May 2008 - A better deal on pay

The Italian government created uproar last week when it published online the individual declared earnings of everyone in the working population.

The web site was over-loaded as people curious to know more about the earnings of their friends, relatives and colleagues logged-in in their thousands.

Twenty four hours later the site was suspended after a legal challenge from a privacy watchdog organisation. But by that time the nosiest of Italians had made the most of their brief window on the earnings list.

The decision to publish the information without notice, was one of the final acts of the outgoing centre-left government, creating deep discomfort for those Italians who are casual in their approach to paying tax.

Tax issues aside, why are we cagey about people knowing what we earn, and why are we so fascinated to learn the earnings of others?

A new piece of research by Hudson, the recruitment and talent management consultancy, reveals that many people would be quite willing to disclose their earnings if they thought it might get them a better deal.

Hudson carried out research among 1,000 UK professional workers that found that 60 per cent of those questioned would be happy to reveal their pay level if, by doing so, it might help them achieve pay parity with better paid colleagues.

A similar proportion – 62 per cent – thought that senior managers should be forced to disclose their earnings to the rest of the workforce. This already happens at board level in public companies, so I assume that people are seeking more disclosure among senior management jobs below board level.

Some 63 per cent of the sample – again about the same proportion – believed there was a need for more transparency in pay to help reduce the gap between women and men’s pay that in the UK, according to the Annual Survey of Hours and Earnings, was 17.2 per cent in 2007.

The gap between women's median hourly pay and men's last year was 12.6 per cent, compared with 12.8 per cent recorded in April 2006, so the gap is closing gradually.

The gender pay gap is an emotive subject, clouded by the differences of sex. If a woman, for example, has taken a two-year career-break, rejoining a business to work alongside a male colleague who joined the company at the same time as she did six years ago, could she expect to be on the same pay?

The male colleague would have had six years’ experience in the job while she had four. On the other hand, even with less experience, she might simply be better at the job. Should she be penalised for spending less time in the role?

Ultimately I think it is difficult to make pay levels entirely fair but I do agree with Andy Rogerson, chief executive of Hudson UK, who argues that employers could do more to create transparent pay policies that explain what people might expect to earn at different levels of a job.

On the other hand, pay spines have been historically clearer in the public sector and it doesn’t seem to have done much to create a more motivated workforce where the levels of absenteeism are generally higher than those in the private sector.

“I think people are interested in general terms in what senior people in organisations are paid because they will make a value judgement on whether the senior people are worth it or not,” says Rogerson. “I think this is particularly true of people’s immediate bosses where they can relate their own efforts to those of the people in charge.

One of the trickiest areas for assessing pay is in making judgements around talent and experience. It is not uncommon, for example, for an extremely talented younger employee to be paid much less than a more experienced colleague.

Sectors that thrive on visible talent, such as sport, tend to pay premiums for outstanding performance, whatever the experience of the player. Even in professional football, however, experience counts.

Young talented players such as Theo Walcott at Arsenal, for example cannot initially expect to earn the levels paid to more senior members of the squad. But it doesn’t take too many displays demonstrating a consistency of excellence, such as those of Cristiano Ronaldo of Manchester United, to take a player to the top of the earnings tree.

In football, however, pay inflation among the top players has been so steep, supported by earnings from televisions rights, that it has skewed the economics of the game, putting it in danger of moving too far away from its grass roots among the often working class supporters who watch every week from the terraces.

In that sense pay will continue to be divisive, creating unnatural barriers in human relations. Take talented working class youngsters from a warm family environment, expose them to the fickle interests of international and national media, and it does not take long before the less robust characters fall victim to the corrupting influences of fame.

Among the corrupting emotions is that of pay envy, one reason why I think employers would be wise to think carefully before posting lists of earnings on the office wall. It’s not just envy, either. Some employees will be embarrassed by disclosure of their inflated earnings and others, humiliated when they find how little they may be earning in comparison with their colleagues.

It is one thing to have a sense of where we are in the pecking order – and I think we all have a good idea where we stand – and quite another to see it plastered all over the office, or, in the Italian case, all over the internet.

Andy Rogerson says he is against disclosing individual pay rates in an organisation and doesn’t plan to do so at Hudson. “It would probably give us headaches with some of our consultants,” he says.

As far as his own pay goes, he says about two-fifths of it is variable, based on the performance of the business. “There are probably a number of people who report to me who earn more than me. Our best sales people will comfortably earn more than I earn but they’re doing a different job.

“As people get older, priorities change and I feel more in control of my job now than I was as a consultant.”

It should be clear from this that emotions around pay are relative to people’s individual circumstances. Rocking the boat too much around pay can lead to the kind of neurosis where a manager is reluctant to congratulate a good individual performance for fear that it could lead to a request for a pay rise or a promotion. That kind of fear is simply cowardice.

While Rogerson believes that full salary disclosure is inappropriate in most organisations, he argues that the underlying principle of ensuring fairness and transparency in the process of setting and reviewing salaries, is a good one. It’s not enough for companies to be fair on pay. They must be seen to be fair.

See also: A case for paying chief executives less and Pay and recognition