How does our salary system foster salary equality? Learn more about the continuous adaptation of processes towards a peer-based system in a holacratic company.
What kind of system do we use?
By the time we founded Liip (2007), we were looking for an easy applicable and adaptable compensation system where social competencies, entrepreneurship and practical experience could be weighted more than diplomas. The salary systems available on the market were not made for a company with our values. So we developed our own system.
We always aimed for transparency at Liip. With the implementation of Holacracy (a self-organization/self-management method) in 2016 we focussed even more on transparency and added the peer evaluation concept to the system. Since about a year, the system is fully transparent: everyone within the company knows who earns which amount and how it is calculated.
What about Liip salary principles?
Liip salary principles are in line with the values and the vision of our company. Salaries, gratification and allowances (double family allowance, paternity leave of four weeks, to name just two) are considered as an overall compensation package. Aiming at a fair and equal internal distribution, to be in line with the personnel market value and to be company-performance oriented.
- We pay a gratification to all or to none (no individual bonus).
- We do not negotiate salaries.
- We maintain a very low wage ratio of 2.5 (ratio between the highest and lowest salary).
- We don’t discriminate between job type.
How does Liip salary system work ?
Liipers are evaluated on six criteria. Based on the number of points, they rank a salary level given a formula (some criteria are weighted more and some are caped). The salary criteria we use are: education, work experience, expertise, teamplayer/motivator, communication and responsibility/entrepreneurship. While some ”hard facts” like the highest diploma are easy to map to point values, soft criteria are more difficult to evaluate.
That’s why peer evaluation is very important in a self-organized company: Once a year, Liipers select five colleagues to evaluate their salaries. Those colleagues decide (and explain), if the current evaluation should be kept or put on a higher/lower level, for each criteria. At the so-called yearly salary conference, salary points and salaries are re-evaluated. Decisions on salary adaptations are taken during that conference. The role Salary Determiner takes the peer evaluation results and a annually company-wide feedback survey into account, discusses them and makes sure equality across the whole company.
Additionally, we apply always the four-eyes principle when salaries are set or changed. And of course, the Salary Determiner role is multi-filled with Liipers of various locations and with different professional profiles.
How does this system help to improve salary equality?
We don’t negotiate salaries. New Liipers salaries are set within the same system and evolve in time and based on experience and feedback rounds. Everything about salary is transparent: the system
and the point values. Such transparency helps to avoid inequality.
No salary system will be considered 100% fair by every employee, but companies can do a lot to make it more understandable, transparent and equal. We will continue our efforts in this direction and share them here. Stay tuned!