New Pay: A new solution for compensation systems – the advantages and disadvantages

New Pay – an innovative solution for compensation systems

New Pay is a concept aimed at developing fairer, more transparent and more flexible compensation systems in companies. It was launched in 2017 by Sven Franke, Nadine Nobile and Stefanie Hornung and has received a certain amount of media attention ever since. The main goal of New Pay is to improve working conditions in companies and give employees more control over their pay, according to the company on its website.

As explains, there are various approaches that companies can pursue under the New Pay concept. One such approach is flat pay, where all employees earn the same salary regardless of role, education, seniority, or other factors. Another option is to introduce a salary formula or calculator to determine compensation based on certain criteria. The self-chosen salary, in which the employees determine their own remuneration, or the salary committee, in which a committee of employees decides on salaries, are also possible approaches under New Pay.

However, there are also concerns about these remuneration systems. For example, some claim that the flat salary is unfair and that self-imposed salary only works for startups and small businesses. In addition, it is impossible to find a compensation system that satisfies all employees, as interviews with employees from different companies have shown. Nevertheless, many of New Pay’s approaches have received positive feedback and can help employees to identify more closely with their company.

In order to create a better compensation system, companies can take different approaches. For example, they can offer flexible part-time models, paid or unpaid leave, and the possibility of part-time or voluntary work in order to support the individual lifestyle of their employees. Workshops to improve the current remuneration system can also contribute to transparency and fairness. It is important to include not only managers but also employees in this process. Although experimenting with money can be difficult, trying out new pay-setting systems can also help improve the compensation system.

The advantages and disadvantages at a glance

The pros and cons of New Pay can vary depending on perspective and implementation. A possible benefit is fairer remuneration. Some of New Pay’s approaches, such as introducing a salary formula or salary calculator, can help make employee compensation fairer and more transparent. By introducing compensation systems that give employees more control over their salaries, they can feel more connected to the company and more motivated to do their job. New Pay can also help create better working conditions by offering flexible part-time models, paid or unpaid time off, and enabling part-time or volunteer work.

On the other hand, there are challenges related to New Pay. The introduction of New Pay can be difficult because it is necessary and not easy to find the right balance between fairness, transparency and individuality. Some of New Pay’s approaches, such as self-selected pay, may have difficulty integrating with existing businesses, particularly larger ones, as the model’s initiators explain on their website. Furthermore, no compensation system can satisfy all employees, and some employees may feel disadvantaged if they feel they would earn less under a new system than under the old system.

Overall, the benefits of New Pay can help increase employee retention and motivation, while the downsides are mostly associated with the implementation and integration of new systems.

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