Data driven compensation solutions are leading the way to fair wage equality.
This article is based on a workshop given by Virgile Raingeard of Figures for Elaia’s portfolio companies.
What does the Premier League of football have in common with European startups?
For decades, we’ve noticed a common problem, salary negotiation remains a pain point in both big and small companies and for all parties involved. So what can be done? Well there’s one idea that’s been floating around: kill the negotiation process.
It may seem like a radical idea, but it could also be what the workforce needs. We know that wage is an issue, people have questions and expectations and there’s never enough clarity to justify the sum. The right compensation tool can remove this pain point and provide a fair and accurate way to propose the right wage.
As negotiation can sometimes be long and drawn out, it can lead to a waste of time, or unhappy parties. Furthermore, even if the outcome is fair, the experience of negotiation can strain professional relationships. A framework or pay grid can help to avoid this sometimes unpleasant experience. Here are some other possibilities to consider:
Compensation models already exist and range from flexible to rigid with pros and cons in each model, so it’s necessary to consider your business, it’s size and culture to see if there is a right model for your organization.
- A flexible structure that lets a company decide every individual’s salary depending on their perceived value or “worth” is often clouded in secrecy and requires heavy negotiation.
- Rigid models are often automatic and use a grid to decide an employee’s salary at every stage of their career with little wiggle room, this system is perceived as fairer and is usually easily available to employees as reference.
- Adjustable grids that reflect industry standards are a solution to both and there are several options available such as Payfit, Alan, Shine, which all use different metrics to create their models.
Here is a peak at the Figures breakdown of salary grid options:
Here are our top takeaways from the compensation workshop with Virgile Raingeard of Figures.
- Structure it: It’s necessary to have structure and sense to your salary compensation policy especially as the company grows and scales. Your company must have a global view of industry standards to create relevant pay scales. Without these benchmarks, employees can be wildly over or under paid which could of course lead to a huge loss of money if you’re over paying salaries or a loss of talent if you’re underpaying. A framework provides structure, data and reason behind each step in the pay scale
- Team bonus > individual bonus According to Virgile, individual bonuses are out and team bonuses are in. Bonuses based on collective efforts boost teamwork, healthy collaboration and benefits for everyone.
- Transparency can be an option. Flexible and discreet pay scales can create feelings of mistrust and bias. If your organization can incorporate a transparent model; feedback has shown that employees will likely have more trust in the pay determination process. This has shown results for some companies but can’t be adapted to any culture so consider what works best for your business. And yes, pay grids still have some issues: If an employee thinks they’re worth more than what is possible on your pay scale, you might lose them. That’s why companies need to compare to real time data to adapt and adjust their pay grids and increase the maximums over time in order to stay competitive and not lose employees. Pick the best option for you.
- Data is imperative and without it, your employees may question you. Providing up-to-date data that shows the industry rate of each job lends credibility to your choices and helps employees understand the logic behind the numbers. These benchmarks are necessary because they don’t just provide the median salary, they also take into consideration the location, revenue, company size and cost of living. An employee in the distant outskirts of a small town or one that works remotely for a small company won’t have the same salary as an employee that works for a large company and lives in Paris or London.
The right compensation tool offers up-to-date market comparison and market rates for positions and experience levels effectively removing the long and strenuous negotiation process. These models have been developed to show relevant figures in relation to company size, location, experience, position and so much more, to help companies accurately assess and create their own grids. So whether it’s Figures, Payfit, Alan, Shine or any other model, using one of these solutions can save you time, money, stress and help you retain your valuable employees. That seems like a win to us.