Salary Transparency at Work: Smart or Stupid?
Life + Money

Salary Transparency at Work: Smart or Stupid?


When Joel Gascoigne launched his start-up, he outlined some founding values of the fledgling company. One of the most important, he stressed, was openness. But Gascoigne's commitment to this principle went further than most, and resulted in him implementing a pay program at Buffer - the social media publishing platform he co-founded in 2010 - that breaks the most entrenched of workplace taboos: revealing one's salary.

Now, rather than clandestinely speculating with colleagues at the water cooler, each employee knows exactly how much their colleagues earn, and Gascoigne is even considering making their salaries public. 


"We have run Buffer with a focus on self-improvement since the beginning, where co-workers talk regularly about what they are working on to improve themselves," he told CNBC. "It's this openness and transparency which led to salary transparency feeling like simply a natural progression for us."

Buffer is one of a small – but increasing - number of businesses making the move towards complete pay transparency. U.S.-based data analysis companies Qualtrics and SumAll, design consultancy Peer Insight and Switzerland's Alternative Bank Schweiz have all implemented a system where employees know each other's salaries. 

This push for openness is in sharp contrast to a number of companies – especially the U.S. and U.K. – where discussing a colleague's salary is at the very least frowned-upon, and in some cases a sackable offence.

Indeed, some argue that this level of openness causes more problems than it solves.

Chris Charman, director of reward and talent management at professional services company Towers Watson, is far from convinced by the benefits of salary disclosure. "People always talk about pay transparency as though it's a very noble idea – it's heralded as the ideal," he told CNBC. "But the reality is very different."


There are commercial considerations, with different market values of some roles, Charman said. For example, the cost of a lawyer would usually be more than an HR professional, even if they were at the same level in an organization. And it is difficult for employers to articulate why some employees earn more than others, with metrics like performance and experience hard to quantify. 

"A lot of organizations we work with talk about pay transparency, but very few take steps towards implementing it," he said. "It carries a lot of risks."

And the benefits of salary disclosure are unclear, Charman added. "I understand why it's good for employees to have a full understanding of their own salary," he said. "But their colleagues' salaries? I'm unconvinced."

Buffer's Gascoigne, however, said that although there was some initial hesitation about pay transparency, it now actually attracted new recruits to the company. 


"They key benefit is trust. There are no unanswered questions such as how much others make, or who may have negotiated higher salary," he said. "It encourages responsibility, fairness and helps us to keep the company flatter."

To overcome some of the stumbling blocks outlined by Charman and others, Buffer introduced a formula to work out all employees' pay, taking into account experience and different roles' market values.

Gascoigne gave his own salary as an example: Joel = Founder (job type) x Advanced (experience) + San Francisco (location) = $80,000 x 1.2 + 22,000 = $118,000.

However, while full disclosure may work on a small scale – Buffer, for instance, employs 13 people – there is an issue of scale, according to Towers Watson's Charman. 

"With larger organizations, you would have to deal with past pay practices, for instance, and mergers which could result is very diverse pay situations," Charman said. "In practice, that's virtually impossible to manage."

But Buffer's Gascoigne is convinced that pay transparency is the future of a happy workplace – even in larger companies - and has even made its salary formula public so other companies can implement it.

"It will be painful to put in place - some may not be comfortable with it, and some salaries may need to change - but the benefits make it worthwhile," he said. 

In fact, Gascoigne is so convinced by the merits of complete openness that Buffer is already "taking the steps" to share salaries publicly.

This radical step draws comparisons with Sweden's tax system, where all tax returns (and so residents' incomes) are available to the public. However, Fredrik Gustafsson, a tax partner at DLA Nordic law firm in Stockholm said the system was not hugely popular in the country, particularly as tabloid newspapers regularly publish lists of the highest earners. 

"My wife – who is American - says it's basically a shopping list for criminals. She doesn't understand the system at all," he added. "I think that when it comes to things like this, Sweden is quite naive. I honestly can't imagine it working somewhere like the U.S."

But Gascoigne said Buffer salaries were already pretty transparent - you can take their formula and calculate fairly accurately each person's salary – and to date, there had been no problems or backlash. 

"I think there are some great benefits of going completely public with salaries, beyond just making them accessible within the company," he said. "The more we can share, the greater loyalty we have among our audience."

This article originally appeared in CNBC.
Read more at CNBC:
Where the Wealthy Get Their Income
More Youth Not in School, Without Jobs
Setting Up Shop: What Out for These Pitfalls