Rameez Kaleem, Director of Pay and Reward Consultancy, 3R Strategy discusses whether wage transparency would automatically lead to fair pay.
Is publishing salaries the answer to fair pay? The theory is, if we all knew our co-worker’s salaries, pay visibility would surely highlight any unfairness or bias – enabling those imbalances to be quickly remedied. Knowledge is power, so they say.
Except – in real life – it isn’t.
Publishing salaries seems simple enough – but pay decisions are not simple.
Calculating the value of an individual to an organisation is not a quick, one-dimensional process, there is no ‘one rule fits all careers’ and identifying the high flyers is not always obvious. Measuring performance, skills and behaviours in a corporate environment is challenging and often subjective, making transparency problematic. So let’s look at industries where pay is transparent – let’s talk football.
Footballers are very well compensated – and their earnings are widely discussed. Footballers will almost always have their earnings bandied about by the global press.
Barcelona’s star forward Lionel Messi, who earlier this week became the first player to score in 15 consecutive Champions League seasons, earns around £500,000 a week. Meanwhile, other sports players at the top of their game, like
Contrast that with the £1.4 million a year paid to Wasps player David Pocock, reportedly the World’s highest paid rugby player – both are sports players, undeniably at the top of their game.
What we don’t see in either case is rugby stars whining that football stars earn more or either of their teammates shouting about pay injustice on social media. Even if, privately, they think their own abilities are great, their co-players appreciate their unique skills and experience, along with their media coverage, and they all reap the benefits. Fellow players also understand that if players like Messi and Pocock were not compensated in line with their abilities, they would move to another team, which would jeopardise all of their future success.
Accepting that others will get paid more – much more in some cases – is expected in professional sport because there are clear performance indicators informing salary decisions. Goals, assists and clean sheets. The number of passes and tackles.
Corporate environments, however, are a different ball game altogether.
Office politics and performance perceptions
In a corporate environment, it is harder to measure individual contributions – and performance reviews can be hugely subjective. Two managers may have wildly contrasting views about the performance of the same person, for instance. Similarly, staff will hold different beliefs about each of their co-workers based on short interactions or gossip. They also may have perceptions of their performance against their peers which may not be accurate.
A study of 700 Silicon Valley engineers, carried out by Todd Zenger, Professor of Strategy and Strategic Leadership at University of Utah, revealed that an astonishing 92 per cent perceived themselves to be in the top quarter of their peer group, while 40 per cent felt they were in the top 5 per cent.
It is therefore unsurprising that office employees usually don’t react well to learning that they earn significantly less than a colleague – and publishing pay can be problematic and divisive.
While footballers and other athletes understand that high-calibre performances directly correlate to a higher salary, the same cannot be said for a corporate environment. Work is not scrutinised and contributions to overall performance of the company cannot be measured in the same way. This makes calculating pay a much more complex process.
Equal pay rules mean that the starting point for equivalent roles needs to be the same – and what is ‘equivalent’ is usually assessed via an equal pay audit, however this may be different to what employees feel is equivalent. Pay is a complicated and emotive topic and ultimately, in a corporate environment, publishing salaries can do more harm than good.
Demonstrating Fair Pay while keeping salaries private
A corporate organisation needs to show a firm commitment to fair pay, but keep actual salaries private. Here’s the advice we give our clients to help them achieve that:
- Be clear about your reward principles. Do your pay and reward principles align with your business strategy and have you communicated them to all employees?
- Clarify the pay process. Explaining how you make pay decisions is often more important than the actual figures. Be transparent and clearly articulate how pay is determined and how it progresses, while ensuring you stick to your reward principles.
- Define and honour organisational values. Challenge employees who disregard organisational values, regardless of their level.
- Demonstrate your commitment to equal pay. Carry out an equal pay audit and share the results with your employees celebrating any adjustments made.
- Educate and guide leaders. Give managers the knowledge, confidence and conviction to have honest pay and reward conversations with their teams.
Pay is determined by several factors such as the skills and competencies of the role, individual performance or the external market value. There will always be pay differentials to reflect these factors, as well as high earners in key roles. Ultimately, we need to equip our leaders with the tools and data to make more informed pay decisions and convince employees that the way pay is managed in our organisation is fair and robust.
About the author
Rameez Kaleem is a Director for specialist pay and reward consultancy 3R Strategy, and has worked with a wide range of companies across a number of sectors. The company’s prestigious client list includes Vitality, Arriva Rail London, London Business School and Paysafe. Rameez previously worked as a consultant for Willis Towers Watson, with clients from the media, financial services and hi-tech sectors. He began his career at a global mobility consultancy where he worked closely with several public sector and governmental organisations.
Rameez has extensive experience across a wide range of pay and reward consultancy projects, including job family design and implementation, job evaluation and levelling, bonus and sales incentive design, pay structure and progression, gender pay advice and equal pay audit.