Haggle Over Salary? It's Not Allowed
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The next article is entitled, “Haggle Over Salary? It’s Not Allowed
Startups say they make take-it-or-leave-it job offers to foster transparency, fairness” by Rachel Feintzeig and Rachel Emma Silverman, from the May 27 issue of The Wall Street Journal.
Some startup companies are making take it-or-leave it salary offers to prospective employees to foster transparency and fairness.
The social-news site Reddit.com has a tip for new hires expecting to negotiate their pay: Don’t even try it.
The San Francisco-based Web company, which has about 169 million unique monthly visitors and is known as the launchpad for viral Web phenomena, has a take-it-or-leave-it policy for starting salaries. Other firms, including e-commerce startup Jet.com Inc. and test-preparation firm MagooshInc., have similar rules in place.
Some candidates walk away when they hear that salary offers are final, but other new hires say they like not having to bargain. Bosses say that taking haggling out of the equation fosters transparency and fair pay.
Reddit Inc.’s interim chief executive, Ellen Pao, says that pay negotiations put women at a disadvantage because men negotiate harder than women. Ms. Pao pursued and ultimately lost a high-profile suit alleging that her former employer, the venture-capital firm Kleiner Perkins Caufield & Byers, passed over women for promotions and plum roles.
Recent disclosures by technology firms of largely male and white or Asian workforces have sparked discussions about diversity and women’s experience in the industry. Many bosses are trying to come up with ways to attract and retain heterogeneous workforces, and they see pay and benefits as a crucial lever.
“People who perform the same should be paid the same,” Ms. Pao says. “We want to make sure we maintain this level playing field.”
Prospective Reddit employees can choose between two offers—one weighted more toward equity, the other toward cash. With just about 50 employees, Ms. Pao says that it’s hard to know whether the company has a gender pay gap but she wants to ensure one doesn’t develop as the company grows.
Not everyone agrees. Users on Reddit’s own discussion boards took issue with the policy, with one sniping that “meritocracy is playing second fiddle to gender politics.” Kenan Abosch, who leads Aon Hewitt’s compensation consulting practice, cautions that A-players might not want to work for a company where pay is preset. Others question whether such policies actually help advance women.
Amy Ala, a recruiter at Microsoft Corp., wrote on a recruiting blog that she wants “candidates to feel like they’ve won” and says that Ms. Pao is “taking that away from them.”
Ms. Pao says she isn’t opposed to women honing their negotiation skills but doesn’t believe in penalizing poor negotiators with low pay. She adds that she’ll make adjustments if Reddit has trouble attracting top talent.
Linda Babcock, an economics professor at Carnegie Mellon University who researches women and pay negotiation, says that standardizing starting salaries might go far in fixing pay imbalances—provided that companies stick to the plan. If they allow exceptions, “women will follow the rules, men will still try to negotiate, and if they are successful, that will further the gap. It could make things worse.”
Research by both Dr. Babcock and Hannah Riley Bowles, a Harvard University lecturer who studies women and negotiation, has shown that men are about four times more likely than women to negotiate pay but that women are viewed more unfavorably when they do so.
As a result, “women’s reticence to negotiate is very real,” says Dr. Bowles.
Set pay levels have long been the norm in industries like management consulting, law and government. Often at these organizations there is a large pool of similarly qualified applicants entering at the same point, as with newly minted law-school graduates entering as law-firm associates. Elsewhere, workers usually expect to negotiate.
Kristin Keating says she was taken aback upon learning there was no wiggle room in the job offer she received from online test-prep service Magoosh Inc. in December. Before long, she says, she felt some relief about not having to haggle.
After the company explained the rationale behind the no-negotiation policy, she says, she accepted the job developing test-prep materials, even taking a 15% pay cut from her previous role because the company offered good benefits, a manageable workload and other “intangible rewards.” But she adds that “I can’t honestly say I wouldn’t have liked a higher salary, because who wouldn’t?”
Ms. Keating’s boss at the Berkeley, Calif., company, CEO Bhavin Parikh, says that of the more than 30 job offers he has made, more than 90% were accepted.
The company reviews salaries quarterly, comparing its pay to market rates at similarly sized firms using salary surveys or listings on the AngelList website. Magoosh raises employees’ pay when the company hits certain revenue milestones or when market rates increase; promotions also result in raises for individual workers. Full-time workers currently earn around $40,000 to $150,000.
At Jet, managers offer candidates one of 10 set levels of compensation, ranging from about $37,500 in base salary to the upper $100,000s, according to Nate Faust, the chief operating officer. (A few senior executives make more than that, he says, and all employees get stock-option grants too.) If candidates say their offers are low, managers encourage them to look up the LinkedIn profiles of other hires who were slated in the same level so they can see they have similar experience.
The approach ensures the company isn’t biased toward loud or aggressive workers even once they’re in the company, says Marc Lore, the company’s chief executive. Workers who try to force a raise by presenting a rival offer are generally bid good riddance.
If “someone gets another job offer, I would be like, ‘OK, sorry, good luck,’” says Mr. Lore, a co-founder of Quidsi Inc., the parent company of Diapers.com. “There’s no matching of things.”
Fewer than five candidates have turned him down so far, Mr. Lore says. The company currently has around 250 employees.
Joe Maliekel, who joined as the company’s associate director of supply chain last December, says he found the no-negotiation rule “refreshing.”
At the time, he had been interviewing elsewhere, spending weeks hashing out the financial details of other offers. With Jet’s pay proposition set in stone, he says he could focus his decision on the company and his role in it. “In some sense, it felt liberating,” he says.
Again, that was “Haggle Over Salary? It’s Not Allowed.”