Best of Working It: Is it time to be open about pay?

This is an audio transcript of the Working It podcast episode — Best of Working It: Is it time to be open about pay?

Isabel Berwick
Hello and welcome to Working It with me, Isabel Berwick. Over the summer, I’m taking a break. So we’re replaying some of our greatest hits episodes and some of my favourites. And here’s one of our very first episodes about pay transparency and how open should we be with colleagues about how much we earn. We recorded this at the end of last year, and since then, the cost of living has been rocketing worldwide. And people, I think, are starting to talk a lot more about pay and how much we need. So I’d be really interested to hear from you about what you think about this episode now. Salaries and whether or not they’re fair have gained a lot of press in recent years. From the UK, where the gender pay gap between men’s and women’s full-time wages is currently almost 8 per cent, to the US, where chief executives’ total pay is 351 times greater than that of an average worker. In 1965, CEOs earned just 13 times more than workers. So what I wanted to find out is how much should we talk about what we earn, and what are the pitfalls of being honest? The answer to any question about fairness and pay tends to be “it’s complicated” and “one size doesn’t fit all”. But for Joel Gascoigne, who’s chief executive of Buffer, a company that helps businesses build their presence on social media, that argument seemed lazy.

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Joel Gascoigne
We started with internal transparency, and as part of that we needed to put a formula in place of how the salaries would work. And that was a big step. And then about six months later, we decided, let’s take this one step further and a big step further by making it completely public information. And it’s been that way ever since.

Isabel Berwick
I’m really interested because salaries are really taboo in most companies. I mean, here at the FT, I do tell people what I earn, but I’m quite unusual. So why do you think we have such a sort of ingrained reluctance to talk about what we earn or even just to be open in any way about it culturally?

Joel Gascoigne
I think it’s probably just something where, over time, it’s been seen as it could be a disadvantage to share something in that way. So it’s maybe kind of that knowledge is power type of thing and just not sharing that has, maybe over the course of history, been tended to be seen as the most advantageous thing. But I think I’ve noticed and, you know, through conversations with different people in the team and even beyond Buffer talking about salary transparency, that there’s a lot of issues that come with not having those open discussions as well, especially within your family, but also, of course, across a company. And even for the company, those things that will get out of hand in terms of discrepancies and disparity between salaries and compensation overall, when you’re not choosing to take an open approach like this.

Isabel Berwick
The way we don’t talk about money at work, when it’s actually the main reason why we’re there in the first place, is sort of extraordinary when you think about it. So to explore the complex and secret world of salaries and Joel’s much simpler vision, I’m joined by my colleague Brooke Masters. She’s the FT’s chief business commentator so she knows all about pay, especially the crazy sums people get at the top of business. And also talking of salaries, Brooke was my boss for a long time. She twice gave me a bonus, so I’m a big fan. Brooke, not many companies are open about what staff and leaders earn. Why do you think that is? What’s the main reason culturally and historically?

Brooke Masters
Well, I think there is a sense knowledge is power and management wants to keep the power to themselves. I think also our experience with CEO pay is that, possibly, disclosure leads to runaway pay, because one of the things that’s happened is the more disclosure there has been about CEO pay, the more other CEOs go to their boards and say, “But look, I’m making less than Charlie at Company B and I wanna make above average for my sector and everybody’s average keeps moving up”. And that’s part of how you get from that very low ratio in the sixties to the really extraordinary ratio we have now.

Isabel Berwick
So even when we’re being transparent about CEO pay, it’s actually only helping the CEOs.

Brooke Masters
Yes, it is. And the pay consultants who help boards decide how much to pay make their money because I think they get some share of it. I’m not entirely clear how they’re paid, but it’s clearly led to higher CEO pay.

Isabel Berwick
That’s extraordinary. And we’ve got some examples there of CEOs who found out they earn less and then argue for more.

Brooke Masters
Yeah.

Isabel Berwick
In a wider context, is this happening in companies? When people find out what their peers are earning and demand more, is that generally a positive thing? I mean, from the staff point of view, it can be, but it can also lead to resentments, can’t it?

Brooke Masters
It can lead to resentments. And really, interestingly, there’s a paper that came out in June from the National Bureau of Economic Research that says actually transparency leads to lower salaries on average because the big outliers — the ones who get paid a lot more than everyone else and bring up the average — companies are less willing to admit to that. And so they are actually trimming those in. It doesn’t lead to more pay for normal people. It leads to less pay for high flyers, which is really interesting to me. So it’s a bit of “Be careful what you ask for”. On the other hand, average pay is heavily influenced by that top end, like those weird way-out-of-control people. So maybe preventing them from getting paid so much does help the rest of us.

Isabel Berwick
And I know for Joel Gascoigne at Buffer, this push for salary transparency, it wasn’t just about money, which is what we’ve been discussing here, Brooke, but it was about being transparent generally.

Joel Gascoigne
I mean, salary transparency emerged from a greater value of transparency overall for us, because we’d already seen a number of situations where just being more open about how we’re doing as a company — our finances and company metrics and things — had been really beneficial for us and just in opening up conversations and getting advice from other people on things. And so that was one of the key reasons that we decided to take this extra step with salary transparency. You know, you really have to choose to be part of this company because at the end of the day, it’s very simple. Your salary will be put up on the website. But I think there’s something greater than just that, that you have to make a decision around in terms of just choosing to even work in a much more open way. We’re not trying to do things in secret that then are big surprises to anyone else in the team.

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Isabel Berwick
I love this idea of the openness, which is the absolute opposite of how we talk about pay or don’t talk about pay. And there’s this massive sort of psychological component to it, which I think is somewhere around shame and fear. What do you think is the main driving factor for people not talking about pay ever?

Brooke Masters
I think talking about money is taboo in many situations. I mean, when you go home for the holidays, people don’t talk about like, well, how much do you make? So I think there is this whole feeling that money is not something that polite people talk about. And I think that extends to the workplace.

Isabel Berwick
So not just British people then?

Brooke Masters
No, I think it’s worse here. I mean, everyone here is so polite. But Americans are weird about money, too.

Isabel Berwick
But I know that in the States, people are made to sign contracts sometimes saying they won’t disclose to colleagues what they earn, which I think is illegal in some states now. But it’s interesting that that’s a thing, isn’t it? Has that been around for a long time?

Brooke Masters
I think the laws are new, partly because there has been a move towards greater transparency and sharing among workers. The laws are trying to address gender and racial pay gaps by forcing transparency, and therefore the laws are trying to prevent companies from exploiting that. I think it’s part of this broader sense that the way the world works and has always worked tends to favour some people. And if you’re in the in-group, you don’t need greater transparency because the in-group will look after you. And so that it is people who are on the margins who need the transparency.

Isabel Berwick
And do you think there’s a generational aspect to this? I’ve been really interested by these spreadsheet sharing campaigns in a lot of creative industries, actually, where people anonymously write down what their salaries are in different companies, and that a lot of that is driven by millennials and now Gen Z. Do you think we’re gonna come to a different way of talking about pay in 10 or 20 years when our kids, for example, are senior in the workforce?

Brooke Masters
I don’t know, to be honest. I think the sharing of the spreadsheets comes a little bit out of the, do you remember in the MeToo movement? There were these spreadsheets where people would write down names and things that had happened to them, and that got shared around. So I think there is this whole tendency towards shared spreadsheets and disclosure in this way. Whether it will continue to happen when they are not the people who are at the bottom of the system but are the ones benefiting from the system, that I’m less clear on.

Isabel Berwick
Maybe every generation has to find its own way of talking about pay. And another thing I’m quite concerned about, I mean, Joel is very open, very transparent. But can it sometimes become a kind of manipulative or power play situation? You know, what if you find out the person next to you is earning much less than you? I guess that could become a toxic culture.

Brooke Masters
I think so. Particularly actually in creative industries and people industries where people may move from a job where they’ve had a lot of responsibility to one where they’re more individual. And you could easily find somebody who’s rising, coming next to somebody who’s sort of moving sideways because the rising person will be feel exploited, you know, because they are clearly getting paid less. But how are you gonna get the other person to take a new job if they have to take a pay cut to take it? So I do think there are some very weird dynamics. You know, for example, at the FT, if somebody’s had a really good job for a really long time, often they’ll try to ease them into something else to give another person a chance to have the really fun, cool job of, say, bureau chief someplace really interesting. And if that bureau chief has to take a pay cut to move in order to be fair, they’ll never move. And then that job will never be available to a younger generation of people.

Isabel Berwick
But one of the things I do wonder about is performance difference. If you have sets pay scales, do you still have the ability to reward staff members for great work? For example, if an algorithm pegs you on the same salary as a colleague who isn’t putting as much in, that’s going to sting. And that’s something I asked Joel about.

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Isabel Berwick
Is there any sort of separate bonus system or differentiation? Do you have annual awards or is everything just laid out as is on the website?

Joel Gascoigne
We only recently have introduced a performance-based bonus at only at the leadership level, but that is fully transparent as well. So anything we do related to compensation, we’re committed to being completely transparent about. We have had also a annual profit share bonus and that is basically we’ve been profitable since about mid 2016, which is also unusual for a tech company these days. But ever since then we’ve been committed to sharing a portion of those profits each year with the whole team. And so we have a simple formula for that. It basically incorporates your tenure and your seniority by using your salary actually as a benchmark for that. So a portion of it is based on what your salary level is, and then a portion of it is actually just split completely equally to kind of reflect that this is really a team effort. We do have equity as well, so we have stock options. We have formula for that and that’s all transparent as well.

Isabel Berwick
Yeah, because we should say there’s a calculator on the website, isn’t there, that you can sort of work out.

Joel Gascoigne
Yeah.

Isabel Berwick
What a salary might be. So even it’s even transparent to people coming on to the website.

Joel Gascoigne
Yeah, absolutely. People can just go to buffer.com/salaries and go there and see all the salaries of people in the team, and you can even filter by roles and location. And then we have a calculator that we created as well. And you know, I have a lot of dreams of getting some of that into our job listings, which I think is one of the key areas that’s something that most other companies do. We’ve always listed the salary range within a job listing, but I’d love to have that calculator in there.

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Isabel Berwick
That’s really interesting. He was talking about salary listings. That’s become a very hot topic too, hasn’t it? When people first go to jobs, it used to be not the dumb thing to list the salary. Are we starting to see more of that even at senior levels?

Brooke Masters
I think we’re seeing a lot of banding where, you know, the salary range for this job will be here in this particular range. I haven’t seen that much for the very senior roles. It’s much more, you know, depends what you’ve been paid. And you will see, that when a company gets a new CEO or CFO, the new person is usually but not always paid less than the person who’s leaving, because the idea is they’ll rise through time. And so it’s not clearly disclosed what they’re going to pay, although once the contract is signed, you know, for very senior roles in senior decision makers at banks and public companies, it is disclosed you have to say what you’re paying people. And in the US, for example, the top five earners in a company, even if it’s not the CEO, have to disclose.

Isabel Berwick
And once you’re actually in the company and locked in, people just start to become obsessed with how to get a pay rise. I think that’s one of the hottest topics we cover in Work and Careers. And we ran a feature last week which I’ll put a link to the show notes and that did brilliantly online. So many people read it. Brooke, have you got any tips on negotiating pay from your career or in your work?

Brooke Masters
What I would say is be very clear why you are asking for the amount you want. You know, not just like I deserve a pay rise, but I deserve a pay rise because I did these three things and I think they were above and beyond what I’ve done before; not just I’m getting a new job, I should get a pay raise. Unless I’m getting a new job and this will involve my working a lot longer hours or having a lot more responsibility. I think it’s really important to tie that you want more money to why it is you deserve it and what you’ve either accomplished or are going to accomplish when you do it. One thing that I find very interesting is they always say, you know, women don’t ask for enough pay rises. I think that’s been said so many times that women actually ask for a lot of pay rises and often ask for them without justifying them as effectively. And I think that can be problematic. It’s not that you shouldn’t ask for pay rises, but you should pick your moments and really tie them to what you’re doing. Probably, and I have to say I believe this, that, you know, the system still looks after some of the favoured sons because they’re usually favoured sons and they don’t have to ask for pay rises. They just get them. But if you’re in the next group of people where you’re hard-working and you’re good, but they’re not handing you money all the time, you don’t ask for a pay raise every year. You do have to pick your spots and don’t ask for a big pay raise when you haven’t done anything special that you’re just going to look like a whiner.

Isabel Berwick
So less entitlement and more data perhaps would be there?

Brooke Masters
Well, yeah, I think that’s a good way to do it. More data, more persuasion.

Isabel Berwick
And I think one of the big arguments for more transparency has been around the gender pay gap and ethnicity pay gap. Have you seen any evidence that reporting these gaps has changed anything about salaries?

Brooke Masters
Well, as they’ve started to report in the UK, the gaps in most companies have gotten smaller year to year. This last year with Covid I think was an exception but that’s such a massive year, it’s hard to know what’s really going on. There was, I remember when the first gender pay gaps were reported, I was in management at the FT. I was, as you say, your boss. Although now I’m just a writer. There was an enormous amount of scrabbling around, oh, my goodness, we look terrible. What are we going to do? You know, how do we affect this? So I do think reporting forced the companies to confront what was going on within the company and at the FT as at most places, I don’t think it’s straight up like, you know, we have a man and a woman doing the same job. Let’s pay one more, one less. It’s more that women, like I did, spent . . . I spent, you know, 14 years working four days a week and not pushing very hard for raises because I was, frankly, too tired. And so people who are the same age as me make more than me.

Isabel Berwick
Yeah, I think that’s a really good point I found. I have to say, the FT was not alone. In fact, there was a huge number of companies that had to look to themselves and their pay scales after these things became public, weren’t there?

Brooke Masters
Absolutely. And what was interesting in industries where they’ve always said, oh, we have such a hard time retaining women, it’s so bad, you know, of course we have a gender pay gap. You would look within the industry, there would be big changes. I mean, you know, clearly banking, the men were getting paid much more than the women. But some banks, it was a lot worse than other banks. And so that had forced some of these companies to actually think about what are we doing? What are we doing wrong?

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Isabel Berwick
I’ve always been a big fan of being open about what we earn, and it’s really interesting to hear from Joel about his reasoning for transparency. But talking to Brooke has made me hesitate, because I think there’s a lot of room for anger, misery and potentially fewer pay rises if we go fully transparent. So it’s not an open and shut case at all. And I guess there’s a reason that this is a big taboo not only at work, but in our lives. But when we all know what our bosses earn, will there be anything left to gossip about?

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Isabel Berwick
Many thanks to Joel Gascoigne and Brooke Masters for taking part in this episode, which first aired in November 2021. I’ll link to an FT article on how to get a pay rise in the show notes and to a piece about Buffer’s pay transparency. Please do get in touch with us. We want to hear from you. We’re at workingit@ft.com or with me @isabelberwick on Twitter. Working It is produced by Novel for the Financial Times. With thanks to the producer Anna Sinfield and executive producer Joe Wheeler. With research from Amalia Swartland and mixing from Alex Portfelix. We have editorial direction from the FT’s Renée Kaplan and Manuela Saragosa and production support from Persis Love. Thanks for listening.

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