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24 Jan 2020
by Dawn Lewis

Tech disruptor Smarkets on self-setting salaries and the lessons big business can learn

Allowing employees to set their own pay is not a new idea. In fact, many companies – often in the tech sector – have been doing this for years, to great effect. And although this is not something that many larger organisations are able to contemplate introducing, there are lessons that can be learned from having such a level of openness.

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Susana Pinto, HR manager at Smarkets, a peer-to-peer trading platform for sporting and political events, spoke to us about the benefits her organisation gets from such an open and transparent culture, and how some of their practices could be replicated in more traditionally structured businesses.

Salary setting

The ethos behind Smarkets stems from its founder and CEO Jason Trost, who believes that a flat business structure allows it to be agile and transparent – keeping the company grounded.

“We can see each other’s salaries, we can see how the company spends the money,” explains Pinto. “We can see things like [the cost of] training courses and the leadership retreat.”

The CFO also provides regular updates on how the company is performing. Pinto says that this leads to high levels of trust and morale.

By making salaries and other business information available, fairness becomes a major part of the salary negotiation. For pay rise requests, employees have to provide a business case that benchmarks against their performance, the market rate and peer feedback, as well as taking into account the financial state of the company. These requests are then reviewed by their peers and HR, and can be seen by all employees. Anyone can contest the request if they do not feel it is fair.

Pinto explains that a lot of this process comes down to trust, and that the business has to do the work behind it, for instance “when we give a higher salary to someone, we have make it clear as to why”.

Due diligence

Despite salary requests being reviewed and approved by peer groups, Pinto says that they still have to be mindful of ethical decision making to ensure that pay levels are fair.

“There is a bit of diligence the company has to do,” she says. “There’s still a responsibility for the organisation to assess whether it is fair.”

Particularly in the tech industry, Pinto explains that there are a lot of international workers who come to the UK, who will take a lower salary due to their own ignorance. So they have to combat this by explaining to them the cost of living in London and what the local market rates are.

What employees think

Smarkets is based in the disruptive tech industry where Pinto feels it is easy to introduce change and it’s absolutely normal to do things differently. As such, employees have really taken to the transparent financial approach the business has chosen.

“Employees have reacted well [to self-setting salaries] and found it socially progressive – they see the company going above and beyond to create a fair process. And this has positives in terms of trust,” says Pinto.

Other businesses, such as Makers, Corporate Rebels and Keytoe, which also have a transparent and open approach to pay setting, highlight positives in terms of trust and the level of understanding that employees gain about the business.

Takeaways for big business

Self-setting salaries are not going to work in all organisations, but many could be more open about how their reward processes work. Here are our top takeaways for making pay decisions more transparent:

  • Offer contextual information – for Smarkets a key part of its culture is giving employees complete access to the organisation’s finances. Without this contextual information it can be hard for employees to understand pay decisions. Full discloser may not be an option, but many organisations could better communicate the financial state of the business and what it means for pay.
  • Smarkets publishes details to its employees on how salaries are agreed. Larger businesses could also be more open about their reward processes by explaining how salary decisions are made and on what basis; is it market rate, length of service, experience etc. Details about what happens when someone asks for a pay rise or what due diligence is undertaken to ensure rewards are fair, could also be made available.
  • There’s usually room for greater transparency – look at your gender pay gap and CEO pay ratio reporting and ask whether you’re being as open as you could be about these? Be honest to employees about areas that need improvement and how you plan to address them.
  • Finally, communicate more to build a greater level of visibility and trust around remuneration.

The author is Dawn Lewis, content editor at REBA.