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In the News

Why paying everyone equally might not work

Graham Watson

28th January 2021

I think this is my favourite in the BBC's CEO Secrets series, with the CEO of therapy company, Spill, reflecting on the company's experiment in paying all of his employees equally.

Initially, as a small firm, with just five employees all in similar roles, the model, where everyone was paid £36,000 worked.

However, as the company grew, and took on new employees it started to generate difficulties, rather obviously given the different revenue generating capabilities of the employees.

Whilst the company was overwhelmed by applications for a clerical role, it soon became clear that they would have difficulty recruiting and retaining either a software developer or a salesman.

All of which strikes me as intuitive - but the fact that the company tried this model, and failed, is a lovely illustration of how economics is able to explain why people are paid different amounts - both for different jobs, and, in many instances, for doing the same job.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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