The third installment in our Paying Differently Series
The term “pay transparency” has become more prevalent due to increasing global legislation mandating more visibility. This means that organizations are inevitably faced with the following questions: Where do they want to be on the pay transparency spectrum and what are the accompanying risks and/or rewards with their approach?
We were able to take a sneak peek at how high tech companies responded to a soon-to-be-published survey on pay transparency. Although the majority see compliance as a key driver, others are seeing the broader, less apparent benefits that pay transparency presents. These include:
- Strengthening the employer brand
- Enhancing employee satisfaction
- Improving the recruiting process
- Increasing perceptions of fair pay
In this article, we explore how three high tech companies are leaning towards greater pay transparency, what motivated their stance, and what they intend to accomplish with a more transparent approach.
Take a closer look at where your organization stands in pay transparency and how you can put a plan in motion.
Airbnb’s pay transparency approach
Airbnb’s pay transparency journey started in the United Sates in 2022 when they included hiring ranges in job postings. More recently, Airbnb decided to share employees’ total target direct compensation, which means providing each employee with actual details about three specific compensation elements for their individual role:
- Base pay range
- Bonus target
- Annual performance equity target
This is just the start. They plan to continue to explore and offer more transparency on their compensation practices to their employees.
Airbnb cited the motivation for their pay transparency as three-fold.
- Fits into their cultural values
- Bolsters their DEI commitments
- Is part of their pay equity strategy
Airbnb believes that offering more transparency than what is minimally required by legislation will build a culture of trust and accountability with their employees. It will create more consistency in their new hire compensation packages, foster an inclusive and equitable workplace, and demonstrate their commitment to pay equity.
Buffer’s radical take on pay transparency
Next, let’s take a look at Buffer, a social media management company that adopted an even more radical pay transparency approach. Their stance has gained attention from other organizations and raises the question: Why are they choosing to be so transparent about pay? Buffer has embedded transparency holistically and intentionally in their organization.
On the Buffer company website, they have a Transparent Salaries section that breaks down what transparency means to Buffer and what outcomes and behaviors they aspire to drive. Here are a few highlights of their broad transparency stance and what they hope it will accomplish.
- Buffer publishes each employee’s pay on their website and explains how they arrived at an employee’s compensation, including the compensation market data sources they’ve used to build out their salary formula. Buffer believes that sharing this level of information will build trust with employees, hold the company accountable, and serve as a resource in the industry for other companies that are looking to do the same.
- Buffer shares their finances and company metrics, company spend on perks and benefits, and visibility into their workflow and product roadmap. By releasing growth, revenue, and profit numbers, they’re hoping to enable employees to think with much better context, see how their work fits into the grand scheme of things, and promote ownership of their role in the company’s success.
Overall, Buffer’s perspective is that if an employee can understand the “why” behind the company’s actions and associate their individual efforts with business outcomes, it will increase employee engagement and drive business growth.
This might be a giant leap for your company, but is there anything you can learn from Buffer?
Netflix’s changing levels of pay transparency
Netflix has historically been known to take a more disruptive, less conventional approach to their HR policies, which includes embracing transparency.
In his book, “No Rules Rules,” Netflix’s Co-Chief Executive Reed Hastings champions transparency, drawing on how it’s directly linked to Netflix’s culture. Mr. Hastings states that “For our employees, transparency has become the biggest symbol of how much we trust them to act responsibly.”
Back in 2014, they began by letting employees choose how much of their compensation would comprise equity. At one point, Netflix had implemented an open-salary policy, where senior level employees could see each other’s pay.
Netflix emphasizes that what drives this culture of transparency is that they “get better outcomes when employees have the information and freedom to make decisions for themselves.” Netflix openly focuses on trusting people not policies, rewarding candor, and avoiding a standard playbook approach.
Though Netflix has received attention with its unorthodox approach to compensation practices, they did recently remove the ability for director-level employees to view the pay of other director-level colleagues. The impetus for this change was the increasing number of directors at Netflix who appeared to be questioning their compensation as they compared it with that of other colleagues with a similar level or job title.
Putting your pay transparency plan in motion
Regardless of the level of pay transparency an organization chooses or whether it’s a higher degree of transparency like the tech company examples above, you will need to ensure your company is in a credible and confident position to be transparent about pay and you should be conscious of common pitfalls.
Implementing a pay transparency plan can start with a few immediate action items, including:
- Understand the unique challenges the company and the employees face — According to our soon-to-be-published Mercer high tech pay transparency survey, tech companies report the top common challenges around pay transparency include maintaining an understanding of the legislation, lack of employee understanding of compensation practices, lack of manager capabilities, and getting leaders on board. Your organization can conduct a pay transparency readiness assessment and use employee listening techniques to understand the unique challenges and conditions that lie ahead. The results will provide a more accurate pulse on how employees currently understand and perceive their pay at your organization.
- Establish a pay transparency strategy and plan in advance — Pay transparency is a journey and not a superficial exercise. Employees are your main audience. It’s important to understand what a pay transparency strategy actually entails and to give yourself time to course correct as you learn what does and does not land well with your employees. Part of this journey will likely involve gathering feedback along the way, implementing robust change management, and adjusting to ensure you’re driving what you intended with your pay transparency approach.
- Being practical when making commitments — Setting lofty expectations that sound good-natured conceptually but have no basis in reality can erode the trust of employees and candidates and cause more disruption. When employees perceive their pay as fair, it reduces turnover and enhances employee engagement. Companies should expect that employees will hold them accountable for how they say compensation works at their company. Employees will ask themselves, “Does what I’m being paid make sense and match the narrative my company is giving me?” Be specific about how you will demonstrate your commitment and determine how you will share the aspects of this journey that fit the cultural identity of your organization.
If you’re having trouble figuring out where to start, the experts at Mercer are ready to help. You can reach us at surveys@mercer.com or 866-434-2120.
About the Authors
Muriel Taing, Principal
Muriel is a consultant in Mercer’s Career business in San Francisco, CA. She advises clients in pay transparency, global compensation plan design and administration, incentive design work, total rewards strategy, job architecture, and change management. She has experience working in corporate and consulting capacities across different industries such as high tech, healthcare, and not-for-profit.
Daisy Lane, Senior Analyst
Daisy is a Senior Analyst in Mercer’s Career business in Seattle, WA. Daisy has experience in compensation philosophy design, developing incentive plans, job architecture, and total rewards strategies. .
iAt Netflix, Directors are Senior Managers below the C-suite level and Vice President roles.