Want a raise or a higher job offer? Conventional wisdom suggests you need to negotiate for it. But over the past few years, some tech firms—most notably Reddit—have indicated a refusal to haggle over money with job candidates and employees.
Do non-negotiable, fixed salaries beget equality and fairness, or do they short-change high achievers and encourage turnover? Several tech leaders shared their thoughts on this controversial topic.
Proponents claim their non-negotiable compensation framework removes bias, discrimination and politics from compensation decisions, and ensures that professionals performing equal work receive equal pay.
“It doesn’t seem fair to pay someone more just because they’re a better negotiator,” said Deena Gianoncelli, chief people officer for Jet, an online wholesale shopping club that determines compensation for its 350 employees by assigning them to one of 10 possible levels. “And the idea of tying someone’s compensation to what they were paid in the past instead of their market value doesn’t seem fair, either.”
Having preset salaries could bring welcome relief from the irrational practices that some employers use to set wages and maintain an edge during negotiations. Examples include asking candidates to “name their price” before granting an interview or playing “keep away” with compensation data until the tail end of the hiring process.
“It’s been my experience that employees are forced to go out and get another offer to confirm their market value and receive a counteroffer,” said Mei Lu, a former software engineer and co-founder and CEO of Geekology, a training firm for tech professionals and recruiters. “That’s a horrible system.”
Although studies show that money isn’t necessarily a prime motivator when it comes to work, discovering that a peer is paid significantly more can be demotivating and erode employee-employer trust. Some employers deal with this potential issue by allowing all employees to see their colleagues’ salaries, which they feel quells animosity and invites open conversations about compensation.
“We strive to make our compensation framework as fair as possible,” said Bhavin Parikh, CEO and co-founder of Magoosh, a test tutoring and preparation firm. He explained that his 20 employees are paid equally based on their level. When market rates go up, everyone at that level receives an equal raise.
Even the most ardent supporters of non-negotiable, transparent pay admit that they haven’t figured everything out. Are all tech employees really equal? Do some contribute more to the bottom and top lines than others? Companies that have embraced fixed (and open) salaries are still searching for the best way to incorporate performance-based pay and incentives into their compensation frameworks.
“It’s naïve and idealistic to think that you can pay everyone the same,” said Ville Lehtonen, CEO at LabMinds, a developer of fully automated liquid solution production systems. “As soon as you install a level-based pay system, everyone’s going to ask what they have to do to get to the next level.”
Parikh’s employees can increase their salaries by “leveling up” as they acquire new skills or take on additional responsibilities—but “leveling up,” he conceded, is just another term for negotiating a higher salary.
Though startups often grant equity to unify and incentivize teams, it’s hard to say how much an employee’s shares might be worth if and when their startup firm finally goes public. There’s always the potential, of course, for two employees to be paid the same amount in salary, only to find their respective compensation is vastly different in the wake of an acquisition or IPO that pays out their equity, simply because one of them joined the startup sooner (and thus gained more shares).
Even salary openness comes with its own set of drawbacks; Lehtonen contends that publishing employees’ salaries encourages poaching. Certainly Google’s managers seem to have frowned on the idea of salary openness.
Given the pros and cons, you’re probably wondering whether your ability to negotiate should determine whether you apply to a particular firm for work. “Don’t shoot for perfect when you’re weighing your options,” advised Lu. “Consider the money and the career opportunities and make the most feasible improvement that you can.”