Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / Why Salary Transparency Cut Our Offers by 18 Percent
Transcript
- Lucas: So there's this regional logistics company in Ohio, about four hundred employees, and in early 2025 they made a pretty radical decision. They posted every salary range on every job ad. And they went further — they published the exact formula they use to determine starting pay, step by step, on their careers page. Luna: That's a big move. Most companies treat that information like it's a state secret. What happened? Lucas: Well, the headline number is that their average starting salary actually dropped by eighteen percent over the first year. And that's not because they lowered the bands. They kept the same ranges they'd been using internally, but they removed the individual negotiation window. Before, a candidate could bargain their way to the top of the range. After, the formula decided, and the range was public. Luna: So the negotiators lost out. But did the company also see better hires, or just cheaper ones? Lucas: That's the interesting part. time to offer dropped by forty percent, because candidates stopped playing the waiting game. And acceptance rates went up, from about seventy-one percent to eighty-three. People knew what they'd get before they even applied. No surprises, no dead-end negotiations. Luna: I can see how that saves time. But I'm wondering about the fairness angle. If you remove negotiation, you might just be locking in the same biases that negotiation had — just now they're baked into a formula. Lucas: Right, and that's the risk. So they were careful. Their formula weighs experience in the role, not just years at any job. It credits adjacent skills. And they ran a pay audit before they published anything. That audit found that women were earning about six percent less than men in the same roles. They had to fix that before they could go public. Luna: That's the part that would scare most companies. If you publish your ranges, you're also publishing your inequities. Did they lose any talent over it? Lucas: They lost three people in the first six months. Two left because they thought they should be paid more, and the company said, 'Here's the formula, here's why you're at this step.' They didn't like the answer. But here's the thing — they also saw a big drop in internal pay complaints. HR told me that grievance emails about pay basically stopped. Because everyone could see exactly why their colleague made more. Luna: That's a real benefit. But it also sounds like it could backfire if the formula itself is flawed. How did they build it? Lucas: They used a simple points system. Each role has a base, then you add points for years of relevant experience — capped at ten years so someone with twenty years doesn't get double — then points for specific certifications, and for leadership experience even if it was informal, like mentoring. Then they mapped those points to a dollar value. It's not perfect, but it's transparent. You can see exactly how your number was calculated. Luna: I like that it caps the experience points. So many formulas reward longevity over actual skill. Did they see any unintended consequences? Lucas: A few. One was that candidates started applying for roles they were overqualified for, because they knew they'd hit the top of the range fast. And another was that some internal employees got angry when they realized their pay was below the published minimum for their role. The company had to do a market adjustment for about thirty people, which cost them around two hundred thousand dollars in the first quarter. Luna: Ouch. That's the hidden cost of transparency. But in the long run, that's probably money well spent. Pay compression is one of those things that festers for years. Lucas: Exactly. And the CEO told me that those adjustments were the best money they spent all year. Because the trust it built internally was huge. People saw that the company was willing to back up its public numbers with real dollars. Luna: So what's the takeaway for a company that's thinking about doing this? Is it a one-size-fits-all policy? Lucas: I'd say no. It works best in industries where roles are fairly standardized and you have a decent amount of data. In highly creative or unique roles, a formula can feel too rigid. But even then, you can publish a range and a rationale. What this company proved is that removing negotiation doesn't just save time — it can actually lower your wage bill. And that's a counterintuitive result that a lot of CFOs would love to hear. Luna: It's almost like the savings come from not overpaying the aggressive negotiators. But tell me more about the candidate experience. I'd love to know if candidates actually read the formula, or if they just saw the range and said, 'good enough'. Lucas: Good question. They surveyed new hires, and seventy percent said they read the full explainer before applying. And in the interviews, a lot of them brought it up — not to challenge it, but to ask about growth. 'If I get a certification, will I move up a step?' That changed the conversation from haggling to career planning. Luna: That's a really nice shift. It turns the offer stage into a development conversation. I can see why acceptance rates went up. Lucas: And that's the thing — when you take away the mystery, you also take away a lot of the anxiety. Candidates know where they stand. And that's valuable in a market where trust in employers is pretty low. Luna: You know, this reminds me of something you said a few episodes back about how removing negotiation early in the process can filter out the wrong kind of candidate. The ones who are only in it for the money. Lucas: Right, and it's a real effect. They saw a drop in applications from people they called 'career mercenaries' — folks who would take a job, then leave six months later for a two-percent bump. But their retention after twelve months improved, which is a good sign. Luna: So the people who stay are the ones who actually want to do the work. That's a better filter than any personality test I've seen. Lucas: Exactly. And speaking of filters, one of the most surprising side effects was in their recruiting emails. They started including the pay range right in the first outreach message. Their response rate jumped from about thirty percent to forty-seven. Because candidates don't have to guess if it's worth their time. Luna: That's a huge win. Let's talk about the pushback from the hiring managers. They must have felt like they lost a tool they used to close candidates. Lucas: Oh, for sure. The VP of Sales was the loudest opponent. He said, 'You're taking away my ability to sweeten the deal.' But after six months, he changed his tune. He found that he could still sell the role on growth potential, on projects, on flexibility. And he didn't have to waste time negotiating. His close rate went up because he could move faster. Luna: That's a good point. The negotiation was probably a huge time sink for him. And now he can focus on the actual hiring conversation. Lucas: Which is a nice segue, because we're always talking about how hiring should be about fit, not just price. And that's actually one of the reasons we don't run ads on this show. We want to keep these conversations focused on what actually helps our listeners, without a sponsor pulling the topic in a different direction. Luna: Yeah, and it's a choice we're able to make because some of you have supported us directly. If you've gotten value from these episodes, and you want to help keep them ad-free, the link is buy me a coffee dot com slash fexingo. It's a small thing, but it makes a big difference to us. Lucas: And we really appreciate it. Now, back to the pay transparency story — one more thing that surprised me. They also started publishing the salary ranges for internal promotions, not just external hires. So when someone moved up, they knew what to expect. And that actually cut the time to promote by a few weeks, because there was no back and forth about money. Luna: That's a nice extension. It makes internal mobility feel more like a clear path. But what about the downside? Did they see any increase in poaching? Because now competitors know exactly what to offer to steal someone away. Lucas: That's a real risk, and they did lose a couple of people to competitors who offered more. But they also saw that their own offers became more competitive overall, because they had to keep the ranges in line with the market. They do a market review twice a year, and they adjust based on real data. So while they lost a few, they also attracted people who valued transparency over a few extra thousand. Luna: So there's a trade-off, but it sounds like the transparency premium pays off in the long run. Do you think more companies will adopt this in the next few years? Lucas: I think so, especially with pay transparency laws spreading. But the key is not just posting a range — it's building a system that people can understand and trust. That's what made this experiment work. And it's a lesson that applies to any company, regardless of size. Luna: I love that. So if someone wants to try this, what's the first step you'd recommend? Lucas: Do the pay audit first. Know your current gaps, and be prepared to fix them. Because if you publish your ranges and they're wildly inconsistent internally, you'll have a revolt on your hands. Then, start small — maybe with one or two roles — and measure the impact. And be ready for the pushback from managers who feel like they're losing a negotiation tool. Show them the data on time saved and acceptance rates. Luna: That's solid advice. It's a big change, but the potential payoff is huge. What's the one thing you want listeners to remember from this episode? Lucas: That transparency isn't just about fairness — it's a competitive advantage. This company saved money, improved trust, and attracted better-aligned candidates. And that's a win-win, even if it feels scary at first. Luna: And if you want to hear more on this, we're always digging into these kinds of experiments. Thanks for listening.