A new way to set pay may be gaining traction as more companies offer the ability for staff to set their own salary. But how does this work in practice, and what are the pros and cons?
UK based companies such as Smarkets and GrantTree allow their staff to set their own salary. This may seem an alien concept to a lot of companies who implement a more traditional way of calculating wages, however both companies feel that this innovative new process has been a success for their business.
How does it work?
There are some variants in the way in which a company implements a pay self-assessment process. However, the main stages appear to be reasonably similar.
The process starts with the employee researching what the market rate is for their role. So what other people doing the same or a similar job, in their location, with their level of experience is being paid on average. They then compare this data to their own position.
They are also required to assess what their contribution to the company is and how that relates to their request for a pay increase.
Part of the data collection will also often be speaking to colleagues who know them or work closely with the employee. They can ask their colleagues questions about their role, whether they’re doing a good job, whether they have missed out any tasks they do etc. The other team members can also contribute data and statistics relating to the role.
Once all the data has been collected, the staff member creates a proposal for their requested salary increase or decrease. Yes, you read that right – decrease. Because the data could also point to the possibility that they are being paid too much and therefore they can also request a reduction in salary.
This proposal is then reviewed by their peers within the company, often the same people who contributed to the data collation process at the beginning. The employee’s colleagues can ask questions, highlight any misunderstandings or errors, and points for the employee to consider. They may feedback that the staff member is asking for too much of an increase and give their reasons, or perhaps they might feel the employee is being too modest and needs to be requesting a larger increase based on the data they have collected.
The aspect of peer review appears crucial in the process, as it helps to manage the concerns of people putting in wildly inappropriate salary requests, which is often a business’s primary concern. It also assists in the cases where people are undervaluing their worth, possibly due to imposter syndrome, and looks to balance out the proposals so that they are realistic and fair.
However, although colleagues review the salary increase proposal, it is still the responsibility of the individual employee to make a final decision about the salary they apply for.
At this point, the employee submits their salary increase, and the company then arranges for it to take effect. Commonly from the next pay date.
What are the pros and cons?
In order to implement a process such as this, the company has to be willing to be completely transparent about its finances and pay, so that employees can make informed decisions based on what the business can afford. For example, Smarkets publish all of their salaries and compensation on their internal wiki. Everyone knows what everyone earns in the company.
Then there are concerns about staff members making outlandish requests for salary increases even after analysing all the data and getting feedback from their colleagues. GrantTree has a robust hiring process that tests a candidate’s development and maturity, they feel this mitigates the risk of employing people who might take action like this. This means companies considering a pay self-assessment process may also need to review the way they hire staff.
Companies may also wish to look at the culture of their business. Implementing a system like setting your own salary requires a mutual level of trust between the company and the employees. This is something that might have to be fostered over time, and the way you interact with your workforce needs to reflect this. In the beginning staff will be wary of a new process like this. They may believe there is a catch, that the salary increases won’t actually be implemented, that a request will reflect poorly on them etc. Communication is vital and also having a clear process for people to follow is crucial.
The benefits of a pay self-assessment process are that the workforce feels that their contribution is recognised, and they are being paid fairly. Removing any feeling of resentment towards an employer that could negatively impact their productivity. It also can contribute to better staff retention.
Salary can be a very emotive subject, and people are usually discouraged from discussing it in a traditional work environment. Moving to a different business model that is more open is potentially a significant undertaking for a company, but one that some companies feel is worthwhile.
What do you think, are you considering a similar process for your company? Would you let your employees pick their own salary?
Further information
If you found this information useful, you may also want to check out the following:
- Misconceptions About Employee Benefits
- Unlimited holiday – an employee benefit too far?
- Should there be more individuality in employee benefits?
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Sources:
https://www.bbc.co.uk/news/business-49677147
https://www.bbc.co.uk/sounds/play/m00089qy (35:20 - 42:25)
https://granttree.co.uk/i-set-my-own-salary-it-blows-peoples-minds/
https://smarketshq.com/a-transparent-approach-to-salaries-d63478421622
https://corporate-rebels.com/set-your-own-salary/