5 min read

Salary Roulette

Job ads which feature salary bands have been shown to be more inclusive and result in a larger number of applicants. Salary transparency is a staff motivator and increases engagement, so why are most companies still keeping rates secret?

I have no idea if this is a peculiarly British 1970s moment in time thing or whether it’s still a global phenomenon but I distinctly remember a birthday party some time around 1979 where I was blindfolded, spun around, handed a cardboard tail with a drawing pin stuck into it, and then asked to move towards a drawing of a tailless donkey and attempt to reattach the missing appendage to the hapless beast. I didn’t win (unless tails grow out of necks) but I’m pretty certain donkey champ Craig Hinchcliffe either had x-ray vision or possessed Houdini-like eyelids capable of pushing his blindfold aside.

This tricky stab-in-the-dark game came to mind when I was studying some job ads recently (for research purposes, I’m not sure I could cut it as a full-time programmer these days) and thinking about how companies determine what salary to pay people. The ads, like most you encounter, were well written if rather staid. They all had decent job descriptions, bullet points of requirements, but crucially there was no indication of actual compensation unless you consider terms like “market rate” or “competitive salary” useful. Why is this?

One reason might be because the company doesn’t actually have a clear definition of salary bands internally. This is pretty common and it’s not necessarily a bad thing. The company need a programmer but they might not understand the market. You could apply, set out your demands and get the salary of your dreams because the employer hasn’t got the foggiest about market rates. Fine if you’re an overconfident white male, perhaps less so otherwise.

It’s more likely in 2021 that the company does have internal salary bands (or at least a budget the hiring manager has been told to stick to) but they think taking a more secretive approach is an advantage. If they let the candidates disclose what they want first then they can get away with offering less than they might have done. Clever, right?

Perhaps the employer thinks that putting bands on the job ad would prevent superstars from applying because the bands were not high enough? Keeping it vague might result in an inquisitive rock star dropping you a cheeky application on the off-chance, right? Maybe, but how many of these heroic applicants have you ever seen? Um, zero?

It might be considered risky to declare salary bands because the company could end up paying over the odds for someone and that would be wasteful. “Dammit Colin, if it wasn’t for your pesky public bands we could have gotten away with hiring this person for £5k less!” It might actually be funny if this myopic attitude wasn’t present in so many companies.

Finally, the absence of salaries might just be because the company is worried that their hard-working employees will figure out that they’re not actually being paid particular well and all that talk of “competitive salary” is a ruse. Employees will always chat to each other about salaries. Don’t say I didn’t warn you.

I think you get my point. There is simply no advantage for a company to try and shroud salary bands in secrecy. If you are, you’re doing it wrong and it’s no wonder you struggle to hire people or have team motivation issues.

Job ads with salary bands are more inclusive, will increase diversity, and result in more applicants!

Publishing a salary range is all well and good, but when you come to make an offer you have to nail down a specific salary. Some companies (especially those in the public sector) make this easier by having a single fixed salary for each grade. Most private companies don’t appear to do this nor talk about what they actually do. It’s something of a dark art (or a lottery) and definitely a topic for a future article.

When making an offer you shouldn’t necessarily pay people what they want as (a) it’s natural for an applicant to inflate their expectations during this negotiation period, and (b) it’s not unusual to ask people to reduce their current salary (e.g. for a change in sector or technology). Your interview process has to try and establish skill level relative to the band in question. It’s super-hard and so it can be safer to err on the side of caution here (and perhaps this is controversial?) but it’s way easier on everyone to raise salaries post-probation than it is to red flag people and see them get stuck and demoralised.

To summarise, rather than blindly pinning the salary on the proverbial donkey my advice for leaders in charge of hiring (especially those in high-growth companies) would be:

  • Publish your bands on your job ads. If you’re hiring specifically for a senior person, put only the senior band on there. If you’d happily take someone at staff or principal level then put the whole range on there, but make it clear what levels this covers.

  • Publish your bands internally. I know this is difficult (“we don’t want marketing executives finding out how much engineers get paid”) and a bit of a minefield, but if you look at it objectively there really isn’t any point in keeping it secret. Take control, talk about it and explain that you might make mistakes. People will value your openness.

  • Benchmark. Put in the effort and figure out where you want to sit against the competition. Forget FAANG and banking, they’re outliers. Use Radford (if you can afford it) and gather your own internal and anecdotal external data. You’ll quickly build up a picture and know what you need to do.

  • Review your bands annually. At least. The job market, especially in engineering, can move quickly and it’s hard to keep up. This makes budgeting a complete nightmare of course, so become best friends with your CFO and CEO. The cost of dealing with leavers is huge, and it’s far less expensive in the long run to pay the best salaries you can, as soon as you can.