The monthly payday is one of the few occasions when I feel truly blessed to be a full-time salaried employee. It is not because of how well I am paid (FYI, the UK higher education sector has experienced a real pay cut of 20% on average over the past decade), but I appreciate that I can expect the same amount of money going into my bank account every month, which helps in budgeting and envisioning what kind of lifestyle that I can afford, especially during this cost of living crisis and age of high inflation.
Some employers and workers find pay fluctuation a good thing. A variable pay system, which typically covers payment-by-result, such as commission and bonuses, is meant to motivate employees, reward good performance and penalise shirking. Advocates of variable pay believe that rather than being paid the same for whatever level of effort and talent they put into their job, workers would also feel that their hard work pays off with higher pay. Variable pay also gives employers the flexibility to reward workers, setting conditions for which a certain promised level of pay has to be realised.
The problem is that if workers are ill-informed about a variable pay system, they may not be fully aware of what kind of performance or behaviour is encouraged and in what ways. If the pay system is not transparent to workers, the ‘motivating’ factors of the pay system will not be as effective. This also begs the question of what makes workers ignorant about their pay and how their pay is governed.
From an employer’s perspective, keeping information about the pay system, such as the composition of a pay package, parameters of each pay component, average pay levels, pay ranges etc., under control is to their advantage. It is not to say that employers would prefer keeping workers completely in the dark about the incentive structure. Rather, employers tend to ensure that ‘just enough’ is known to workers for motivational purposes. For example, if you know about the existence of a commission but not the brackets, you might put in as much as you can to bet on the possibility of unlocking a higher commission. Or if you are not aware that a ‘seniority premium’ is paid to just one colleague instead of everyone else who is told to be paid by just output, you might not realise that cronyism exists in your company.
What employers would not like workers to know might provide ammunition for workers to contest pay and aggregate pay demands. Without the capacity to accumulate this kind of knowledge, workers may struggle to even notice that ‘something doesn’t look right’, not to mention to investigate ‘what exactly has gone wrong’ with their pay. Pay obscurity also risks becoming a hotbed of wage theft, unequal pay and unjustifiable pay gaps, in which employers take advantage of workers’ partial understanding of the pay system.
In my recently published article, I examined how factory workers in China learn about pay in their workplace, given the managerial control over the availability of information about the pay system. By laying out the ‘pathways towards ignorance’, I teased out the managerial practices, whether it be intended or unintended, which create hurdles for workers to make sense of, enquire about and verify their pay at different stages of their employment relationship.
In general, workers get to know more about the pay system only over time, even though they sell their labour power to the employer from Day 1, as long as they could make it to that stage before feeling fed up with the obscurity.
The three factories that I studied have a few things in common. First, they are not unionised, meaning that collective bargaining as a wage setting mechanism and occasion for workers to deliberate pay demands collectively is unavailable. Workers have to make sense of the pay system in their individual capacity. Second, these factories adopt a variable pay system, which consists of a combination of base pay and other components determined by, inter alia, working time, seniority, education qualification, output and performance. Third, the workers are mostly migrant workers who have weak social ties and little local knowledge about the greenfield area where the factories are located. Fourth, these workers are implicitly or explicitly demanded not to discuss pay with others by the management.
Pay is communicated to workers in a one-directional manner. It is true that workers are briefed about the pay system when they are onboarded, but without first-hand experience working on the job, it is not easy for workers to understand the practicalities. For example, in one factory, workers are told upfront that they will be paid by piece. However, it is not until when they are randomly assigned one of the 80 products that the factory produces every day, each bearing a different unit price, that they realise how difficult it could be to keep track of their earnings.
A pay slip with a breakdown of each pay component could have helped, but most workers do not receive one with such details. With just the amount on their bank balance in hand, they have to go through a set of administrative hurdles to enquire in case they find the amount suspicious, during which they may be put off by unsupportive line management or unfriendly HR officers. The lack of opportunity to cross-check with colleagues also makes it hard to judge whether their own pay makes sense.
In face of the obscurity, some workers figure out ways to be more informed. For instance, they stay hypervigilant to keep track of their work and befriend resourceful people who do not mind disclosing information over time in a piecemeal manner. More notably, they ‘misbehave’ by sharing information among themselves regardless of the non-disclosure requirement, but only when they identify the right timing and the right people to discuss pay with, so that they do not get into trouble. This involves the understanding of the shop floor dynamics, as well as time and effort to establish rapport among colleagues in a volatile workforce.
Workers manage to understand how they are paid in varying degrees, and not all of them get to know much about the pay system throughout their time on the job. Some internalise the unexplained pay differentials between workers to individual differences and acknowledge the pointlessness of delving deep into the system. Some cannot live with the opacity, and attribute unexplained underpayment to poor management style and dishonesty, leading to discontent and exit as protest.
This study focuses on Chinese factory workers, but other waged workers may also relate to their experience. A key takeaway is that understanding how one is rewarded at work is not subject to just how much information management would like to disclose. To achieve pay transparency, workers should not only have access to information relevant to themselves without being overburdened with administrative hurdles which discriminate against the less connected. They should also be equipped with the tools to investigate pay-related issues which matter to them collectively for further pay demands.
Fuk Ying Tse is a Lecturer in Work and Employment and a member of the Centre for Work and Sustainable Employment Futures at the University of Leicester, UK.
To read more, see: Fuk Ying Tse, “Learning about pay at work: a labour process approach to pay transparency” in Work, Employment and Society 2022.
Image: One Click Group UK via Flicker (CC BY 2.0)