The matter of money: putting wages into a formula

Review

We are committed to innovation. In the course of abolishing management and transitioning to a self-organized company, we could not avoid subjecting our wage policy to a critical review.

Just over a year ago, setting salaries was still part of the management's remit. They enjoyed complete freedom of decision within this framework. Salaries were set individually based on the profile of potential new employees and experience. Of course, the negotiating skills of an applicant could influence remuneration.

It became apparent that this approach could be perceived as unfair, even arbitrary, by employees. In order to rectify this situation, last year I set about iteratively developing a new salary concept together with the People working group. What followed was a long process with many clarifications and extremely interesting personal discussions. It quickly became clear that the salary calculation should be clear, value-driven, comprehensible and transparent be. Wages should non-negotiable as this would affect the aforementioned properties.

The formula

It was clear that we had to move away from a system in which individuals or authorized groups of people set salaries. A solution in which all employees decide on the level of individual salaries was also quickly off the table due to its scalability. What we needed was a standardized formula that could be applied at any time. Building on the knowledge gained, we developed a salary calculation based on four cornerstones. The formula is used to calculate a monthly gross wage (annual payroll = 13 monthly wages).

Solid basis

Eine marktkonforme Basis im Bezug auf den Grundlohn ist unabdingbar. Diese Basis entspricht bei uns einem Gehalt von CHF 5'500.-

Experience

Experienced specialists bring the company forward with their many years of knowledge. One year of experience corresponds to CHF 150. The maximum number of years that can be credited is ten years.

Qualification

We want a be an attractive employer for highly qualified employees. Degrees such as a higher technical college (CHF 200.-), a Bachelor's degree (CHF 750.-) or a Master's degree (CHF 1,000.-) within the specialist field are remunerated accordingly. There is also an additional CHF 200 for a completed apprenticeship.

Company loyalty

Loyale Mitarbeitende sind in unseren Augen das höchste Gut eines Unternehmens. Pro Arbeitsjahr bei smartive erhöht sich dessen Lohn um CHF 175.-

Family allowances

Our smartive family is growing and growing. And that doesn't just mean our direct employees. In order to meet our social obligations towards moms and dads, we pay an extra CHF 300 per child (up to the age of six). This enables and encourages family-friendly part-time work without major financial losses.

Responsibility

As a self-organized company, we are particularly reliant on our employees actively taking on responsibility. That is why we have defined areas of responsibility, such as project manager, and included them in the salary formula at CHF 150 each.

We drew the conclusion at the beginning of this year. And we realized that this additional salary component is impractical - primarily because the allocation is subjective. We believe that each person contributes equally to success and that responsibility is therefore shared by all employees. This realization led us to the decision to remove the areas of responsibility from the formula.

The example shows: The salary formula is not irrevocable. It should live and be adapted to new circumstances - in an agile and uncomplicated way.

The result

We are proud of our new salary model, which has the following key points:

• We live transparency. Every employee knows the composition of their salary. All our salaries are openly visible internally.
• We consider our wage policy to be so fair that we even communicate it openly to the outside world. We have nothing to hide on the market.
• The Ratio between the lowest and highest wage within our company is 1.6. We are particularly proud of this extremely small pay gap.

We make No distinctions between specialist areaswhen it comes to salary. Our formula applies equally to a software developer, a UX designer and a project manager. Every employee contributes equally to the success of the company. And you can easily calculate this using the salary calculator.

One More Thing: Bonus

The discussion about wage policy immediately led to a discussion about bonus policy. Just as with traditional salary setting, the problem here is that bonuses are often paid on the basis of subjective opinions. It has always been clear to us (and this opinion also manifested itself in discussions with employees) that monetary incentives are not part of our company DNA. Rather, the incentive for our employees to achieve great things is a functioning corporate culture.

As a consequence of these insights, we agreed that bonuses evenly be paid to all employees (in proportion to their annual salary).

The total amount paid out as a bonus corresponds to 55 % of the profit made in the previous year. In good economic years, this can quickly lead to a bonus payment amounting to several months' wages.

Lessons Learned

Traditional, monetarily driven wage systems no longer work in many places these days. The perception of work and an attractive job has changed drastically in recent years. The idea that a job is only defined by its salary can be considered outdated. New, important aspects such as transparency, diversity, fairness or a sense of responsibility define a company to a large extent.

Meeting these new demands when setting wages can be time-consuming. A democratic process in which everyone has a say is essential. Feedback from every employee is worth its weight in gold. The fact that the result is ultimately supported by everyone is the reward for the effort.

A predefined salary formula deliberately leaves no room for maneuver in salary negotiations within an application process. This initially led to some uncertainty. Can we find enough qualified new employees? Are we still competitive and attractive as an employer? However, it quickly became clear that the core idea behind such a formula - transparency among employees - is a selling point on the job market: Job seekers who can buy into our approach already internalize some of the values we live by at smartive. The result: a good match.

Looking back on the past year, we can say that we are proud of the path we have taken. The results we have achieved position us on the market as a modern, value-oriented and innovative company.