Imagine a company where everyone is paid the same. Yes, you read it right: a company where everyone, from the CEO to the peon, takes home the exact same amount at the end of the month.
Sounds like a pipedream, impractical? You’d be surprised.
SafetyWing, a travel insurance provider, has been doing exactly that for five years. Not only has the idea worked, but has worked fantastically well, going by the considerable increase in salaries seen in the company since it started and its high retention rate.
The startup provides insurance for digital nomads, remote workers, and frequent travellers and is based in Oslo, Norway, and San Francisco, USA.
It currently has around 70 full-time employees across 60-plus countries, including South East Asia, Latin America, India, and Eastern Europe.
SafetyWing was founded five years ago by Sondre Rasch, who was inspired to go for a ‘flat salary system’ by similar structures found in his native Norway.
In SafetyWing, there are no appraisal meetings and increment negotiations. Instead, when it reaches a pre-fixed revenue milestone, all employees have their salary increased by the same amount – and most often, it has been more than 10 per cent, according to employee reports.
Flat- System hierarchy
Safetywing is not the only company to go for a flat salary system. Others include software companies like HelpScout, Basecamp, Daily. co, and Sourcegraph, e-commerce company Gumroad, and Pennsylvania-based Website Designer Wildbit.
The primary motivation for going for a flat salary structure seems to be to increase harmony and solidarity among employees and get them to focus on the company’s overall performance, instead of peripheral things like currying favor with bosses.
In such systems, salaries are fixed according to experience and ability levels and promotions are decided by the whole team. Nobody has anything to hide because salaries and promotions are decided impartially, as a team and this builds up trust.
However, a complete flat pay hierarchy like SafetyWing’s also addresses gender parity issues that most companies have been unable to make progress on. Gender pay equity in almost every country has been depressingly slow and even worse.
According to researchers, a flat salary hierarchy boosts harmony, motivation, and freedom, in a geographical and professional sense. Studies have shown that pay transparency and equity improve employee engagement, motivation, and productivity. It helps to keep employees too, as is proven by SafetyWing’s impressive, 97 per cent retention rate over the past five years.