What happens when you let employees pick how much they want to be paid? This company decided to find out.
- London-based betting startup Smarkets lets employees pick how much they want to get paid.
- The system works through social consensus, with each employees' salary information published within the company's internal wiki.
- There's pros and cons to the process, says Smarkets CEO Jason Trost, but ultimately, it works.
"It's not as cool as it sounds," says Jason Trost, CEO of London-based betting company Smarkets, when asked about his company's unusual policy to let employees pick how much they'd like to be paid.
"It's a crazy process," he continues. "But it does work."
It was about three years ago when Trost introduced a system at Smarkets for employees to pick their own salaries. The inspiration for this decision was largely based on what he describes as a companywide pursuit for greater transparency.
"I think this is the fairest system," he says. "It gives people a rightful sense that they are more in control of their job, more in control of their position."
At Smarkets, employee salaries aren't the result of conversations with upper management; instead, each person picks how much they'd like to be paid, and then their colleagues vote on whether or not they think they're worth it. Each employee's salary is published within an internal wiki, and they're invited to renegotiate their worth twice a year. (Originally, Smarkets reviewed salaries once a month, but Trost says that this process turned out to be "way too disruptive.")
If you ask for a substantial amount more than what your colleagues make, you might face your peers' disapproval.
"People scrutinize what you ask for within an internal court," says Trost. "Some people will think it's about right, and some people will say that it's too high or too low. Usually, they say it's too high. And then they get negative and positive feedback."
While employees can't veto someone else's salary entirely, they can attempt to block it. The system works largely off of social consensus; if you take issue with how much someone else is getting paid, you'll have to confront them about it directly.
Angeline Mulet-Marquisenie, a French engineer who has worked out of Smarkets's UK office for four years, said that the process has triggered hard conversations among employees. But, ultimately, she said that the system created a healthier environment.
After all, employees will talk about salary discrepancies, whether the information is public or not. "The public salary makes it much healthier," she said. "The fact that we know what everyone gets paid, and that there isn't that much inequality in how people are paid."
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But there's drawbacks to the system, as well. When the process was employed early on, Trost said that one employee, unhappy with a project he was assigned, doubled his pay as a matter of protest. In the end, the disgruntled employee settled for around $40,000 less, but, said Trost, "It was upsetting and a waste of time."
Mostly, however, this "pick your own pay" approach allows for greater flexibility. "I think it lets people be human," Trost said. "If someone needs to buy a house and they want a few thousand more...If you can give that to people, that's really nice."
Trost said he believes the system benefits people who might be good at their jobs but aren't strong negotiators. Additionally, "it decreases the incentive to brown-nose, and the incentive for office politics," he said. "It's much harder to schmooze the crowd when you know what everyone is getting paid."
But instituting the process in the first place wasn't easy. "It's really scary to be so transparent - scary for everyone," Trost said. "People don't want to know how much their colleagues make because they don't want to know if they're making more than them. Managers don't want to do it because they feel they'll lose control."
Is this the future of salary negotiating? Trost thinks it might be. "It's important for humanity to keep improving these social systems," he said. "I'm not just doing this because I think it's a good idea - I want Smarkets to be an example company."
As for whether or not he would recommend applying Smarkets's salary process to other companies, Trost said that it all depends on the company. For smaller, scrappier startups, it might just work. For larger, established companies, it would admittedly be more difficult.
"If the management has the courage to deal with the ups and downs, it could be worth it," he said. "But there might be a trade-off."