Closing the Gender Pay Gap Is Simple: Stop Negotiating
We have no pay gap. In my company, we make no distinction between genders because our men and women are paid the same. In fact, everyone is paid the same. I have found this is the easiest way to be transparent as a company. It is also the most effective way to prevent all kinds of human biases that distort the pay scales as a result of a common, but silly, time-wasting ritual: the salary negotiation.
Do people with certain ethnical backgrounds get paid less in your company? Not where I work, because we pay everyone the same. Are people from middle class or upper class positions paid more than those from lower classes in society? Not on our team, because we pay everyone equally.
“That’s impossible!” I hear you thinking. “This may work for one team, but it doesn’t scale. You cannot have a company of 10,000 people who all earn the same salaries.”
Ten friends may agree to be compensated equally for their share of a project they work on together, but this approach will never work for a group of people the size of a city. At some point, distinctions must be made. The question is: How?
Actually, it’s not that difficult. Each time you think there is a good reason to differentiate between people, you should define the criteria, formulate a rule, and apply it to everyone.
Do you think employees in Italy should earn less than workers in Sweden because of their lower cost of living? No problem. Define regional criteria, create some location-dependent rules, and apply them transparently. Should senior developers earn more than junior developers? OK, explain what makes someone a senior, create a rule for seniority, and apply the rule to everyone. Do you want to assign financial value to age, tenure, diplomas or achievements? Why not? Define. Formulate. Apply. And always do so transparently.
It is even possible to include performance measures into people’s monthly compensation. My team uses a merit money system (peer-to-peer crediting) to calculate regular bonuses. But I’m sure you can devise some other mechanisms that work for your company, as long as the criteria, rules and consequences are transparent and fair for everyone.
The result is a salary formula. A simple (or complicated) set of rules that defines how much people are paid depending on measurable and easy-to-identify variables. We do it. Buffer does it. And many other organizations are considering it.
I have done many compensation exercises in my workshops around the world and people always had great discussions about rules for age, education, experience, performance, etc. Their conclusion was always: there is no single best solution for creating salary formulas. What is “fair” depends on the people you work with and the organizational culture you want to have as a business owner. However, I have never seen anyone in my workshops assign different financial values to genders, ethnical groups, or social classes.
When a discussion about the gender gap in salaries comes up, I often see the suggestion that organizations should “help women become better negotiators” or “educate people on biases”. But that doesn’t make much sense to me. It’s like trying to address the problem of traffic jams with either slower or faster cars. Better negotiations are not going to make much difference. The negotiations themselves are the issue!
The gender pay gap problem is too complex to fix with better negotiations. It’s much easier to resolve the entire matter with a salary formula. Nobody I know thinks it’s fair that women get paid less than men for the same kind of work (all other factors being equal). So it’s better to just stop performing the silly negotiation ritual that allows this gender gap to emerge in the first place.