Der Standard – 15.06.2021

New Pay, Fair Pay?

The past decade has seen a dramatic rise in people looking for ways to engage in New Work. More and more companies have realized that their traditional, hierarchically organized systems are no longer suitable for the demands of an ever-complex and rapidly changing world of work. They have been experimenting with agile work methods and network structures in order to gradually do away with hierarchies.

What does this mean for employees? If things work out as planned, they would no longer be just cogs in the wheel who could easily be replaced. Instead they would belong to teams which, more or less pro-actively, make use of market opportunities and collaborate with clients to jointly develop adequate solutions. And that’s pretty neat because it’s exactly what employees want. Already in 2018, the job platform Xing found in a survey that it is important for 87.1% of employees in Austria to do a job that gives them a sense of purpose. A similar survey by Gallup in July 2020 revealed that currently only about 20% of employees in Europe regarded their work as meaningful.

As employees can and want to act much more autonomously in the new world of work, conventional pay models need to be reformed to fit these new forms of working. And this is where New Pay comes in.

Nadine Nobile, Stefanie Hornung, and Sven Franke, who wrote a book with this title, discovered that New Pay was based on seven principles that are all closely associated with New Work ideas: fairness, transparency, responsibility, participation, flexibility, team spirit, and permanent beta.

In February 2021, XING commissioned the market research institute marketagent to carry out an online survey, in which it was found that about 64% of 1,000 Germans and as much as 70% of 500 Austrians surveyed were content regarding their salaries. However, more than half of them voiced the wish for more transparency when it came to their employers’ remuneration models. In both countries, about a third of the survey’s respondents was convinced that men earn more than women and also have better career opportunities.

About 55 percent of respondents argued that pay should not only be based on the hours worked but that factors such as performance, team spirit, and the will to collaborate should also be considered. They also felt that performance was inadequately measured by solely looking at whether or not targets were met. Instead creativity and ideas contributed should also be components of employees’ assessment and be reflected in their remuneration.

Already in 2019, appreciation and fair pay ranked high on the wish lists of Austrian university students who were surveyed by A more recent PwC study of June 2021 showed that young employees also deemed flexibility with regard to hours and work place as very important. So companies will be well advised to take the topic of New Pay very seriously.

A trickier question is the one concerning fairness when it comes to salaries and performance. How much transparency can employees really take?

Prof. Dr. Stephan Fischer, who heads the Institute for Human Resources Research at Pforzheim University, says that the answer to these questions lies in fairness regarding distribution and processes.

Employees tend to perceive salaries as fair if employees in comparable jobs both in and outside of the company receive a similar amount of pay.

If, however, somebody who never lifts a finger beyond what is absolutely necessary gets the same paycheck as somebody who is known to always help out team members, this is perceived as unfair. And who should get the higher bonus payments: the one who sealed the deal or those who have worked in the background providing the necessary support?

People’s views of what’s fair differ significantly, which is why both Prof. Fischer and Sven Franke emphasize that every organization has to involve as many employees as possible in defining New Pay concepts instead of dictating rigid salary structures.

In general, the clearer and more consistent salary distribution is and the more transparent and inclusive procedures for assigning salaries, bonus payments, and benefits are, the fairer and more justified employees will perceive their pay.

Some large corporations such as XING have published the salary bandwidths of its various positions. Other companies, such as Morningstar and elbdudler, let staff determine their paychecks themselves. Yet other organizations, such as einhorn or Ministry Group, have staff take a democratic vote on their pay. Deloitte’s recommendation is to, among other things, carry out surveys among employees to establish which benefits they perceive as truly valuable. Deutsche Bahn has already responded to employee wishes by letting them choose between extra days off, more pay, and reduced hours.

Is this a starry-eyed delusion of proponents of an excessive amount of employee benefits? Not at all – it’s about being an attractive employer and prevailing in the oft cited war of talents, which will be prerequisites for being able to master future challenges with the help of the best staff. And without New Pay, there simply won’t be New Work.