Salary transparency reduces jealousy, discrimination and unexplained income differences.
Would you be ready to tell people at your workplace how much you are paid? This is the question technology company Vincit’s HR manager Saana Rossi poses to her audiences as she introduces her employer at various events. Only a few hands are raised. Rossi believes that people are interested in other people’s salaries, but they still have doubts about disclosing their own earnings. At Vincit things are different.
Vincit was founded in 2007. Five years later the company implemented an open salary model because employees wanted to know more about their salaries and how they were determined. According to Rossi, the creation of the model was a lengthy and experimental process that the employees participated in.
– The goal was to achieve transparent and more just salaries. There is no such thing as an objectively good salary model. However, from the perspective of HR, it would appear that employee satisfaction increased when they understood the grounds for their salaries, Rossi says.
Vincit holds a “salary week” once or twice a year. During salary week, the employer collects and publishes people’s salary information – initially to the entire company, but now the information is published within each business unit. Each employee gets to decide whether they want the size of their salary published, but according to Rossi many want to do it. In the early years of the model some 85 – 93 % of employees chose to share their salary information. As the company has grown, this share has slightly diminished. Last year 50 – 85 % of employees, depending on the unit, chose to disclose their information.
At Vincit, employees may suggest salary raises to each other.
After the information is made public, employees may suggest raises to each other. These raises can be justified by the value the person has produced in a client project or for their colleagues. You may also ask for a raise for yourself.
Supervisors and HR go through the suggestions and decide on raises.
– Some employees are keen to ask for raises for themselves and some are not, even if they deserved one. It is the responsibility of the supervisors and us, the HR department, to ensure that the quiet ones also receive raises.
“Talk about your salary as you would about the weather”
At many workplaces, salaries are still taboo – a topic to be steered clear from. According to TEK’s latest labour market survey, which was published this year, as many as 62 % of respondents said that they did not discuss their own salaries at the workplace at all. A third of respondents said they discussed salaries with their colleagues. When the survey presented the statement that everybody knew each other’s salaries at the workplace, 88 % disagreed with it.
– Young people discuss salaries with their colleagues more often than older employees. When analysed by sector, people discuss their own salaries the most in the IT, auditing and consulting sectors and in the university world, says TEK’s salary researcher Tuunia Keränen.
According to Keränen, people find salaries interesting, but there are a lot of doubts and uncertainty surrounding the issue. TEK’s work life specialist Sirkku Pohja says that even some employee representatives believe that one is not allowed talk about one’s salary.
– Salary secrecy requires that you keep your friend’s salary to yourself, but you can disclose your own salary, Pohja clarifies.
However, not too many people do. Keränen says that salaries are discussed very little at workplaces in general. According to the labour market survey, the most common salary-related topics are general raises (64 %) and the general salary level (56 %).
62 % of respondents said that they did not discuss their own salaries at the workplace at all.
– In Finland, salary is seen as a measure of human worth, and people don’t dare to talk about it. People are also ashamed of having a high salary. They believe it is a source of jealousy, says Keränen.
TEK encourages everyone to talk about their salaries on a number level with their co-workers and supervisors. This helps dissolve the mysticism surrounding salaries and breaks the taboo. Talking about actual euros makes the salary issue more concrete and better highlights salary differences, both justified and unjustified, than discussion on the general level. When people talk about their salaries in numbers, it makes them aware of their own salary and its development, or lack thereof. In addition to euros, people should also discuss the difficulty and content of the work tasks.
Talking about actual euros makes the salary issue more concrete and better highlights salary differences, both justified and unjustified.
– When people know how their own salary and the salary of their co-worker is formed, and when the justifications are sound, there is no room for jealousy. This improves occupational well-being. You should also talk about salaries with friends working for competitors, Pohja says.
People who do the same work must be paid the same, but justified differences may exist – as long as the criteria are objective. These are the difficulty of the work task and the person’s work performance, availability, education, work experience and suitability. Age and sex are invalid justifications. These criteria should be made transparent at the workplace. The measures of productivity should also be made clear to everyone.
– Salaries are mystified for no good reason. One’s salary should be as mundane a topic as weather, Pohja says.
Keränen and Pohja praise how active young people are in discussing salaries.
– The old guard, myself included, gives their all to their work. The young people are smarter. They place career and salary on par with life outside of work. Salary must be paid on the basis of expertise, not external factors. This is a healthy revolution in working life, says Pohja.
Transparency requires trust
Vincit’s salary model is bursting at the seams. When Vincit launched its open salary model in 2012, the company employed 70 people – now the number of employees exceeds 500.
– Transparency is based on trust. As the company grows, people no longer know each other and new employees are especially shy to share their salary information. Our growth has also brought us new work roles and new justifications for salary payment. I believe that our open salary model will be beneficial when we strive to hire our next 100 employees this year, says Vincit’s Saana Rossi.
Vincit continues to hold salary weeks, but instead of publishing salaries company wide, last year the grown company published the information by business unit. The company’s units range in size from Oulu’s 30 employees to over 200 in Tampere. The business units get to decide how to distribute their salary budget. Some allocated raises evenly while other units distributed theirs on the basis of collected feedback.
– In order to evaluate your own or someone else’s performance, you need to choose the right reference group. Software developers understand each other’s work, but now we also have a lot of other experts, and in different cities no less.
The growing company continuously develops its salary model. Rossi puts her feelers out to see whether employees wish to share their salary information with the entire organisation or only with a smaller group, and whether the disclosed data should be precise or at the level of role-specific salary ranges.
Transparency is not the easy way. It requires a look in the mirror.
– Transparency is not the easy way. It requires a look in the mirror. When salaries are made public, discrepancies are discovered. This is not nice, but that is why we are doing this.
What is salary transparency?
- Employer talks to employees about salary policy.
- Employee knows the grounds for salary payment.
- Everyone knows what they can do to increase their salary.
- Different levels: salaries may be disclosed on a personal or job task basis, or as a salary range.
- In the public sector, salaries are public, but this is rare in the private sector.
Means to reach salary transparency
- What kind of salary transparency suits your company culture: will you publish everyone’s salaries down to the last euro, or will you opt for a job task -specific average?
- If you disclose salaries to the entire company, explain the requirement level for each role. Explain the justifications and reasons for the salary. Remember that everyone gets to decide whether to make their salary public or not.
- Test your salary model with a small group.
- Monitor the development of salaries in your sector.
- Be prepared to modify the salary model.
- Correct the uncovered salary discrepancies.
These tips were provided by Vincit’s Saana Rossi.
Getting rid of salary discrimination and unexplained salary differences
Making salaries public is only one form of salary transparency. According to TEK’s Sirkku Pohja, salary transparency means that salary policies are discussed at workplaces and everyone knows how salaries are formed and what they can do to increase theirs.
TEK’s labour market survey demonstrated that salary transparency divides opinions and is not well known as a concept. A third of respondents were happy with the state of salary transparency at their workplace, while 39 % said that they were not. Slightly under a third could not say one way or another. YLE published similar findings in early February. It commissioned a survey from market research company Taloustutkimus, which found that 43 % of Finns want their salaries to be public, 39 % opposed the idea and 19 % could not say.
– Studies have demonstrated that salary transparency increases trust, motivation and productivity. The employee must know what they are paid for and what they can do to get a raise. If nothing else, the benefit to the employer is that by adhering to salary transparency and correcting unjustified salary discrepancies the employer can demonstrate corporate social responsibility to shareholders and business partners, Pohja says.
A quarter of employees never discuss their salaries with a supervisor (TEK's Labour market survey 2020).
In TEK’s labour market survey, 66 % of respondents stated that they trust their employer in salary-related matters and 77 % knew how they could get more information about their salary. TEK members want TEK to study salaries and promote salary transparency through legislation. TEK is a proponent of salary transparency because it weeds out salary discrimination and unexplained salary differences.
– We must not think that because legislation prohibits salary discrimination the matter is solved. There is language-based salary discrimination in the technology sector. Even though English has become more common as a working language, many places still necessitate that everyone knows Finnish. Family leave or graduating in a recession may also push an employee into a salary trap. I do not believe that employers leave anyone in this trap out of spite. These are blind spots that can be removed through open discussion and by conducting a salary survey, says Pohja.
When colleagues know each other’s salaries, it is easier for employees to ask their supervisor why they are being paid differently than their co-worker. 44 % of the respondents to the labour market survey had brought up or were meaning to bring up their salary with their supervisor within a year. A quarter never discussed their salary with their supervisor.
– You should talk about your salary. There is nothing embarrassing about it! For help, you can turn to TEK’s salary counselling and Salary Surveyor, or the employee representative at your workplace, Tuunia Keränen says to sum up.
But do the shoemaker’s children go barefoot? What is the state of salary transparency at TEK?
– The salaries of our employees are based on reference data gained from the Palkkavaaka salary system and sector-specific statistics. Use of the salary system requires that the work tasks are rated according to how demanding they are. These ratings and the level of salary transparency are agreed upon together with staff representatives, says TEK’s HR manager Kati Johansson.
– The employee is made aware of the rating of their work role and how their salary places on reference graphs, but we do not publish any individual’s salary information. There is some sharing of salary information between colleagues, which is a good thing.
By the power of law
The current administration aims to increase salary transparency via legislation. The goal is to remove unjustified salary discrimination and salary differences by means such as improving employees’ rights to knowledge about their salary. The deadline for legislative preparation by a tripartite work group assigned by the Ministry of Social Affairs and Health to work on the matter is set for Midsummer.
The EU Commission issued a directive proposal for salary transparency in early March. The directive aims for transparency and equality in salaries and improved legal protection for those facing wage discrimination. One of the proposals is that the employer should already state the starting salary or salary range in the job ad, or before the interview. If the European Parliament and the Council of Europe accept the proposal, member countries have two years to make it a part of their legislation.
Check out TEK's salary services, statistics and the Salary Surveyor tool at www.tek.fi/en/salaries.