Just Banning Salary Negotiations Won’t Solve Pay Inequity

  • Coinbase is eliminating salary negotiations for new employees.
  • Ending salary negotiations can be a boon for pay equity.
  • But companies interested in addressing pay gaps need to go further. 
  • See more stories on Insider’s business page.

The world’s largest cryptocurrency exchange isn’t just trying to revolutionize how the world spends money. It’s also trying to normalize a new model for pay equity.

In a May 10 blog post, Coinbase announced it would be eliminating salary negotiations for incoming employees and raising current employees’ pay relative to peers. The move was intended to improve gender pay equity and make Coinbase more appealing as an employer, L.J. Brock, the company’s chief people officer, explained in the post.

“These negotiations can disproportionately leave women and underrepresented minorities behind, and a disparity created early in someone’s career can follow them for decades,” he wrote. “We want to do everything we can to ensure that’s not the experience at Coinbase.”

Research has found that women are less likely to negotiate their salaries, meaning they earn less over time compared to their male colleagues. According to Brock’s post, Coinbase isn’t interested in contributing to those unequal trajectories. 

“It doesn’t matter what your background is, where you went to school (or bootcamp), where you’ve worked before, or even what you’ve been paid before,” Brock wrote. “If you pass our bar and are hired to do the same work, you get the same offer as the next candidate for a role.” 

Banning salary negotiations is still a relatively novel concept for most employers, though some companies such as Reddit and Fathom Healthcare (and now Coinbase) have eliminated the practice. Management researchers, nonprofit advocacy groups, and some HR leaders have supported the strategy as a way to make progress toward eliminating the gender pay gap.

But based on additional research on negotiations and industry case studies involving pay, banning negotiations without offering further information into how workers are paid will not solve pay inequity. In some cases, it might even reinforce harmful biases about women’s negotiation skills.

Instead, the best evidence suggests companies should look toward giving employees better insight into how their compensation works and the steps the company is taking to correct existing imbalances. This can be done in part by making sure that those making hiring and promotion decisions are aware of unconscious biases and how they might affect their decision-making and working to develop more effective habits.

Eliminating negotiations can reinforce gender biases

Hesitation to negotiate might be linked to gender biases about women who speak up. 

For example, a study in the journal Organizational Behavior and Human Decision Processes found that male evaluators penalized women for initiating salary negotiations more often than men. Perceptions of niceness and demandingness contributed to women’s reticence to negotiate at all, the study found.

In turn, banning negotiations sends the message that women are poor dealmakers — a bias that should be challenged, Katherine Shonk, the editor of the Negotiations Briefing newsletter for Harvard Law School, wrote in a post. Everyone has the ability to become a strong negotiator, Shonk wrote. 

“A bigger challenge is to address deeply ingrained societal expectations that women will accept whatever they’re offered when negotiating a business contract rather than being assertive in dealmaking,” she wrote. “These expectations are what lead us to believe, if only on a subconscious level, that women who negotiate for higher pay are unfeminine and thus unlikable.”

The case for pay transparency

Making compensation data public also gives employees a clearer sense of whether they are being paid fairly. 

The social-media software company Buffer, for example, has a policy of “radical transparency” for salaries. The company publishes exactly how much each employee earns on their website. Caryn Hubbard, the head of finance at Buffer, said the company’s policy is a driver of equity and empowerment for employees. 

“From a diversity and inclusion and equity standpoint, this has been a really cool impact of this, just enabling our women and others to ask about their compensation and to come to that table informed,” she told HR Dive. 

According to Buffer’s 2021 pay-analysis data, the company has been able to reduce its pay gap from 15% in 2019 to 5.5% in 2021. 

Buffer’s strategy might not be easy to replicate at larger organizations, but there are other ways companies can increase transparency.

For example, they can provide pay data to employees on pay for certain positions that helps workers understand how their salaries stack up against national, industry, or company averages. This can empower employees to feel comfortable discussing their compensation and address cultural barriers to pay equity.