Buffer, a social media startup, just released public information about every employee’s salary, from CEO ($158,800) to its newest hires in the lowest paid positions (currently $70,000 is the lowest salary). It also published its “salary formula,” in which it takes a base salary for each position and multiplies it by seniority, experience, and location.
As part of the announcement, the company explained that it made this move to stay committed to one of its core values, “Default to Transparency,” and explained, “Recently, we also made the decision to apply our ideas around transparency to compensation. We hope this might help other companies think about how to decide salaries, and will open us up to feedback from the community.” It also explained that it believes transparency in all processes builds trust and breaks down barriers within its team.
Another important effect, for Buffer or any company that decided to make compensation totally public, could be to reduce racial and gender discrimination in pay. Most companies aren’t like Buffer; about half of all workers are either discouraged or outright banned from discussing their pay with colleagues. This makes it very difficult for women or other workers who suspect pay discrimination to find out whether they are being unfairly paid less than their peers. Lilly Ledbetter, of Lilly Ledbetter Fair Pay Act fame, didn’t find out she was being paid less than her male coworkers until 19 years after she started working for Goodyear and only thanks to an anonymous note.
Not all women are the victims of discrimination, but women on the whole still make just 77 cents for every dollar a man makes, and a portion of that gap can’t be explained by other factors. Even without clear transparency, nearly a third of women say they would be paid more if they were a man and 13 percent say they were denied a raise because of their gender.
The picture is even worse for people of color: African-American men make 73 percent of what white men make and hispanic men make 61 percent, while women of color make even less: black women make 64 percent of white men’s wages and hispanic women make just 54 percent.
Buffer’s transparency makes it easy to see not only that many of its female employees are paid less than other men, but also why. Mary, an entry-level employee, makes less than Adam in the same position because of their different locations. Michelle, who appears to be one of the more senior engineers, still makes less than Andy and Colin, other senior engineers. Carolyn, CHO, is the only woman in the C-suite but also the lowest paid, partially because her base salary is based off the lowest paid position. The lowest paid employee at Buffer is also woman. The company is transparent in all of these calculations, but employees could still question whether these gender differences are actually fair.
Another way to tackle salary secrecy, however, would be for Congress to pass the Paycheck Fairness Act, which would ban the practice of salary secrecy.