When the vice president of people at compliance training platform Ethena, Melanie Naranjo, recently revealed the company’s decision to implement a no-negotiation policy — where the first salary offer the hiring manager makes is the last one — she ignited a hot topic of conversation. It’s a move that might raise some eyebrows following the Great Resignation. Do businesses think they are going to attract top talent by telling employees they can’t ask for more money?
But any assumption that such a policy would deter job seekers misses the exciting possibilities that it offers to employers and employees alike. Everybody has sat at the negotiating table at some point in their careers, and while the thrill of negotiation may provide a rush for some, for others it is stress-inducing and ultimately disappointing.
Some companies are now asking if salary negotiations are necessary to provide employees with competitive compensation. Furthermore, is the negotiation process conducive to truly creating equity in hiring?
Building From a Foundation of Trust
Advocates of no-negotiation policies argue that doing away with salary negotiations allows employers to begin employee relationships from a place of honesty, trust, and respect. There are no more nebulous promises of a raise down the line or creeping resentment from an employee who thinks they are working for less than they are worth. With negotiation off the table, hiring managers offer a salary based on the candidate’s experience and education and the conversation stops there.
If an employee believes they deserve more, they can walk away. The communication is upfront and pragmatic, without games, winks, or nudges. No one feels like they’ve compromised or given anything up and employees enter the company without drama.
Increasing Equity and Addressing Bias
No-negotiation policies also have the potential to increase equity in the hiring process. Marginalized communities have historically been offered less than their white, male counterparts. Hired’s 2021 wage inequality impact report found that men were offered higher salaries than women 59% of the time. To make matters worse, wage disparities have created an “expectation gap” — people who have historically been paid less have learned to expect less. In turn, they ask for less at the negotiating table, and the wage gap only continues.
Closed-door negotiations can exacerbate these inequities, allowing unconscious biases to go unchecked and favoring those who are confident negotiators. But an excellent negotiator does not equate to an excellent employee. Without negotiation, salaries are based on a candidate’s skills and experience — not their background, location, gender, or race. Furthermore, with equity in mind, employers can create processes that guide salary decisions and help managers address pervasive biases.
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Putting the Policy into Practice
A no-negotiation policy will not magically create workplace equity if it is implemented without systems in place to ensure its effectiveness. Companies considering a no-negotiation policy need to pair it with carefully considered processes, robust data, and clear communication.
To start, create systems for hiring managers to determine these non-negotiable rates. If there is no system, hiring managers will pull numbers out of the air, and many of the same biases that come into play during negotiation will be magnified.
To determine salary ranges, companies can utilize third-party data to monitor market compensation, guiding both new hires and internal compensation adjustments. Magoosh, a test-prep company that has worked with a no-negotiation policy since its founding, utilizes data on market compensation to offer raises to their full-time employees as the market rates increase. This approach allows companies to attract top talent and retain them once they are there.
Finally, no-negotiation policies need transparency to increase equity. Magoosh lists the salary range in all job listings and is upfront about their no-negotiation policy with potential hires should they not want to partake. And Ethena recently published its pay structure for engineers, including how and on what schedule they offer raises. Transparency is the lynchpin to the success of no-negotiation policies — without it, such policies will only add more opacity to the hiring process.
A New Approach to Consider
Doing away with salary negotiations brings with it the potential to free employees from working against a system that is not always in their favor. Instead, it puts the onus on the employer to compensate its employees with careful consideration and an eye to equity.
Employers can no longer avoid the burgeoning conversation around transparency and equity — 70% of tech candidates believe employers need to increase salary transparency across the board. If employers want to retain top talent, it is time to meet the needs of the people they so keenly want to hire, offering clear communication throughout the entire hiring process and beyond. No-negotiation policies may not work for every company, but they offer employers a new approach to consider as they move toward creating a more equitable workplace where all employees feel valued, respected, and supported.
