Let employees pay themselves

Complaints are common about the currently popular systems of remuneration for employees.

The most commonly used system is an hourly wage, where you get paid a specific amount of money per hour you work. This incentivizes you to take longer doing tasks, so that you get paid the same amount while doing less work, or more while doing the same work. It also doesn't incentivize you to make improvements to efficiency (though if you do, you can have some free time that you probably have to spend pretending to work).

Another is salary, where you get paid a specific amount per month or so, just to be an employee, regardless of how much work you do or how long it takes you to do it. It usually comes with an expectation that you'll work overtime for free.

Another is piece work, where you get paid a specific amount of money for each task you do. This is illegal in some places, though I forget why. It incentivizes efficiency and task completion, but it also encourages rushing and therefore doing a worse job.

Those are just the complaints that I could think of on the spot; there are others. Also, if you are the boss, deciding how much an employee is to be paid can be difficult, and if you are an employee, asking for a raise can be awkward, and you might unknowingly get paid much less than a coworker who does the same work and hasn't even been with the company as long as you (because bosses discourage employees to discuss with each other how much they are paid).

Anyway, my solution is to throw all of those out and just ask the employees how much they want to be paid, and/or how they want their pay calculated, and then just pay them accordingly. They can ask for an hourly wage, an output-based wage, a salary, compensation calculated by a custom formula, or even just a lump sum of arbitrary amount whenever they want.

For example, you could use a formula like $300/[feature implemented] + $15*(1.1^[hour spent implementing a given feature]) + $5/[hour on call at home] + $100/[hour worked when called in]. Another employee doing the same job could choose to use the same formula or a different one (or one of the simple hourly/piece work/etc. options).

Whatever an employee sets, that's how they get paid. Employees are expected to use this power fairly, considering how much similar jobs elsewhere are offering, how much value they provide to the company, etc. Employees can set their formulas to give themselves incentives to work in certain ways, such as taking on fewer larger projects instead of more smaller ones.

In exchange for allowing them to set their own compensation, all of this information is 'publicly' available within the company. Everyone at the company can see how everyone else gets paid, and everyone else's compensation history. Therefore, they can also use the knowledge of how much their coworkers are paid in setting how much or by what formula they get paid. They can also see if someone else is paying themselves too much or too little.

This system can be implemented using a internal payroll application that employees can access to set their compensation settings.

Yes, you'll probably need good people to make this work well. If someone abuses their power, you can warn and/or fire them. (They'd probably be a bad employee in other ways too.) On the other hand, giving your employees more agency in this way should be good for morale, so it should help with retention.

I thought of this mainly in the context of companies with employees doing highly skilled work (such as software development), so I don't know if it would work as well for other jobs, especially those with lower skill requirements, but it probably could.

63/384 [2018-05-03]