What’s fairer? That two people doing the same job receive the same pay or, if one works harder, and gets more done, the wages of the more industrious person are higher? The answers to these questions go to the heart of employee relations.
Treating everyone equally does not mean equalising everyone. People have different levels of capabilities and motivation and, as a result, some work harder and achieve more. It is unfair if those people are paid the same as colleagues in the same role who achieves less, just as it is unfair on the rest of the team if a lazy employee doesn’t pull their weight but is nevertheless rewarded the same.
The pernicious outcome of treating everyone the same is that performance becomes a race to the bottom where everyone is exploring how little you can get away with and still draw your monthly salary. It poisons the company’s culture and damages employee relations by forcing managers and workers into confrontation. In conditions where pay genuinely reflects performance you will still find people that are lazy and lack motivation but the confrontation is at an individual level and there’s no incentive for anyone else to copy them.
Everyone should of course be treated in the same way. Having policies that are implemented uniformly guards against exploitation and favouritism by managers of their weaker and less powerful employees. It is the responsibility of management to ensure their policies are implemented fairly and the responsibility of HR to see that they do. It is the unions’ job to hold companies to account if they don’t. However, it is only fair to reward people according to the work they do, in which case it is perfectly possible for two people doing the same job to be treated equally but have two different salaries.
Some unions and HR departments, particularly in the public sector, have a concept of fairness that emphases uniformity of outcome rather than equality of process. Several times, I’ve been in the situation of treating an employee in a way that I thought was unfair but, when I questioned it, was told ‘That’s what’s been agreed with the union / employee representatives’.
The obvious examples are where everyone gets the same % pay rise, regardless of performance; and where everyone on the same grade gets the precisely the same pay. But there are other examples. For instance, people with the longest service receiving higher pay and better conditions, such as longer holidays. Why? This isn’t fair on new employees. But unions and employee reps never seem to care so much about new employees so much as their older colleagues. It’s nice to recognise loyalty in long service awards, but I’ve never understood why two people working equally as hard should be paid differently just because one has been doing the same job for longer.
Are all employees equal? When I started work in a professional accountancy firm there were a few senior managers who, if they found themselves at the back of a queue to use the photocopier used to turn around and say in a loud voice to no one in particular that their charge-out rate was higher than that of the people in front of him. They thought their commercial value to the firm conferred queue jumping rights but common courtesy says they were wrong. Everyone else in that queue thought their work was just as important to them as his was to him; certainly no one ever stood aside. It is for similar egalitarian reasons that the executive dining room and parking spot are a thing of the past, or should be.
The most egregious example of unfair pay is chief executives and senior managers, who after all are just employees, being rewarded as if they were the risk-taking entrepreneurial owners of the business. This abuse of power has yet to be checked by the political and legal system. No employee’s performance justifies these rewards and no healthy system of corporate governance should allow rent-extraction of this kind to take place.
Perhaps the culture of corporate governance is changing. In the news this week is Persimmon who paid out £75m to their chief executive, and then parted company with him and the non-executives that had designed the uncapped bonus scheme. This person’s case demonstrates that in addition to the failures mentioned, his was also a failure of personal honour and integrity.