At Einhorn: “Employees Can Override Our Salary System”
How much do we actually need for living? That’s the first question German condom manufacturer Einhorn asks when it comes to salary. Beyond this basic income, every employee can help determine his or her own salary. Markus Wörner is on their salary council. We asked him: what is behind this?
Markus, talking about salary is commonly taboo. What happens at Einhorn?
At our company, salaries are transparent. Even so, it is not an easy topic. In some salary rounds, tears have been shed. Compensation is linked to many fears, and existential questions of securing one's life, for example. But it is also about appreciation. The more you get, the more you sense your worth to the company. When it comes to salary, there are different perspectives we need to reconcile.
Einhorn experiments a lot with new forms of working. To what extent is this reflected in the way you determine salaries?
We are a bit extreme. We have no investors to tell us “You guys are stupid.” So, we try a lot of things. We are a sustainable company and have the core value of "Fairstainability", a word created from fairness and sustainability. We realised early on we can only live this consistently if we also address our ways of working together. For example, we don’t have fixed working hours—everyone can work when and how they want. There is no control, not even on holidays. At first, we had completely self-set salaries. But this didn’t work well.
Everyone could determine their own salary – without restriction?
Yes. We simply wrote on a flipchart what everyone wanted to earn. All agreed that we should make it transparent. And people then received the corresponding amount.
But you dropped this procedure...
We grew strongly. There was more money. New desires emerged. Not everyone wanted to discuss their salary in public. Those who are not outspoken can be stressed by this, and not get enough. To protect all, we now have a salary system, which is the responsibility of the salary council, an elected body of three. I have been a member for two years. We all do something quite different. Jördis is CFO, Teresa is a designer and I work in PR and marketing. We first had to come to grips with the compensation issue.
Markus Wörner: "To protect all, we now have a salary system, which is the responsibility of the salary council, an elected body of three. I have been a member for two years."
So, what does your compensation system look like today?
In principle, we pursue three basic values: transparency, co-determination and needs-based remuneration. The base is a salary that secures livelihood: in other words, a kind of unconditional basic income. We use the Berlin cost of living index as a guide. Currently, that is 1,650 euros net. Everyone is entitled to at least that amount. But everyone gets more. We have determined nine salary bands based on personal background and professional experience. The fixed salary also includes the Einhorn social benefit, for example, of 700 euros per child. Plus, there is a component based on self-assessment of up to 2000 euros. It’s also important to us that the salary gap is not too wide: the highest salary may not be more than three times the lowest.
What is the highest salary? That is, how much do founders and managing directors earn?
That's ~8,000 euros net per month, which is not much for this level, compared to the market. But the two founders are fine with it. We all agree we don’t want a minimum salary while the founders make millions. We have discussed if tripling is the right factor. But the basic idea is clear: everyone should grow with a company, not just those at the top.
Can you keep this philosophy and still attract, say, sought-after software developers?
We do not look at the market at all. What other companies pay is irrelevant to us. So that’s not an issue in our calculations. And we don’t have job descriptions which would be the basis for it. As a matter of principle, we don’t cluster by roles. For us, marketing is not automatically worth more than logistics or sustainability.
But people still look at what others earn and compare themselves?
Of course, it is natural to look around, but we focus on what people really need to live. As a consequence, we are able to compare well with the market in most cases. In the junior sector we pay very good salaries, sometimes above the benchmark. In the senior sector we do not have any major increases and are somewhat below the market. But that's okay. Our system works differently. You start well, and then development is limited at the top.
It is often said that someone who performs better should also earn more. How important is performance in your company?
We have set out in a salary manifest how our remuneration system works. The word "performance" does not appear once, because we focus on people's needs. We basically assume that all Einhorn employees do their best. Nevertheless, performance is important to us and plays a role in our self-assessment.
How exactly does the self-assessment work?
All employees assess their own contribution to the success of the company. There are no instructions for this, only a guideline. We agree it is worth more if someone not only does his or her job, but also contributes to the company and the development of the organisation. It is also important how someone uses his or her potential and develops his or her skills. However, the variable component can be higher or lower for other reasons. We discuss this in a feedback session with the salary council and colleagues. We use the "non-violent communication" method and have become very good at giving feedback, even if it is critical. But nobody has to follow the opinions of colleagues and can determine the variable part themselves.
A large amount of money is distributed via self-assessment. How well do people manage that? Does it feel fair?
Ultimately, the idea is that our system sets a salary we think is fair. But anyone can say my salary should be higher or lower. We give employees the power to override the system. When someone new joins us, it is difficult to judge. That's why the salary council makes the first recommendation. Then, after six months there is a first feedback round for self-assessment. With time, you get used to it. In the end, we have a transparent list of everyone's salaries. Since the whole team can see how much everyone earns, you come to understand why someone earns a certain amount. People make this assessment very consciously and quite well.
Ultimately, the idea is that our system sets a salary we think is fair. But anyone can say my salary should be higher or lower. We give employees the power to override the system.
So, there are really no rules for self-assessment?
No, we only have guidelines on how to proceed with self-assessment – for example, think about what you need to live. For one person this means being able to pay the bills and be the tenant of a one-room flat. For another it means two bottles of champagne a month and a house with a garden. We do not want to judge that from the outside. Everyone should reflect on what he or she needs to be happy, and to be able to work for us. We trust that no one wants to harm the company and this has proved to be the case. Transparency is important. Employees know what is possible in terms of the budget.
For one child, you pay 700 euros more. Do the childless find that fair? When will they get something out of the social welfare money pot?
That could be something else. Many people here are between 30 and 40 years old and having children is a big issue. But it could also be that someone gets more for caring for their parents. If you have other additional expenses, such as a rent increase, you could end up in a salary consultation. We offer a monthly meeting with the salary council where you can talk to us about your salary. It is important to us that this is not only possible in an ongoing salary round, but at any time.
As long as your company is going well, it may be possible to always add something on top. What would happen if an economic crisis hit you?
Of course, we have a luxury situation. We are a profitable company, recording growth and increasing profits. We don't have to worry about the financial situation. And we have a lot of great people who do a good job. But that also has to do with our culture, which cushions a lot and makes great things possible.
Overall, your compensation system is quite complex and follows a fixed structure. How does that fit in with Einhorn's liberal corporate culture?
When we initially said goodbye to the self-set salary, and built a salary system for the first time, it was very rigid. It felt weird and inappropriate. That's why we brought more personal responsibility back. But later it was regulated again. In the last salary round we simplified the whole thing again and strengthened self-assessment. We constantly oscillate between more freedom and more security – but the waves are getting smaller.
Interview: Stefanie Hornung, a freelance journalist, specialized in topics of New Work, HR, Management and Diversity. For more information on Stefanie check out her rebel page.
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Interesting read! I find it liberating and inspiring to read about the waves at the end. We don't have to find the perfect way the first time (is that even possible??), we can only do our best, try it on, and make adjustments as we go along, and also as time changes. Accepting and finding the beauty in that is key, I believe.
If we could tag one apocalyptic rider for adaptive organizations, it would be "traditional performance management." It is old-fashioned performance management that keeps us in a world of humans as resources, as command-and-control takers, with rigid top-down planning, and solid prevention of curious and exploratively-minded cooperation. Its logic is plan – do – check – act.