A $70,000 fatal attraction?

Pay is a shallow reward
Glenn Close Fatal Attraction to show excitement and mistake

What seems like an attractive proposition on the surface might not be such a good deal after all.

Last week saw Dan Price, CEO of Gravity Payments, reduce his salary to $70,000.  He used the money to fund pay increases for employees to the same amount.  The story is big in the press, his employees are happy, and job applicants have rocketed.

High pay levels make jobs attractive and make employees feel pretty good too.  At least for a while that is.   High pay alone is a shallow reward.  Once the initial excitement fades away, it can reveal a nasty shock.

All business leaders should take action if their lowest paid workers are not receiving a wage that is sufficient to enjoy a basic standard of living.  That is right.  GSK and Burberry are most recent examples of this.  But to increase the lowest paid to such an extent that it erodes the differential for higher skilled workers will cause problems.

This is because it's the relative fairness of pay that’s important.  It’s not about the actual amount of pay.  It’s about feeling your pay is fair compared to those around you.  So if you have more experience, higher skills, and contribute more, you expect to be paid more. Pay progression aligned to individual progression is a good thing. 

Of course, for some companies, high pay at all levels may be a great differentiator.  But the impact will be eroded as others follow and the market rate increases.  And then there’s the ‘golden handcuff’ where unhappy employees just can’t afford to leave.

Aside from the obvious publicity, I can’t help wondering why Dan Price didn’t adopt a more thoughtful, longer term, approach.  By making a more moderate pay adjustment and rewarding performance through sharing profits perhaps.  Or by funding skills development that would increase an individuals’ worth in the external market as well as within Gravity.

Or perhaps upskilling managers.  After all, there's a reason why neuroscientists (Lieberman) tells us 2/3 of employees would prefer a better boss to a pay rise.

OK.  Using a bunny boiler as an analogy is extreme.  But it’s worrying just how many people are attracted by high pay and see this as evidence of a great place to work without looking any deeper.  The reality is that they may regret making this assumption and be unhappy at work.  That’s an unhealthy and unsustainable situation to be in. 

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