Fair Pay Does Not Mean Equal Pay

2026/10/08

Dace Tauriņa, Senior Consultant at Figure Baltic Advisory

When discussing fair pay, one common assumption is that people doing similar work should receive the same salary. In practice, however, two employees with similar job titles may have justifiably different salaries, while two seemingly very different roles may be considered equivalent in terms of pay. Pay is influenced by the value of a role within an organisation, the level of responsibility, the competencies required, labour market conditions, and the availability of particular skills. The purpose of a well-designed compensation system is therefore not to pay everyone the same. Its aim is to ensure that pay is determined according to clear and consistent principles, while enabling organisations to attract specialists with the competencies they need.

When discussing salaries, the term “average salary” is frequently used in public debate, but on its own, this figure tells an employer relatively little. A country’s average salary encompasses a wide range of professions, levels of responsibility, and industries. Even the same job title does not necessarily mean that the roles being compared involve work of similar or equal value. This is why organisations develop modern compensation systems, evaluate roles, and compare jobs and pay levels in order to maintain internal balance – the greater the value of a role, the higher its pay should generally be. However, determining an appropriate salary also requires understanding which segment of the labour market a particular role should actually be compared with. The level of the position, its responsibilities and the knowledge required all matter, but so do the industry, professional field and other factors. For this reason, saying that “the market pays this much on average” without providing context can create more confusion than clarity.

Scarce skills sometimes command higher pay

Another common misconception is that a higher salary always reflects more complex work or greater responsibility. Labour markets are also shaped by the supply of and demand for particular competencies, and highly specialised knowledge or skills can command significantly higher pay simply because they are difficult to find. This is particularly evident in professions where demand for certain competencies substantially exceeds supply. Examples may include particular types of IT developers, cybersecurity experts, highly qualified engineers, or specialists in other fields with very specific expertise, including knowledge developed within the organisation itself through experience with particular technologies or work processes. Increasingly, this category also includes skilled technical professionals – electricians, plumbers, equipment technicians and others whose expertise is in particularly high demand in the labour market. In such circumstances, an organisation may need to pay significantly more for a particular competency than for another role that appears comparable in terms of responsibility. From the organisation’s perspective, this can be an entirely rational and justified decision if, without that specialist, the company cannot develop a particular product, maintain a critical function, or achieve its business objectives. This does not mean that one employee is somehow “more valuable” as a person than another – employers also pay for the value of particular work and competencies in a specific labour market context, and understanding this distinction is essential when designing a compensation system.

A job title alone does not determine the value of a role

One of the most common mistakes is to determine pay primarily on the basis of job titles – two project managers, HR specialists or software developers may, in reality, be doing substantially different work. One may carry significantly greater responsibility, make more complex decisions or apply more sophisticated solutions in their day-to-day work, require scarcer competencies, or have a considerably greater impact on the organisation’s results. For this reason, a professionally designed compensation system begins by evaluating the role itself rather than the person currently performing it, as this makes it possible to compare different roles according to consistent criteria and determine their relative value within the organisation. Only then does the next question arise: where within the relevant salary range should an individual employee’s pay fall? At this stage, factors such as professional experience, competencies, performance and other predefined criteria come into play. This approach helps organisations avoid situations in which pay has developed largely as a result of historical circumstances – one employee may have negotiated more successfully when joining the company, another may have been hired at a time when there was an acute shortage of specialists, while someone else may have received salary increases over the years without any clear link to the value of their role. Over time, such individual decisions can create a compensation system that even the employer finds difficult to explain.

One of the most important characteristics of fair pay is an employer’s ability to explain why a particular role sits at a certain pay level and why the salaries of two employees differ. The answer cannot simply be “that’s how it evolved over time” or “they asked for more when they joined”. Pay differences should be linked to understandable criteria – the value of the role, level of responsibility, competencies, performance, labour market conditions, or other principles established by the organisation in advance. This does not mean that every employee needs to know the individual salaries of their colleagues – pay transparency is first and foremost about understanding the logic of the system: the principles used to determine pay, the factors that influence salary progression, and the reasons why differences may exist within an organisation. Instead of asking whether everyone in the company is paid the same, a much more useful question is: can we justify every significant difference in pay?