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Transparent salaries can help both employees and companies

I’m not in the habit of discussing a stranger’s income; however, within 30 minutes of talking to Jason Nazar I learn he makes US$150,000 annually.

Nazar, co-founder and CEO of Comparably, an employment and culture information platform based in Santa Monica, Calif., promotes the concept of transparent salaries, whereby compensation is common knowledge in a company and coworkers know everyone’s income. It makes work more rewarding for employees, he says. (While we’re leveling the playing field, I should mention I opted for secrecy and didn’t share my pay stub with Nazar’s communication staff.)

As Nazar puts it: “Nobody should be in the dark when it comes to things they care most about at work, which is their value for what they provide to their company, what the culture is, what experience their peers are having, and what employees think of their company.”

Shifting the conversation about pay

Comparably is similar to Glassdoor and LinkedIn, which provide a window into companies by providing data on salary and culture. Comparably differs from its competitors because its focus is on tech companies and, in addition to employee reviews, it provides structured data that helps current and prospective employees understand a company’s culture and compensation structure. It also has a unique equity calculator that asks (anonymously) for an employee’s department, job title, and how much venture capital the company has raised. The information helps a person determine how their equity compares to what the market is offering and can be crucial in helping a candidate determine whether a job offer is fair, or the current value of their equity or whether a current employee should quit their job.

Since the company launch in March, employees from 4,000 tech companies have signed up with Comparably via LinkedIn, Facebook or other social networks and then voluntarily submitted data – which is posted anonymously. They’ve outlined whether or not they believe they are fairly paid; if they’re pleased with the amount of stock and equity they received; if they’re satisfied with their benefits; the future outlook of the company; and rated the quality of their manager and team.

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[An overview of how 260 employees of Amazon have ranked the company across several categories on Comparably. / Screenshot]

“Talking to your peers about compensation is often a socially taboo topic,” Nazar says. At the same time, “There’s a real desire, a craving from people to learn about this.” Transparency is is useful for companies, he says, because they have engaged and accountable team members who feel a sense of ownership.

On Comparably’s platform employees sort by location, years of experience, ethnicity and gender, and they can easily find out whether or not their pay is competitive among their tech industry peers who are equally experienced and have the same job title. There’s an immense amount of data and, subsequently there are reams of pie charts, line graphs, infographics, as well as a question of the week and analysis on the blog.

On a forum called #talkpay, employees anonymously get advice on things like whether they should quit because they’re underpaid to suggestions on how to approach the boss for more equity.

Why transparency matters

Research suggests transparency can benefit employees while secrecy can bog down their performances.

Researchers Elena Belogolovsky, of Cornell University and Peter Bamberger, of Tel Aviv University, found that keeping salaries secret is associated with decreased employee performance. The duo studied 280 Israeli undergraduate students, all of whom were paid a base salary for completing three rounds of a computer matching game. The students received bonuses based on how well they played the game. Half of the participants were told only about their performance and bonus pay and were restricted from discussing anything related to pay. The other half of the group knew what everyone else was getting paid. Ultimately researchers found that keeping salaries secret resulted in disengagement and decreased employee performance.

David Burkus, an associate professor of management at Oral Roberts University in Oklahoma, has observed that employees who work in companies experimenting with transparency have a higher sense of the organization being fair and collaboration increases.

The author of “Under New Management, How Leading Organizations are Upending Business as Usual,” explained the causes to the Harvard Business Review: “Everybody knows what it takes to move up the pay scale, knows what it takes to perform and make more money, and everybody knows that there’s an overarching commitment to fairness because things like discrimination and wage gap tend to hide in the dark corners.”

Other benefits of transparency are that it allows employers to have open conversations. If you can’t pay the market rate, for instance, you can re-engage your employees to explain.

“This is why you’re underpaid, these are the other benefits you get, or this is the mission of our organization,” Burkus says. “You can really retain a lot of employees in a transparent condition that you couldn’t really do otherwise.”

Transparency is one of the core principles at five-year-old social media company, Buffer, where everyone from bloggers to staff in the marketing department to the CEO know each other’s salary (as does the public) because it’s online.

[As of November 2015, Buffer has a formula it uses to calculate employee salaries, which it explains in detail on its website. / Screenshot]

One of the biggest benefits they’ve seen, says Tom Redman, a product manager at Buffer based in Guelph, is that there are no internal politics, nobody is jockeying for position in order to get a financial incentive, or to get what they think somebody else is getting.

“We’re not preoccupied with either our own salaries or with peers’ salaries at all, ‘I wonder what John makes?’ We are free of the mental overhead that naturally accompanies secrecy,” Redman says. Transparency can prevent low morale and salary-related turnover.

Redman who previously worked at Innosphere SDG, says he hasn’t experienced many drawbacks of having an open and transparent salary. However, the company could be, “potentially missing out on great talent because they’re (a potential candidate) not totally comfortable with publicly transparent salaries, which is completely valid,” he notes.

He also thinks Buffer’s public transparency has the potential to assist people outside of the company to understand their market value and aim for a fair salary for themselves. “We’re mindful that we play a very small part in influencing market rates for certain roles in certain regions,” he says.

Finally, since Buffer uses a set formula for determining salaries there are no negotiations and that allows employees to focus on work.

“It removes the need to be a great negotiator to get a better salary then the person next to you,” Redman says, “unless you’re applying to be a negotiator.”

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