3 ms·

Though I think that's why this is a good solution: it still provides the company with wage control while creating transparency for the employees.

• A1kmm 13y ago
  It is not beneficial to the company over individual wage negotiation. Suppose V_i is the amount of value the ith employee contributes to the business (V_i = revenue from employee i, minus non-salary costs). For the business, the hire makes sense if the salary is anything in (-inf, V_i) - but with the lower the better. Presumably, the company believes that their computed salary (call it S_{f,i}) is such that S_{f,i} < V_i for all employees. However, there are things that the formula doesn't take into account - for example, an employee might be bad at negotiating, and be willing to accept a salary below S_{f,i}, or they might have something in their history (e.g. a conviction) that means that it is hard for them to find alternative work and they are willing to work for less if told to take it or leave. Similarly, a very good prospective employee might be currently paid S_{c,i} in (S_{f,i}, V_i), or an existing employee might have received a counter offer S_{c,i} in (S_{f,i}, V_i) - it is rational for the business to offer S_{c,i} (or another number between S_{c,i} and V_i) to gain / keep that employee, but it isn't in their interest to give every employee the same pay rise.
  • kazagistar 13y ago
    This post might be better without the mathematical abstraction. > An employer wants to pay their employee as little as they can get away with, as long as it is less then the value that employee provides. Presumably, this company set such salaries. > However, there are things that the formula doesn't take into account - they lose the ability to screw bad negotiators and convicts out of money. > Similarly, if people are offered higher salaries elsewhere, it might be worth it for the company to counter-offer with something still less then the employees value to them to keep that employee, but they don't want to do the same for everyone.