If pay transparency is the goal it might be better to publish each employee’s pay. That way, at least it’s possible to connect the reasons why someone is being paid more or less (like experience, or extra responsibilities, etc). Few people are excited about that, though.
I’ve set pay for engineers at several companies. In my experience, employee pay levels have a very broad range with the max and min overlapping significantly between levels, making the levels not very useful for pay analysis. This is because of 2 things:
1) “Equal work” is mostly a myth in creative jobs like software. It’s an idea that we’ve inherited from factory work where the job types were highly regimented. In software and other creative fields, if you ask two different people to solve the same problem you’re likely to get two very different solutions. Across hundreds of people, the best solution might be 10x better than the average. That’s a big difference, and not like factory work at all. If someone is doing 5x-10x better work, and your company can make use of the surplus, should that person be more highly payed? What if your competitor is willing to pay more than you are currently paying her? Would you match? And what if matching would push up the top of the pay band?
2) Usually, the goal is to match the market pay (although this is sometimes laundered through various levels of abstractions like years of experience, degrees, etc). Levels can rarely be made detailed enough to model the full complexity of the market. Let’s say you have two mid-level engineers with 5 years of experience and similar work histories. One builds web UI and another is a security engineer. These two people are in very different markets. Security expertise is hard to hire right now (and has been for the last 10 years) and therefore pays 1.3x - 2x. But your company only has one level for “mid-level engineer.” You have the option of underpaying the security engineer, and thus expecting to lose them to another company willing to pay market rate, or pay them market rate yourself but have pay levels with enormous ranges.
Comments
If pay transparency is the goal it might be better to publish each employee’s pay. That way, at least it’s possible to connect the reasons why someone is being paid more or less (like experience, or extra responsibilities, etc). Few people are excited about that, though.
I’ve set pay for engineers at several companies. In my experience, employee pay levels have a very broad range with the max and min overlapping significantly between levels, making the levels not very useful for pay analysis. This is because of 2 things:
1) “Equal work” is mostly a myth in creative jobs like software. It’s an idea that we’ve inherited from factory work where the job types were highly regimented. In software and other creative fields, if you ask two different people to solve the same problem you’re likely to get two very different solutions. Across hundreds of people, the best solution might be 10x better than the average. That’s a big difference, and not like factory work at all. If someone is doing 5x-10x better work, and your company can make use of the surplus, should that person be more highly payed? What if your competitor is willing to pay more than you are currently paying her? Would you match? And what if matching would push up the top of the pay band?
2) Usually, the goal is to match the market pay (although this is sometimes laundered through various levels of abstractions like years of experience, degrees, etc). Levels can rarely be made detailed enough to model the full complexity of the market. Let’s say you have two mid-level engineers with 5 years of experience and similar work histories. One builds web UI and another is a security engineer. These two people are in very different markets. Security expertise is hard to hire right now (and has been for the last 10 years) and therefore pays 1.3x - 2x. But your company only has one level for “mid-level engineer.” You have the option of underpaying the security engineer, and thus expecting to lose them to another company willing to pay market rate, or pay them market rate yourself but have pay levels with enormous ranges.