NewPay? Please what? Is that now the same as pay 4.0? Or does this have something to do with mindfulness and new values? When I first saw Hashtag NewPay and the accompanying call to the blog parade, I thought:”Nope, the cup passed you by. Is just enough else to do. Salary talks are coming up. I can’t deal with trivialities.” But then I read the really worth reading first articles on the topic. And I started to think a little more about what we actually deserve? In all the senses of the word. The difference between earnings, earning and receiving has already been discussed in detail. But how do I classify my own salary and the salary entitlements of my colleagues? And who actually determines a “fair salary”? And now we have the salad (as we say in Germany). Once again I’m investing valuable time into an unpaid blog article.
Who actually defines “fair salary”?
For me personally, the topic of payment is interesting from two perspectives. On the one hand, of course, I think – often involuntarily – about what I earn, what I need and what I want to get. On the other hand, I have regularly been involved in salary negotiations in my role in the company. Different worlds and ideas meet here. Many different aspects need to be reconciled. Salary level of our company, salary expectations of our employees, market benchmarks, training, location and expected added value for the company. Since these aspects rarely coincide completely, compromises have to be made. And compromises, which everyone who has had to organize a birthday party at one time or another, seldom lead to the fact that everyone involved is enthusiastic.
From a manager’s perspective, this is highly unsatisfactory for me. On the one hand, I’d like to say to every employee,”Hey, sure, you get what you want, plus 20% and extra vacation upstairs.” This makes no sense from an economic and social point of view. Simply because the company cannot afford it and because some employees have very different ideas about what their performance is worth, even if, objectively speaking, they might even do exactly the same thing. And then you start thinking about yourself as an executive. How much experience does the employee have, what kind of education, is there family, where does he or she live? Speaking of him or her, for me personally, this is one of the few aspects that does not play a decisive role in determining salaries and an internal analysis has shown that fortunately there are no gender-specific differences in the rest of our company either.
Regardless of this, the current system with fixed salaries, bonus-relevant targets and annual salary negotiations repeatedly leads to dissatisfaction on the part of all those involved. Now there are, of course, quite interesting concepts of self-determination, where salaries are made transparent or determined by the employees themselves. These are remarkable models, but they always assume that all employees have all the relevant information they need to make an economically responsible decision. But we’re not there yet.
Can salary be “fair” at all?
Let’s take a step back instead. Salary is never a relaxed topic. Why actually? Because salary defines what we are worth to the employer? Because very few people really know their market value? Because market value is actually something that has little to do with your own job? Because that’s what causes frustration? Because you earn less than you earn and everyone else always earns more? Because the criteria for the final salary decision, no matter how well-founded, always sound arbitrary anyway?
Yes, we have a market-standard salary scale and within these ranks you will earn 58,340 € (fictitious figure, no real salary) due to your education, your experience, your negotiating skills, your hair color and my personal performance in the recreational kick against the boys of Foodora.
This often leads to short-term satisfaction, if at all. On the contrary, over two thirds of Germans are dissatisfied with their salaries. From a purely objective point of view, it does not seem plausible to me that the majority of Germans are not adequately remunerated for their services. Of course, objectively speaking, this does not matter for subjective perception. But there’s an error in the system somewhere.
Do you know what you’re worth?
In my opinion, one of the reasons for this discrepancy is that most people are not able to assess their own contribution to the value creation of a company.Simply because they lack concrete information for this. Because some of this information does not even exist. In the Middle Ages it was quite simple. If the employee of a retailer sold ten sacks of flour a day with a profit of one dime per sack, then the retailer could not pay him a salary of 20 dimes. When a designer drafts a design for a customer meeting with us, it is very difficult to measure the concrete added value. The measurement criteria for teachers, social workers or politicians are certainly even more unclear.
Inga Höltmann has recently called in her blog parade contribution for the topic of salaries to finally be brought out into the limelight. That seems to me to be a perfectly reasonable demand. Transparency is the only way to ensure comparability and fairness. The question of “fairness” is, in my opinion, one of the most difficult. And without transparency perhaps never really solvable. Because when it comes to fairness, most people often only ask:”What do I think is fair? And what else should one ask as long as there are no possibilities for comparison. Honestly, however, a completely fair pay would have to consider many more aspects.
What is this blog article worth
Let’s take this blog article here. What would be fair pay? I myself have put in about 6 hours of my time. Not everything is typing on the laptop, but the mental performance is added. In addition, this text also includes over 15 years of experience as a freelancer, entrepreneur, employee, employee and manager in the product development sector. They also have a value.
On the other hand, there is the question: Who benefits from this article? At what point is value created here that would justify remuneration? And should be held responsible for this payment. Is it CO: X? I mean, by this article I also get a little bit of attention to the blog parade. Or are they the readers? Ideally, they will benefit from this article or at least be entertained. Or is it the whole of society because the ideas here are so revolutionary that they bring about a lasting positive change for everyone (well, that’s probably a bit too far-reaching in this case, but there have been blog articles that would be appropriate). It is also necessary to take into account certain dependencies. Is my performance entirely voluntary or was I forced to do so, for example because I am threatened with sanctions for failing to perform. Taking all this into account, the following conclusion could be reached:
Remuneration can be described as fair if the service provider voluntarily decides to provide the service in exchange for an amount of money that a service recipient is willing to pay for the specific value added that concerns him/her.
That sounds more complicated than it is. For example, if I want someone to write me a blog article about #NewPay, I could specify that it’s worth 10€. If someone now finds himself/herself willingly accepting this assignment (because he/she is very interested in this topic, for example), then this is a fair reward. It doesn’t make sense to offer more money when it’s not worth more to me. However, it also makes no sense to accept the order if I have to or would like to invest the time elsewhere. The attentive reader will now find that, according to this definition, the sacred concept of “Equal money for equal performance” has become very unstable. In fact, a particular service does not create the same value for all recipients and therefore cannot be remunerated equally in a model that is fair for all parties involved.
Personally, for example, I would write a 1,500-word article for a non-profit organization for a much smaller amount of money than for an international tech company. Even if effort and content were exactly the same.
Unequal Pay for equal Efforts
As a freelancer you already have a lot of levers in your hand. However, the economic pressure is somewhat distorting voluntary action. At this point I would therefore like to put forward an idea for discussion as to how this interplay of ideas could be practically resolved within a company. The idea is not fully developed and has never been tested. But it makes sense in my head:
All employees, no matter which level, no matter what kind of activity, receive the same basic salary of 1.500€. For many people, this would be at least equivalent to securing their livelihood. Quasi a kind of unconditional basic income. For this basic salary, only very limited tasks have to be performed. For example, attendance requirement one day a week, completion of administrative tasks, a few training measures. Depending on what makes sense in the respective industry. This would ensure that employees are guaranteed at least a certain degree of voluntariness when deciding whether they wish to provide additional benefits.
In addition, employees now have very flexible opportunities to participate directly in the company’s value creation. Every company has internal and external tasks. In other words, external value creation (e. g. the development of a software application) and internal value creation in order to enable external value creation (e. g. invoicing, personnel support, etc.). The external value added is, similar to the profit with a sack of flour, quite well measurable, as a customer pays for it. The internal tasks can be given a concrete value in this respect, since one only has to compare what the company would be prepared to pay if it were to purchase the services on the market.
Every employee can now take on external and internal tasks. Each task is confronted with a concrete value defined by the service recipient. For example, if the company receives an order to create a website, a company-wide margin is retained (which is used to finance internal tasks similar to a tax) and the remainder is advertised as an offer to employees. All employees who consider this offer to be fair (because they are particularly good at creating websites, for example, and therefore only need a short time to complete the task) can now voluntarily accept this offer.
In this way, each employee can fill up his or her own salary account in a completely transparent and fair manner. If you get above the €1,500 base salary, the additional amount will be paid out. If you stay permanently underneath it, you have to sit down together, because then there are apparently no fair tasks for both sides within the company for a longer period of time.
New rules for co-determination and effectiveness
What would that lead to? Every employee at any seniority level could decide for herself how much money she wants to earn. There would be no reason to feel underpaid because the added value is transparent. It would also mean that all tasks that do not add value would have to be given value by the company. As a result, these tasks are likely to be much more strongly questioned than before. Suddenly they cost something.
Employees would have the opportunity to react very concretely to their own life situation. You could spend two months working on one or more projects with full commitment. We are also happy to do this day and night and on weekends if the result, in which the employee participates fully, justifies the effort. And then you could take a longer break with long weekends and only a minimum of effort, because you have earned a financial buffer. In my opinion, time is the new money, as I had already explained in detail elsewhere.
But employees who want stronger structures would also find room in the system. The way in which the service is provided would be relatively flexible, since it was only a question of whether the corresponding service was provided on time and in the desired quality. So if anyone prefers 9-to-5… don’t force yourself.
On the other hand, it also leads to more uncertainty. Economic responsibility is much more widely shared among all employees. The company only takes care of the subsistence level for the time being. If the company does not meet market needs and fewer orders come in, employees have to either work on their own or make do with lower salaries. However, this automatically gives you more self-responsible time.
More flexibility vs. more security
Ultimately, this model would on the one hand provide much more flexibility for companies and employees. Employees are less tied to rigid corporate guidelines and can concentrate fully on creating value. Companies do not have any financial burdens that are not either covered by value added or actively priced in via internal tasks.
On the other hand, some advantages of being an employee are lost. Employees suddenly have to consider whether the company creates real added value. Whether the customers are satisfied and pay for the services provided. At the beginning of the month it is not clear how much money will end up in the account at the end of the month. But for this there are now many intermediate stages between “We can just as easily adapt to the employee’s needs”.
Most likely, however, it would mean that you would no longer feel unfairly paid, since you yourself decide which projects you accept on which terms and conditions and how much effort you put into fulfilling them. If one is not satisfied with the price-performance ratio, then the order will not be processed unless the internal clients adapt their offer. And you get a very direct market feedback, if the corresponding performance is actually not worth any more. Each individual task is thus confronted with concrete internal or external added value. For the customer or for the company. We are already there when it comes to effectiveness. You can be sure that you are not just wasting your time in this way, but that someone actually attaches a concrete value to the service provided. And at a level that is fair for both sides.
I myself have been working on this idea for quite some time, because I consider the unconditional basic income to be a very exciting concept, but I do not believe that something comparable will be introduced across the board in the foreseeable future. That is why I have tried to find arguments in favour of why it would make sense to implement a comparable model in the free economy. I have the feeling that companies in the waters of New Work (and now perhaps also #NewPay) are opening up to such a discussion. My 7 theses on the New Economy are quasi crying out for a new salary model. Hence the question: Does anyone have any experience with it? Or solid arguments why such a model should not work? I’d really like to know and maybe try it sometime.
Latest posts by Gregor Ilg (see all)
- The (first) annual review of 2018 – Looking back at the future - 25. January 2018
- Fair salary for all! – A #NewPay thought experiment - 25. October 2017
- NewWork, WhyWork, iWork – Application for Employee of the Month - 23. April 2017