From the beginning Fraktio has made one unconventional decision when it comes to salaries: they are entirely open to all our employees. A transparent salary policy has helped us to build a more equal and open work culture. Here’s what we have learned about salary transparency on the way!
Talking about salary is still a taboo
Salaries are still a taboo subject in many organizations and knowing how much your colleague earns can be just a rough estimation. Often money is also a topic that you might not want to bring up in conversations with your colleagues. Ignoring the problem won’t make it go away and doubt can easily start to creep its way to employees’ minds.
When employees start to doubt themselves, the company, or their colleagues, they start building a culture of mistrust. In the long term, this can be harmful to the culture and affect the company’s competitiveness as talented employees might lose their motivation and start looking for other opportunities. Salary transparency reduces doubts, rumors, and misconceptions and increases clarity which is one core reason to consider it in every organization.
Salary transparency builds trust and can lead to better productivity
Organizations should strive to achieve a high level of transparency because it reduces the risk of employees feeling underappreciated and doubtful. Transparency in the workplace is an ongoing process and salary transparency can be one core step towards building a more inclusive environment and creating trust in the workplace.
We have succeeded to create a transparent salary policy by developing both general compensation models and individual salaries. This model-improving work, as well as personal discussions, should take place in a safe environment, respecting everyone’s individual needs.
Transparency in the workplace is an ongoing process and salary transparency can be one core step towards building a more inclusive environment and creating trust in the workplace.
Salary transparency is a rather recent concept so there is not much research on it. Some existing studies suggest that transparency can lead to better productivity, motivation, an increased sense of fairness and other positive effects. A highly relevant study from Penn State University suggests that pay transparency improves compensation negotiation possibilities for women and other underrepresented groups.
Creating a routine is the key
One big factor in creating a successful transparent salary policy is to have a routine around it. Our salaries are determined collectively, openly and iteratively. We are always in the process of improving our system and aim to be even more transparent and clear on how individual compensations are formed.
We have created an online spreadsheet with a listing of all our employees and their salaries. This spreadsheet includes their starting salaries from whenever they started and also how much dividends we have paid to our shareholders.
We have created an online spreadsheet with a listing of all our employees and their salaries.
At Fraktio, the starting salary is often a collective estimation we try to fit inside our recently developed grading system. The same system is used twice a year for all consultants’ salary assessments. This work is done by an internal working group, which also works on other monetary recognition mechanisms.
One part of the routine is creating a process for salary development and reviews. To get more out of transparent data, we need transparent means to assess individuals’ compensation.
Salary transparency is not an automatic solution to pay-related problems
It’s important to remember that salary transparency can also have some unexpected downsides. For example, employees could lose their motivation if their perceived-as-competent colleagues earn more than they do. They can also feel less satisfied with their salaries if these are lower than average.
These downsides seem to be more prevalent in studies that focus on environments where a sudden change takes place: opaque workplaces that suddenly turn transparent, or when the revelation of collective compensation has a more radical effect.
To sum it up, salary transparency is not an automatic solution to your pay-related problems, especially if you impose it without proper planning and communication. But it can be one of the many tools worth trying to advance equal pay for all.
Joonas Pajunen is the CEO at Fraktio, a (former) software developer with a tendency towards generalism. Fraktio is a consultancy specializing in web and mobile application creation. We organize our work in a flat structure of internal and customer-facing teams, with as much transparency between them as possible.