Tag Archives: Compensation

Why Do Companies Pay Cost of Living, Not What the Job is Worth? [Reader Question]

Another reader question today, this time on compensation. If you have questions you can always email ben@upstarthr.com and we’ll fit it into the queue if possible!

Why do companies pay employees by cost of living of the city/country that the employee is working from rather than the cost/value of the work? Can employees game this system to earn more money?

This is an interesting question, but the truth is it’s not either/or–it’s both. Employers must consider both internal equity and external/market equity when building a compensation structure.

Employers pay what the job is worth, or they will never be able to hire anyone. Try offering a software engineer $10,000 a year and see if they want to work for you. This is about internal value and equity–what value does this job have to the firm relative to other jobs? There’s a general hierarchy in terms of pay rates, which is why an administrative assistant earns less than the CEO.  Continue reading

How to Make Salary Decisions without Performance Review Ratings [Video]

In the last few years more and more companies have made the decision to move away from the big, annual performance review to more frequent, informal conversations about performance on the job. But the biggest question I’m hearing is “what happens to our compensation decisions?” After all, most of the time those two activities are deeply intertwined, so what’s the deal?

In the short video below I release some of the preliminary findings from a new research study I’ve been running on this topic. The short version: Continue reading

money pay gap

Should We Be Asking for Pay History Data on Job Applications?

In many states, it’s still legal to ask about candidate pay history. While some states have outlawed this practice, I still get questions like the one below fairly regularly:

I have a question for you that I thought you would be uniquely able to provide advice for. I am currently seeking new employment. When submit an application, the prospective employer asks for me to input a salary into the online application. The field does not allow a range and does not allow letters so I cannot say “negotiable”. How should I answer this since I am experienced professional and I don’t want to automatically disqualify myself by being on the high side of whatever range the perspective employer is looking at. How would you recommend I answer these questions? –A reader in Alabama

So, what should we do?

Rethinking the Question

money pay gapOne reason some states have outlawed the practice of asking for pay information is because it adversely affects certain populations. For example, women are likely to negotiate salary just 7% of the time while men are likely to negotiate nearly 60% of the time. This doesn’t even touch on minorities, where the numbers are often worse.

The problem I’ve always had with this question is this: what your last employer paid you should have zero bearing on the value I have placed on the position. If your former employer didn’t pay well, that doesn’t give me an excuse not to pay well.

The Frank Reality

For the most part, employers don’t set out to ask this question in hopes of messing up someone’s life. They aren’t asking about former pay rates to trap someone in a job making less than they are worth. While that sometimes happens, it’s not the goal for many employers.

The reason employers ask for pay history is so they don’t spend an inordinate amount of time walking down the path towards hiring a candidate they really like only to find out in the salary negotiations that the person wants $20k more than the role is budgeted for.

So, if employers want to avoid this roadblock without running afoul of the law, what’s the option?

At the front of the process, whether in the application or in the early screening conversation, simply tell the candidate this: “Our budget for this position is $X to $Y. Does that fit your expectations?”

[Read more:  Pay transparency, pay equity, and a powerful model for how to guide these conversations]

Yes, you’re showing your cards. Yes, you’re being transparent. But it satisfies two things. First, it helps to make sure you’re legally compliant in any markets where this applies. Second, and perhaps most importantly, it helps to demonstrate that you are dealing in a fair and transparent manner with potential employees.

This long-standing method of waiting until the first person blinks (that’s what career coaches tell candidates to do in salary negotiations) is a terrible way to run the process for everyone. Nobody wants to speak because we’ve all been told the first person that speaks in a negotiation loses. However, this isn’t about creating a combative experience for new hires–it’s about building a new relationship. Don’t you want to start it the right way?

pay commuting

Should Employees be Paid for Commuting Time?

An interesting piece of research on publicly available WiFi access in England led to a question that made me pause. Should employees be paid for commuting time?

As someone that travels a fair bit for work, I know the value of being able to connect and work from any number of strange locations–restaurants, hotel lobbies, airports, etc. But what about the commutes that make up a significant part of the day for so many workers? From the piece:

Interviews with customers revealed why internet access was as important for commuters as business travellers. Many respondents expressed how they consider their commute as time to ‘catch up’ with work, before or after their traditional working day. This transitional time also enabled people to switch roles, for example from being a parent getting the kids ready for school in the morning to a business director during the day.

Until now, there has been little research to evaluate the impact free Wi-Fi provision has had in the UK, despite government encouragement for companies to provide access on transport networks. The researchers looked to Scandinavia to see how commuting time could be measured differently, and found that in Norway some commuters are able to count travel time as part of their working day.

Dr Juliet Jain told the conference: “If travel time were to count as work time, there would be many social and economic impacts, as well as implications for the rail industry. It may ease commuter pressure on peak hours and allow for more comfort and flexibility around working times. However it may also demand more surveillance and accountability for productivity.”

Continue reading

business card job title

Using Job Titles Instead of Pay to Compensate Employees

Writing a lot about compensation today! I also have a piece up about 3 ways compensation policies can cause employee turnover as well in case you want to check it out. . 

This past week I was talking with a friend and he explained that his job title had recently been changed from “XYZ specialist” to “XYZ manager.” He laughed and said that, of course, it didn’t come with a pay raise. I know those kinds of “promotions” are common, but I also explained to him that even if a raise didn’t come right away, having a title like that could lead to higher pay down the road.

For starters, even if there is no pay change, the recognition of your hard work with a title change can give you a sense of satisfaction with your work. Dan Pink’s book Drive talks about the three areas we need to hit in order to create an engaged workforce: autonomy, purpose, and mastery. This recognition hits squarely on the mastery piece, especially if the title change is conveyed appropriately. We want to feel like masters of our own domain, and that transition in job title can be one way of realizing that. Continue reading

press compensation transparency framework

How Pay Transparency Affects Equality, Engagement, and More

Next week I’m heading up to Massachusetts to talk about pay transparency to a group of HR and business leaders. Of all the topics I could have spoken about, why pay transparency?

First of all, it’s becoming more and more of an issue because of legislation that prevents employers from asking about salary history. Research shows that women are less likely to ask for higher salaries and these laws are about trying to reduce negotiations so that women and men have more equal pay for equal work.

Secondly, in a workplace where trust is at a premium, all the research points to considerable links between trust, transparency, and employee/business performance. We can’t have engaged employees without trust and transparency, and employers can’t succeed without engaged, energetic employees. It’s all connected!

The Options for Transparency

Employers have a range of options when it comes to transparency. They can be transparent about:

  1. Business decisions–why certain decisions are made and how they affect the workforce
  2. Job opportunities–are you sharing open jobs with internal staff or hoping they don’t find out about them and try to make internal moves?
  3. Compensation decisions–do workers know how decisions are made around compensation or is it a “black box” where decisions are made without any clarity or insight?

Deloitte’s research says that high-performing companies are 4.5x more likely to have a well-defined communications strategy, sharing information on pay determinants, budgets, and distribution.

The Spectrum of Transparency

The first thing that appears in your head when I say transparency around compensation might be a company like Buffer. Buffer posts its salaries on the website for the public to see. Yes, really. The company also shares radically about its business plans and other information openly. While this has worked out for the firm, it’s not something I’d recommend for everyone.

There are clear pros and cons for a fully open and transparent approach. The benefits include clear expectations, consistent compensation schedules, and difficulty to discriminate. However, the issues can include a lack of connection to performance, lack of organizational agility, and a significant difficulty to motivate/retain top performers.

Without some measure of transparency, bad things happen. For example, Lawler’s research shows that workers routinely OVERestimate the pay of their peers and subordinates and UNDERestimate the pay of their superiors. That means they are less happy with what you’re paying them!

Additionally, Helliwell and Huang’s research points out that a 10% increase in organizational trust is equal to a 36% increase in pay for workers. They want, need, and crave trust (and transparency), and it’s as important as a pay bump to get it!

Making it Stick

I have developed a five-part process called the PRESS framework that guides employers through the decisions that improve transparency.

press compensation transparency framework

What are your thoughts on compensation transparency? Is your organization doing a good job of this, or would you like to be doing better? 

*If you’re interested in having me speak at your conference or company on this topic please feel free to reach out to me!

money pay gap

Can Artificial Intelligence Solve the Pay Gap Problem?

[Update 2019: This story has been woven into my new book, Artificial Intelligence for HR, which highlights the key skills we need to compete with machines in recruiting, engagement, and more. The book is getting rave reviews. Check it out here.]

Note: if this concept interests you then you definitely need to click here and sign up to get a heads up when my new book is coming out later this year. In the book I tell dozens of similar stories along with leveraging research and examples of AI technology to support HR, recruiting, and talent. It’s written in my usual, down-to-earth style and will introduce you to a wide variety of use cases, vendors in the HR tech space that are doing interesting work with AI, algorithms, machine learning, and more. Learn more: http://AIHRBook.com

money pay gapPay parity is all about ensuring that women and men earn the same pay for the same work, yet the gender pay gap is still alive and well. Sources vary but one estimate put it at 11% back in 2016 (source). For every dollar a man earns, a woman earns 89 cents. But can an artificially intelligent system that makes decisions without bias or regard for someone’s gender solve this problem? For example, if you could design a system that schedules work shifts and pay rates based on a blind algorithm that does not factor gender into the decision, you would logically expect to find that men and women earn the same in such a system, correct?

But what if I told you this isn’t the case? Continue reading