare their pay. So in this case, full pay transparency encouraged greater overall dissatisfaction and possibly turnover—the exact opposite of the power that full transparency has in the right situations to motivate employees and attract talent. What really makes people unhappy: telling them that they are underpaid, or underpaying them?
Joakal 9y ago
Pay transparency could cause a revolt by women when they see they're paid less than men. This is not studies they were quoting but they could see themselves paid less than men for same work, etc. BBC and several other places are having this issue. Without the pay transparency, the women would've been oblivious.
- sonthonax 9y ago
  Women are rarely paid less for the same jobs anymore. https://www.ft.com/content/a0d8872c-d1b9-11e6-9341-7393bb2e1b51 https://www.ft.com/content/a0d8872c-d1b9-11e6-9341-7393bb2e1... https://www.theguardian.com/money/2015/aug/29/women-in-20s-earn-more-men-same-age-study-finds https://www.theguardian.com/money/2015/aug/29/women-in-20s-e... Edit: I do know you're talking about the 'scandal' where there was a paygap between male and female presenters in the BBC. Obviously it's not great, but it's also something I find it hard to care about when the story is, "Man is earning 500K a year, while woman is earning 300K".
dawnbreez 9y ago
If your employees are angry and think that they're not paid fairly, that's on the employer to fix. Either it's perceptual, and the employer needs to clarify something, or it's a real gap, and the employer is at fault. This article suggests that the solution is to continue not telling people what they are paid. I concede that humans have terrible judgement in many things. This is why it's absolutely necessary to be as transparent as possible. Tl;dr: If your employees are complaining about unequal pay, you're doing something wrong.
marcoperaza 9y ago
>In a study of engineers at two major Silicon Valley companies conducted some years ago, I found that nearly 40% perceived themselves as performing within the top 5% of their peers. Ninety-two percent felt they were in the top quartile, and only one engineer felt his or her performance was below average. This is the heart of the problem. People think they are more deserving than they actually are. When they find out that they're not getting paid as much as they think they should, relative to people who they wrongly think they perform better than, they will be upset at management and envious of their peers.
JohnnyConatus 9y ago
ITT people assuming they have an objective view of coworkers performance.
lolsal 9y ago
I can't really articulate why, but to me my salary and compensation is extremely private. I'm not ashamed of my compensation and I could justify it (compared to my peers for example), but it still seems like something that is extremely private. When I ask myself why I would care if my coworkers, family, friends, etc knew my compensation I can't come up with a solid answer. I am in my early 30s, if that matters. If we think of compensation being directly and only related to the value that that person brings to a company, it seems like we're neglecting half the equation. The flow of value goes the other way as well - I would require higher compensation for the same value delivered if I did not like the company or the work environment for example. I could also require lower compensation if I really liked the company or work environment. How does this discrepancy have any bearing on compensation compared to a peer who is (for the sake of argument) delivering the same exact value to the company? This half of compensation is extremely personal and subjective. If transparent compensation becomes the norm (or legally required), I can see myself migrating back to consulting work where I would charge by project or deliverable which would totally obscure my hourly compensation even if the contract itself was public.
Corrado 9y ago
This Joel On Software article[0] is my favorite work on compensation. It details a ladder system that exposes everyone's salary as well as the requirements to move up. The lack of individual bonuses is an interesting twist and I'm thinking that it might not work in a large company where you can't directly influence the direction of the company. Then again, when requirements are clear it becomes much easier to make decisions that benefit the company. "Maybe we don't need to have the company retreat in Tibet this year." [0] https://www.joelonsoftware.com/2000/08/30/fog-creek-compensation/ https://www.joelonsoftware.com/2000/08/30/fog-creek-compensa...

148 points by grellas 9y ago

> But it can also have the opposite effect, demoralizing employees and driving valuable talent away, especially when it isn’t clear why some people are paid more than others. Yes, if only something could be done about that.

ch4s3 9y ago
Sometimes I think that the staff at the WSJ has no understanding of irony.

NateyJay 9y ago

This article says that it's easier and better for companies to keep their unfair compensation schemes private than risk employee unhappiness by making them transparent. Sure, it's easier and better for companies to keep their dirty laundry hidden, but it's better for employees. That's the whole point of transparency: to see the unfairness, and to work to fix it. And if you don't fix it, you won't be able to attract talent.

pnathan 9y ago
It is the Wall Street Journal. It's a paper for management and companies optimizing for companies. It's the nature of the beast.
matwood 9y ago
Define ‘fair’.
- whipoodle 9y ago
  People get what they deserve and deserve what they get.
  - krotton 9y ago
    And that's precisely the subjective part. If neither party knows the worth, neither can objectively argue, so we deal with emotions on both sides.
    - whipoodle 9y ago
      Oh no, not subjectivity!!!
      - dang 9y ago
        Since you've continued to post plenty of unsubstantive comments after we repeatedly asked you not to, we've banned this account. If you don't want to be banned on HN, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll use the site as intended.

phoobahr 9y ago

So.... Companies used to using information-hiding to manipulate negotiations with employees find that Thierry culture and skill sets aren't well adapted to maintaining the 'house advantage' in a free and open market place for talent. This is my surprised face.

Mitchhhs 9y ago

The problem with pay transparency starts with the problem of determining compensation itself. If compensation could be a direct output of an algorithm that was highly accurate based on attributes of an individual that highly predict their market worth, pay transparency works well because people could agree that this person is being paid fairly. Also, if everyones pay could be dynamically determined it would help too. Basically, people get hired and get their salary set. Then new people are being recruited and market dynamics may have changed and now maybe a higher salary is required to attract this candidate. I'm not being very articulate here, but i'd say the problem with pay transparency isn't the transparency part, but the actual process of determining fair/market-clearing wages for employees.

abtinf 9y ago
> If compensation could be a direct output of an algorithm ... people could agree that this person is being paid fairly Nope. Then they would start accusing the algorithm of being racist, sexist, otherist. They would cite institutional bias - bias so pervasive everyone has it even while no individuals do - and demand the algorithm be tweaked for their favored lobbyists. The problem with pay transparency is not that it doesn't work; the problem is that the entire concept is immoral and evil. How much money you make is, properly, strictly a conversation between the parties in the transaction. No one else should care about your income; they should focus on maximizing their own value and find those for whom their services are the most valuable. The kinds of benefits valuable to an individual are unique: everyone has a different in background, life choices, purpose, and capability. There is no way to account for the fact that person A values work that involves travel, while person B is interested in work with a predictable schedule; and it is improper for person B to look at person A's compensation and make judgements about their own compensation, not because it is impossible to analyze all of the factors, but because person B must decide their own purpose and work toward it. This is simply another manifestation of the inequality debate. Equal is Unfair is a great book that unpacks the issues of inequality: https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequality/dp/125008444X https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequ...
- 09094920394314 9y ago

maxxxxx 9y ago

If you can't explain why someone gets paid less than someone else then you have a problem that shouldn't be solved by keeping people in the dark.

matwood 9y ago
On the flip side do people want all the reasons listed out why someone is better than them? Athletes are used to this comparison because it’s happened literally their entire life (well until the everyone gets a trophy crowd kicked in), but I’m not sure the population at large is ready to be explicitly told of their short comings.
- phil21 9y ago
  Yep. People are horribly fragile when it comes to this, and vastly overestimate their importance in comparison to others. Just this week I had a talk with an employee asking for advice. He was paid $10k under one of his peers, and he was rather upset he got told to go pound sand when he asked to be brought up to that level. My thoughts at the time? Only $10k? The other guy is vastly more valuable in his role than you, sounds like either you're overpaid, or the other guy is underpaid to me! The fact the guy thought it was unfair is the norm for humans. Exceedingly few folks have the self-awareness to step back and say "oh yeah, that guy really is more valuable to the company than I am - maybe I should step up my game". Typically we call those folks high performers, and they aren't generally the ones having issues getting paid well :)
  - maxxxxx 9y ago
    "Typically we call those folks high performers, and they aren't generally the ones having issues getting paid well :)" I know plenty of high performers who suck at negotiating.
    - phil21 9y ago
      True, very good point I didn't consider. This is pretty common actually, as unfortunate as it is.

everdev 9y ago

I've seen team chemistry dissolve when pay information was released. The problem is with egos, Employee A might view themselves as more valuable to the company than Employee B and vice versa. If Employee B gets a raise, Employee A will want one too, or a higher one. A spiral of trying to get a higher salary relative to other team members can begin. Also, Employee A and Employee B might have private salaries that meet or exceed their expectations and everyone is happy. When salary information is public, unhealthy comparing can begin. Even though they're grateful for what they have, they see that more might be available if they ask for it.

lend000 9y ago
It only seems weird because it isn't the norm -- like one of the other commenters mentioned, we tend to know the approximate net worth / salaries of family/friends and yet society, on average, continues to run. And in large companies with salary ladders, we know the range of all our coworkers.
kaosjester 9y ago
It seems like this could be fairly easily resolved by the management having a rigid "we pay everyone the same, deal with it" position, perhaps up and and including a formula for salary computations.
- mattnewton 9y ago
  Get ready to see a) people gaming the formula and b) talent leaving because they feel like they are paid the same as people who contribute less. Edit: Not that it isn’t currently gamed and not that this doesn’t already happen: I’m pro pay transparency but there aren’t any magic fixes here, this is a really complicated social issue.
  - trowawee 9y ago
    Something like Buffer's formula (https://open.buffer.com/transparent-salaries/ https://open.buffer.com/transparent-salaries/) isn't really "gameable", as far as I can tell. And the counter argument might be that you'd attract talent that appreciates the transparency.

thetron 9y ago

I work for a company with full pay transparency – well, complete transparency across all parts of the organisation – I can't imagine working in an opaque environment ever again. I love it.

Harkins 9y ago

> And the legal basis for such rules [prohibitions on employees sharing salary information with their peers] is at best murky—indeed, a large number of U.S. states now explicitly ban them. And besides that, the National Labor Relations Board considers employees discussing pay to be protected concerted activity. I'm not sure if just having the rule is illegal, but enforcing it certainly is.

tabeth 9y ago

Transparency aside, I've seen little evidence that employers can properly measure the exact value an employee adds to their organization. The reason for most of these problems lies there. If employers could solve that there wouldn't be any problem. However, since that isn't the case, employees can take advantage of the opaqueness. --- Case and point: if you could measure the value, you could figure out what is valuable, and if you can figure out what's valuable and what qualities it takes to create said value then your organization would already be successful.

neilwilson 9y ago
If the information is available to all the function of the labour market will force the value to the correct figure. It's not a matter of individual firms. It is a matter of individual firms interacting with a functional market.
- tabeth 9y ago
  I disagree. What's valuable, and therefore compensation, is a matter of opinion, not fact.

mankash666 9y ago

No surprise that a Murdoch publication hell bent on proselytizing Reganomics opines against open salary information. Nothing here stands muster - in school, kids freely share their grading information, and seldom do they not understand why an objectively better performance earned someone a better grade

detaro 9y ago
Pupils will disagree on what "objectively better" means if at all possible though, despite individual pieces of schoolwork being relatively easy to rank.

dragonwriter 9y ago

> Full pay transparency works well in two settings. One is where pay levels are based simply on rank and tenure, and perhaps location—not on performance. Think government agencies. But, that's not how government agencies work; in the federal general schedule system initial pay steps within a grade can vary based on special needs of the hiring agency or special qualification of the candidate, and advancement in steps within the grade is based not only on longevity but acceptable performance. State and local civil service systems I've seen seem to be generally similar.

holograham 9y ago
have you ever worked in a government setting? I would hardly call them the epitome of a highly functioning workforce. Laziness and waste is rampant.
- ryandrake 9y ago
  Sorry, but laziness and waste is rampant in the corporate world as well.
- dragonwriter 9y ago
  > have you ever worked in a government setting? Only for a little over 15 years. > I would hardly call them the epitome of a highly functioning workforce A mixed bag, IME, as are private orgs. But, even insofar as your claim is true, it would only be relevant as counterevidence (weak, perhaps, because of potential compounding factors) to the article’s claim that government agencies are an environment in which full pay transparency is not demoralizing and demotivating.

xster 9y ago

Yet another corporate lobbyist type response - You can't have net neutrality, it'll confuse customers - Food origin labeling? Bad, people will realize we have no idea where food came from. - Single payer? But it'll undermine the whole employer paid insurance patchwork. - Close tax loopholes? We'll just push rich people to move money offshore. - Stop bombing the world? Where's all the weapons, oil and mercenary companies gonna make money from? - Share compensation data? People will quit once they realize their pay grading mechanism is subjective and arbitrary.

colemannugent 9y ago
>Share compensation data? People will quit once they realize their pay grading mechanism is subjective and arbitrary Do you have an objective and determinite way to set compensation? If you do then you should tell the good folks here at YC that you have a great startup idea, pay gradation as a service, and collect your easy fortune. All pay grading schemes are subjective by definition. A product is worth only what others will pay for it. When you are looking for employment you are selling your labor to an employer, of course your prospective employer can always not buy your product, especially if she can find another product for less.
- loa_in_ 9y ago
  This implies the problem is lack of understanding on behalf of the payees. You said what you know, therefore I understand you would not expect to be paid 100% "fairly" and you wouldn't get mad if paycheck information was open to your co-employees.
- xster 9y ago
  I think it's worth taking a step back and looking at the grand scheme. Everything is a non-binary spectrum. As an example, if you temporarily suspend societal norm (which is what I'm challenging here), to think that we have the audacity to pretend that we know how to tax people and objectively rate society's needs and redistribute wealth into various public programs in a way that's objectively fair to everyone is absurd if we try to think of objectivity as a binary thing. But our policies obviously have socialistic elements because we don't dogmatically lock ourselves in a strict dichotomy. And I argue for the same thing in work compensation. Some form of pure cosmic objectivity may not ever be possible but it doesn't mean we should ideologically oppose attempts to approach that end of the spectrum.

kevinmhickey 9y ago

I have worked for a company with full pay transparency and for several with full opacity. I prefer opacity. At the transparent company, I was hired in as one of the highest paid employees at a time that the company was struggling. Everyone ranked higher than me had taken a voluntary pay cut, to the point that some of them were paid less than me. I felt guilty for taking more money than them, but conflicted as the problems were not of my making. I felt some resentment at pay peers that were underperforming. I was able to observe the performance of other employees and knew which ones were being treated fairly and not. It was information that did nothing to benefit me, my peers or those below us in the organization. It led to more bad feelings than good and I am grateful that I do not have that information at my current employer. I prefer sites like Glassdoor where you can get a general idea of what your coworkers might make, without the fine resolution of a name to dollar amount mapping.

majormajor 9y ago
A lot of people are paranoid about the malicious case: "the company is trying to screw you over." I don't think it's that hard to identify malicious employers even without knowing everyone's salaries. The non-malicious case then boils down, to me, to: who do I think is less biased in evaluating my value vs my peer's value? Me, my peer, or a third party that is neither of us? The answer to that is pretty obvious, and so what am I going to gain except being overly focused on me against my peers vs me against my past self? I would be very interested to know how many people who want full transparency are managers who've had to deal with things like "there's a mismatch in these people's salary because they came in at different levels but are now performing equally, but if I give a massive raise (say, 30%+) this year am I setting them up to be disappointed when the size of that isn't duplicated in the future vs spreading that across 4 every-6-month slower-paced bumps?" Or with employees who are radically wrong about how valuable they are compared to a peer, because they're focused purely on code and not noticing how their peer laid a bunch of ground work in negotiating with product and other stakeholders to eliminate some requirements that would've made the project take several months longer? You can be transparent about the why: "we're going to be doing some market adjustments to your pay, but here's how many people we've seen get disgruntled and leave in the past if we do it too fast," and "the next step for you is looking beyond the tasks in front of you to see the bigger picture of these projects, and building a relationship with people from the rest of the business," without the gut punch that "here's how much less money you're making" is.

neilwilson 9y ago

So the downside of Full Pay Transparency appears to be that it causes the labour market to function as a market by increasing the information necessary to eliminate sub-optimality. Who knew? It isn't the company that provides you with job security. It is the job market. If everybody who thinks they are being underpaid moves on, it soon sorts itself out.

epx 9y ago

"nearly 40% perceived themselves as performing within the top 5% of their peers.". That's exactly the problem. I've been well paid my whole life, but in comparison with other peoples' productivity, I should have been paid thrice as much. I don't complain; everybody has to eat, everybody has to take care of their families, etc. But I am damn sure all these people would not tolerate knowing even that I got as little as 30% more. This is one reason why I don't have a typical job for almost a decade now. I get interview invitations from big SV companies, but I hardly ever get invitations from local software houses, and when it happened, it went nowhere because they wanted to pay the average ERP programmer salary, citing "internal politics". It also happens when I do per-hour consulting work - my rate is considered high compared to what Dummy Database Consulting charges, so I have to settle for lower values, but at least the values are higher in absolute terms.

cortesoft 9y ago
You do realize the irony in quoting the part about how so many people overvalue their performance and then following it up by talking about how you are 3x as productive as everyone else at your previous companies?
jackgolding 9y ago
What you are saying is as a top performer it financially was and is better for you to charge based on results? (i.e. as a consultant)
- epx 9y ago
  Yes.
sdiupIGPWEfh 9y ago
Wait, what is the "average ERP programmer salary" in your area? I ask, because I've seen them billed out by consultancies at like $200 an hour. What slice of that makes it back to the devs?
- epx 9y ago

pjungwir 9y ago

Reflecting on this article brings up a lot of contractions in my own past thinking: I wouldn't want to work somewhere with public salaries, because I suspect that like unions they wind up enforcing mediocrity. I'm confident enough in my own abilities that I want the possibility of out-performing and being compensated for it. On the other hand, as an employee I would want freedom to discuss salary with fellow employees, to get better information when it's time to negotiate raises and promotions. Also, in a professional services firm, which I think is the ideal structure for software developers to capture more of their value, the partners all know each other's earnings (at least assuming the firm is of modest size). What's more, I agree pretty strongly with David Maister's recommendation in Managing the Professional Services Firm that partner profit-sharing should be based on seniority rather than some metric, since that is less likely to distort incentives and cause resentment. It seems like I am all over the place! I'm not yet convinced these are true contradictions, but having them laid side-by-side does force me to ask why not.

seem_2211 9y ago

I think the hardest bit about salaries is that most people bring an intangible amount of value to their companies, with pay usually determined by the local market. For example, I'm not sure how you'd accurately determine how much someone in HR middle management brings over the course of a year, or for someone working in corporate PR. The company I work for has extremely transparent pay - you keep a % of the amount you bring in. It's no great secret how much anyone makes in a given month, nor how much the company brings in. But this only really works in that we're all working sales jobs, so you don't have to justify anything.

throwawaymsft 9y ago

There are numerous thought experiments on how transparent salaries affect team cohesion and go against human nature. Meanwhile, professional sports teams and the military, who rely on team cohesion more than random white collar professionals, have transparent salaries. If teams worked better with opaque salaries wouldn’t these ultra competitive/life-or-death industries have figured it out?

mk89 9y ago

The concept of salary is interpreted by people in all different ways since always, therefore you won't achieve nothing but grudge and dysfunctional teams on long term, unless pays are really fair and people are really the right ones for implementing such a system. Some people see their self worth in their job, some in how much they earn, some mixed, some in how much good they do at work, some in having a family, etc. One fixed component is the salary which can't be the lever among people but it can certainly be interpreted as such, therefore should be private. Also, if I am a better negotiator than you are, why should I be perceived in a negative way? "Oh he works less than me, but he earns more". Maybe he is better at selling himself (?). But it's ok that companies do such experiments, otherwise we would not know the outcome...

kristofferR 9y ago

I like the Norwegian model, full tax/income transparency.

fastbeef 9y ago
If it's anything like the Swedish model, it's not as easy as that. You can of course solicit someones tax return from the Tax Agency (as it's a public record) and read how much income they declared, but it's not as easy as typing in someone's name into an API and getting "They make X per month".
- dx034 9y ago
  The process is quite easy and can be done online [1] but since 2014, the person in question will be informed via email about the request. But as anyone can request salaries, you can just ask someone else to request your neighbour's salary if you don't want him to see it was you. Journalists are exempt from that and can see any tax report without notification. [1] http://www.skatteetaten.no/en/person/Tax-settlement/Search-in-the-tax-lists/ http://www.skatteetaten.no/en/person/Tax-settlement/Search-i...
  - walshemj 9y ago
    I hope that newspapers then publish their hacks salary's
  - Enhanced 9y ago
    There is no e-mail being sent, but I think many people actually believe that the person they search is notified - would explain why so few people have used it in recent years. Everyone who has searched for your name is listed in a sub-section / "tab", listed as a link on the same page where you can search for the information of others. I imagine that very few people are looking at that, especially not a few days after the initial "OMG now you can look up what everybody makes" articles in the newspapers.

kruhft 9y ago

All income should be reported.

andrewclunn 9y ago

High turnover of underperformers isn't a bad thing.

mietek 9y ago

> Surveys done shortly after this found that employees who went to the website and discovered they were paid below the median for their peers were much less satisfied on average with their jobs and more likely to express an intent to depart than those who were paid below the median but didn’t receive the prompt to compare their pay. So in this case, full pay transparency encouraged greater overall dissatisfaction and possibly turnover—the exact opposite of the power that full transparency has in the right situations to motivate employees and attract talent. What really makes people unhappy: telling them that they are underpaid, or underpaying them?

Joakal 9y ago

Pay transparency could cause a revolt by women when they see they're paid less than men. This is not studies they were quoting but they could see themselves paid less than men for same work, etc. BBC and several other places are having this issue. Without the pay transparency, the women would've been oblivious.

sonthonax 9y ago
Women are rarely paid less for the same jobs anymore. https://www.ft.com/content/a0d8872c-d1b9-11e6-9341-7393bb2e1b51 https://www.ft.com/content/a0d8872c-d1b9-11e6-9341-7393bb2e1... https://www.theguardian.com/money/2015/aug/29/women-in-20s-earn-more-men-same-age-study-finds https://www.theguardian.com/money/2015/aug/29/women-in-20s-e... Edit: I do know you're talking about the 'scandal' where there was a paygap between male and female presenters in the BBC. Obviously it's not great, but it's also something I find it hard to care about when the story is, "Man is earning 500K a year, while woman is earning 300K".

dawnbreez 9y ago

If your employees are angry and think that they're not paid fairly, that's on the employer to fix. Either it's perceptual, and the employer needs to clarify something, or it's a real gap, and the employer is at fault. This article suggests that the solution is to continue not telling people what they are paid. I concede that humans have terrible judgement in many things. This is why it's absolutely necessary to be as transparent as possible. Tl;dr: If your employees are complaining about unequal pay, you're doing something wrong.

marcoperaza 9y ago

>In a study of engineers at two major Silicon Valley companies conducted some years ago, I found that nearly 40% perceived themselves as performing within the top 5% of their peers. Ninety-two percent felt they were in the top quartile, and only one engineer felt his or her performance was below average. This is the heart of the problem. People think they are more deserving than they actually are. When they find out that they're not getting paid as much as they think they should, relative to people who they wrongly think they perform better than, they will be upset at management and envious of their peers.

JohnnyConatus 9y ago

ITT people assuming they have an objective view of coworkers performance.

lolsal 9y ago

I can't really articulate why, but to me my salary and compensation is extremely private. I'm not ashamed of my compensation and I could justify it (compared to my peers for example), but it still seems like something that is extremely private. When I ask myself why I would care if my coworkers, family, friends, etc knew my compensation I can't come up with a solid answer. I am in my early 30s, if that matters. If we think of compensation being directly and only related to the value that that person brings to a company, it seems like we're neglecting half the equation. The flow of value goes the other way as well - I would require higher compensation for the same value delivered if I did not like the company or the work environment for example. I could also require lower compensation if I really liked the company or work environment. How does this discrepancy have any bearing on compensation compared to a peer who is (for the sake of argument) delivering the same exact value to the company? This half of compensation is extremely personal and subjective. If transparent compensation becomes the norm (or legally required), I can see myself migrating back to consulting work where I would charge by project or deliverable which would totally obscure my hourly compensation even if the contract itself was public.

Corrado 9y ago

This Joel On Software article[0] is my favorite work on compensation. It details a ladder system that exposes everyone's salary as well as the requirements to move up. The lack of individual bonuses is an interesting twist and I'm thinking that it might not work in a large company where you can't directly influence the direction of the company. Then again, when requirements are clear it becomes much easier to make decisions that benefit the company. "Maybe we don't need to have the company retreat in Tibet this year." [0] https://www.joelonsoftware.com/2000/08/30/fog-creek-compensation/ https://www.joelonsoftware.com/2000/08/30/fog-creek-compensa...