Associate Professor Chia-Jung Tsay was interviewed on BBC London News about her thoughts on changing the way employee pay is decided. 

Most companies operate a traditional ‘top-down’ model, with salaries decided based on a scale. Some argue that this system is open to bias.

A new model, however, which has already been adopted by some companies, sees employees recommend a pay rate/raise based on their perception of colleagues’ performance and contribution to the business.

Chia suggested in her interview that such a system has the potential to benefit the wider interests of the organisation.

“It’s more meaningful for employees if they are appropriately paid or rewarded by people who can directly observe how they do their work. A system that includes evaluations from peers may incentivize employees to be more mindful of overall contributions to the work community, rather than to maximize on individual-based performance outcomes, and the system may serve to better align the interests of the employees with the interests of the workgroups and the company.”

She also suggested that the new system could help to reduce pay bias.

“Generally if we have many employees to evaluate or have rather limited interactions with employees, it’s possible that we end up depending on cognitive shortcuts. Instead of evaluating each person as an individual with merit in mind, these shortcuts can result in preference due to demographic categories.”

“We must keep in mind that we often use these shortcuts without deliberation, simply because we all have limits to how much info we can process. At the same time, these shortcuts can result in the application of certain biases. This is not in the interests of either the candidate who wants a fair assessment, or the company that wants to identify actual merit.”

Finally, she touched upon the potential downsides of implementing such a system.

“There could be some risks to full transparency with regard to salaries. We tend to pay attention to these quant measures. Knowing exactly where each of our colleagues stands could lead to more tangible conversations involving comparisons. If we’re ultimately trying to be our best selves at work and to contribute to the best of our ability to the company, these comparisons can be less productive.”