The Death of Salary Negotiations — Part I
Why we completely removed salary negotiations at elbstack.
Life isn’t fair. We all know that. Unless you’re winning, most of life might seem unfair to you. But at the same time, it’s essential for all of us to feel treated reasonably. This is especially important when it comes down to our salary.
Eventually, we want to be paid the same for the same performance. And yet so many other factors influence our salary. Factors that we cannot always affect personally: our self-confidence, our negotiating skills and, unfortunately, our gender.
It’s painful to learn our colleagues earn far more than we do for the same job. This is one of the reasons most companies keep their employee salaries secret.
And yet, we at elbstack decided right from the start to make our salaries transparent internally.
Who are we to remove salary negotiations?
We are a software engineering & design company based in Hamburg and have been doing things differently for more than three years now.
Some people would describe us as an agency. But we feel like more than that. For example, we leave it to each employee to decide how much time per week they want to invest in customer projects, and how many hours they want to spend into own ideas, products or self-improvement.
Because we do a lot of remote work, we organize one bigger team retreat for two weeks once a year. This year, for example, we enjoyed the beautiful city of Lisbon with the help of the SurfOffice.
Until the beginning of 2018, our salaries were to some extent based on professional experience and negotiation skills. This created a situation where two team members did the same work for the same client but had a difference in salary of about €10,000 a year — just because of different work experiences.
It’s painful to learn our colleagues earn far more than we do for the same job.
As a result, the painful feeling of being mistreated gradually evolved within the team. We talked a lot about our situation and how possible solutions could look like.
We experiment and learn along the way.
Then, in January 2018, we finally began experimenting with a payment system which embraced our team’s needs. It was understandable and comprehensible for everyone — and at the same time enabled us to stick to our value of transparency.
The experiment was voluntary for everyone and lasted six months. Luckily, everyone participated although there was skepticism among some of us.
This wasn’t a huge surprise because the new payment system demanded everyone to assume responsibility for their salary through client work — something which only those people knew who worked as a freelancer before.
In June 2018, on our team retreat in Lisbon, we collectively decided whether we wanted to continue along this path or not.
Every single person loved it. It was rewarding, challenged us to leave our comfort zones and to take on a more entrepreneurial mindset. At the same time, we experienced a tremendous amount of freedom about our own work.
Today, with our new transparent salary model, every employee who works for a client can choose their salary to a certain extent. Their salary now depends on the number of hours they want to work for our clients. It also ensures a base pay of €40,000 per year.
At the same time, there are no more unfair salary negotiations. Just a fair, understandable formula that obliges us to pay everyone the same salary for the same work.
Our salaries are about how much of our freedom we are willing to exchange for money.
We just recently noticed, talking about our salary with colleagues, friends, family or even strangers is not about “how good I negotiated” anymore. It’s about how much of our freedom we are willing to exchange for money.
This is the first of three articles about how we calculate salaries at elbstack. In the coming blog posts, we will explain the created algorithm in detail. We will also describe the benefits and challenges we face with our salary model.
