Ask HN: Why not make everyone's salary public?

29 points by aiurtourist 13 years ago | 25 comments

Say, hypothetically, I'm starting a new company that's extremely tech-heavy and I want to recruit the best engineers in the world. Fairness, recognition for effort, high hiring bar, the best equipment... all things that are important.

Why not go an extra step to be fair and make everyone's compensation public, including the founders? Why not open up the cap table to everyone, employed or potentially-employable? Then there's no question as to whether a candidate is getting a good deal.

What could possibly go wrong?

nyrulez 13 years ago |

1. People who think they are equivalent to someone getting higher pay (and there will always be plenty, regardless of the actual truth) will get demoralized and lose motivation. This can happen at any level, not just junior employees.

2. In a market where great talent is scarce, you will lose your ability to negotiate if the candidate has a better offer from your competitor. Sometimes bidding up makes sense.

3.More generally,this works less well in any field where there is a high possible variance in ability of folks with same credentials and experience. This is especially true in tech (only matters if you are in the market for top talent, not the median. Burger king doesn't need to care, but Facebook and Google can't survive with median talent). Without the ability to have that variance in compensation, you lose the ability to get top 25% folks, especially when your competitors are not restricted in the same way.

cjbprime 13 years ago |

I think Fog Creek does this: http://www.joelonsoftware.com/articles/fog0000000038.html

They also have "levels", with compensation tied to a level, so it looks like they've basically removed compensation negotiation from the company. You don't mention wanting to do that. If you do want to do that, something like Joel's setup sounds like it can work out fine.

If you don't want to remove the ability to let people negotiate their compensation, it sounds like you're setting yourself up for unhappy and jealous and resentful employees, because some of your employees will be much better negotiators than others.

jasonm23 13 years ago | |

To be fair, you'd just making a different set of people resentful, those who know they could negotiate a better deal, and they leave to start their own venture. If people feel like their wasting time, ie. getting paid less than they know they could earn, because they're folded into a salary level system, they're going to leave.

Frankly making salaries public knowledge is an egregious invasion of privacy, and a security risk.

cjbprime 13 years ago | | |

shrug I work at a US nonprofit, so the salaries of all our "key employees" are legally required to be public knowledge. As I understand it, this is also true of all H1-B recipients. You seem to be over-reacting.

crazygringo 13 years ago | |

It seems like having "levels" is another way to be able to negotiate.

A couple companies ago, I worked at a place where you employee "level" was public knowledge and tied to your job description, and determined your base salary level. (A, B, C, D, ...). Everyone got yearly raises roughly equivalent to inflation, etc. Yearly bonuses were based on the letter too.

But everyone had a (more secret) number after their letter, so you might be K5, which provided a lot of leeway for negotiating higher salaries, etc. So you'd know if you were in the same general band as another employee, but one of you might be making 25% more than the other.

S4M 13 years ago |

In Norway, the salaries are public. I have never lived there, but a colleague who has worked in Norway told me that it was a pain, not because your neighbours know your salary, but because people can target you commercially as they know how much you can afford. But apart from that, nobody cares.

runarb 13 years ago | |

I live in Norway. Its not the salaries per se that is public, but how much you pay in tax. But from that you can quite accurate estimate someones salaries. Your capital assets are also public.

This is nice reading for all kinds of scammers. Thus list are actively being analysed by banks and financial institutions when soliciting potential customers, and burglars are literally driving around with thus list when looking at houses to break into.

Until two years ago thus list was publicly available on the internet, but now you have to log in at a government run portal to search them. But everyone can still search anyone.

johnrgrace 13 years ago |

If you make salaries public you can't screw someone over on pay while making them feel great.

I worked at a small company a big company bought bought and moved from the finance group to the business development group and kept my salary the same, another business development person who had our key accounts was paid 60% of what I was because she had been promoted twice in a few years. Her salary was rising at double digits a year, but was still far under where her peers were. Getting 12-15% raises every year feels great, until you learn you make a lot less than others. The company was going to easily save over 150k in salary moving her up to the average over a period of years.

1123581321 13 years ago |

I think you can do it if you quantify everything that goes into the number and list that too. For example, if you hire top talent from Google and pay $30k/year more, you could note in the salary table that being from a prestigious company at that level is worth so much, and give a range. It would take work, but if you credit everything that could possibly explain the difference, you might satisfy people or at least explain to some exactly why they make less.

Or, and I prefer this, you could not disclose but pay everyone above market rate so they don't think about money, but not so high that it's an issue/fuels the desire for perpetually more.

alok-g 13 years ago |

PS: My comment relates to economy as a whole and not just implementation within a specific company.

Not having access to information is one of the things that makes an economy suboptimal, so overall, I think making salaries public should be good.

At least some of the issues in actually implementing the above is the impact of the transition. The economy becomes more optimal if everyone takes this new information to make intelligent decisions about themselves (and not be caught up with pure jealousy type of things), and the resulting shuffling balances the salaries out again according to people contribution/skill levels. During the transition however, a lot of messy things would happen, leading to short-term losses in the economy.

I generally hear that such transitions often have to be slowed down considerably and implemented in phases to not have negative spiraling effects on the economy, like the stock of an underpaying company going down considerably even if the company as such was doing good, or HR salaries overshooting because of the sudden overload that may come.

I highly welcomed glassdoor.com when it showed up.

scheff 13 years ago |

2 reasons I can think of.

1 - nobody would get a pay rise because "If I give you a pay rise, then I have to give everyone a pay rise" would be the mantra of managers in an established organisation. Anything less would create arguments.

2 - the ego of every employee. "Oh, right, just because he's an engineer, he's more important than me in marketing ... which one of us improves how much profit you generate?" ... and so for every other class of employee. even between engineers - "I'm sorry, but I'm better than that guy because of X, Y and Z (subjective reasons) and I should get paid more."

The extension of 2 is - "If I don't get paid the same as that guy then I'm not working nearly as hard as I have been ... I mean - what's the point?"

hjay 13 years ago |

From my limited understanding, it's not the best idea for companies who want to keep their costs to a minimum.

There are employees who are being underpaid and don't have many metrics to look at if they want a higher salary (win for the company). Then there's also that if companies make their employee's salaries public, there will be a more aggressive and obvious effort to poach employees from competition. Potential employees will benefit off of this war, while the companies will be just trying to one-up each other.

Not to say companies don't currently poach employees from competitors, but I think making those figures public would make that much more prevalent.

rm999 13 years ago |

I prefer the glassdoor approach: aggregate anonymized numbers so people get a good idea of the income and bonus distribution by company, job title, city, and experience. This really gives anyone a ton of useful information without drama.

maniacwhat 13 years ago | |

I think ideally this would be great, but in practice de-anonymization (by cross-referencing etc.) is extremely hard to prevent. So for the effort you may not even benefit from the bulk aggregation, only adding a layer of obscurity.

smartwater 13 years ago | | |

That sounds like the least creative way to use mathematics. They can de-anonymize till the cows come home for all I care. In the grand scheme of things, it doesn't matter at all. Plenty of salaries are made public for various reasons.

gamechangr 13 years ago |

It's hard to take this post serious??? There are soooo many reasons not to do that. I can assume you don't live in the valley or anywhere there is a shortage of developers.

Biggest one:

More expensive for the company initially and way less secure. Talk about telegraphing to your competition what it would take to poach your top employees!

You would end up with 80% of your staff believing they were underpaid (even if that was not even close to true--perspective is reality)

cybernomad99 13 years ago |

Interesting thought. I heard that Nordic countries like Fin, Swede.. make their government information public, not sure if they include salary information.. Transparency inspires trust. But in practice there is more to that.

Mz 13 years ago |

Given your remark about "socialist assholes," I will suggest that it is extremely hard to pursue "socialist" agendas and business in a heirarchical setting. Rock groups sometimes split the credits and the money evenly, not caring who actually wrote the lyrics, but they are generally not heirarchical. I don't know the answer to this question. I do know I would do more research than tossing the question out on hn if it were my company. You can't easily put the cat back in the bag if you try this and conclude it was a disaster.

coryl 13 years ago |

And if some employees don't want their salary to be shared?

aiurtourist 13 years ago | |

That's not my question, exactly. Inevitably, as the company grows, the probability of someone not joining because we're "socialist assholes" goes up. I want to know what's wrong other than sentiment.

aiurtourist 13 years ago |

Thank you all. Fascinating discussion.