Why is Pave legal?
If you haven't heard of it, Pave is a YC-backed startup that helps startups with compensation. I can't actually access the system so I'm speaking from hearsay and what's information on public parts of their website. The way I understand it works is that you connect Pave to your HR and Payroll systems, they take the data about who you employ and how much you pay them, combine it with all their other companies, and give companies a collective breakdown of compensation ranges.
My question is, isn't this specifically anti-competitive wage fixing? This seems exactly like RealPage but for employee compensation. As far as I know, colluding on wages like this is illegal. Is there something about the company that I'm missing?
I have never heard of Pave before, but this just sounds like yet another copy of Equifax's "The Work Number" [1]. Basically, HR at many companies gives your salary and employment history data to Equifax, who then sells access to the information to certain parties with supposed need to access it, including potential and current employers and creditors. This report is likely one of the most invasive consumer files out there for many people.
I cannot comment on the legality of this kind of data sharing, but as I and others have pointed out, it has existed for a while. I do agree that it is concerning. You can freeze your Equifax The Work Number report at least, just like other credit reports.
[1] https://theworknumber.com/
The FTC Guidelines for Collaborations Among Competitors https://www.ftc.gov/sites/default/files/attachments/dealings... says it’s illegal to share “competitively sensitive variables”, not just any data. Some forms of data sharing such as industry averages may not be illegal, but more detailed data such as numbers of applicants or price elasticity that enable the companies to act together as if they were a monopoly probably are. RealPage crossed the line by sharing an optimization algorithm and encouraging collective action. I’m not sure what Pave does.
As described, it is a fair ways away from what RealPage is doing. Specifically:
* RealPage sells raising rents, not just market info.
* RealPage pressures clients into taking their higher rents.
* RealPage also pressure clients to refuse to rent at lower rates for their own narrow economic interest - in other words, they actively seek to circumvent competitive pressure to keep rents high. (edit: to clarify, I mean they discourage lowering rent to attract a renter)
Pave does sound like it gives businesses a leg up over employees in wage negotiations, but until it e.g. starts promising clients that they will be able to pay lower salaries, the critical element of coordination won't be in the mix. Pave gives you the data, but you can still choose to pay above market to attract talent.
Competitors making similar price adjustments or salary adjustments based on seeing each other's public announcements or sharing data is legal: https://en.wikipedia.org/wiki/Tacit_collusion
That's why it's "legal tacit collusion" when one leading law firm announces salary increases and other law firms immediately match it: https://www.reuters.com/legal/legalindustry/large-law-firms-...
That type of salary matching has been happening for decades.
What's illegal is competitors making agreements with each other to set wages -- via secret emails, etc.
Companies like Radford have been doing this for decades and are used by pretty much everyone, Pave is just a more efficient version of the same game.
I got access to Pave through one of my investors. Seeing the data made us set salaries and contractor rates higher, not lower. It’s like salary banding at big companies. It’s a framework for how much other people are paid at the same level, not a contract. HR will make it seem like a rule, but if you do spectacular work - you can always negotiate.
Collusion requires an agreement between rivals that negatively disrupts market equilibrium. Is this company not actually making the market more efficient and transparent? That said - an efficient market is good for the collective, not necessarily the rogue / outlier individual.
Wage fixing is when multiple companies agree to set wages at a certain amount.
Sharing compensation data across companies doesn't necessarily mean wage fixing. Company A can use the compensation data from Company B to try and compete better for talent.
Not saying thats what it will be used for, but it's technically not wage fixing.
Hate it in concept (I can't speak to Pave specifically). Metrics are useful if the manager doesn't make hard targets, the data is good and the model is good. How do you model compensation packages? how does 20 days leave compare to unlimited leave? Are two companies with unlimited leave equivalent? When the managers have targets, they're incentivized to massage the data in their favor. So even if you're doing it right, that makes every other companies data suspect.
This also sounds like it will reinforce some negative behaviors. If the data shows that other companies are paying women 80% of their male peers, shouldn't this recommend I also pay women 80%? But I doubt the output will spell it out that way, will I even know it's influencing me this way?
Gratitude for the expose. I was(and assume most here were as well) completely unaware of Pave.
I will, and hopefully other potentially impacted, look up if I am affected by this and if so - share experiences/info here.
The overwhelming question I have when reading these responses is "don't you guys read salary survey data when you're looking for a new job, or at annual review time?"
I believe wage-fixing would require companies to agree to…fix wages. Having knowledge of average compensation is not inherently problematic. Firms are still able to decide to pay more or less than the prevailing wage.
I guess my issue with all the “it’s just info” arguments is this. Employers inherently have an information advantage in salary negotiations. A tool like Pave drastically increases that imbalance.
How am I ever going to realistically negotiate salary vs a company that has this level of information (even during performance reviews)? And frankly something that worries me is, what level of data are they getting? If it’s tied to your HR system, does it get anonymized performance reviews? If every company can perfectly profile me and place me in an expected salary, I as the employee give up all my power. That’s strictly bad for me
Sharing compensation ranges may not be enough to qualify as wage fixing.
It seems like there would have to be an agreement or at least a collective incentive to lower wages.
While companies could use the data to ensure their offers are always below average (pushing wages down), they could also use the data to ensure their offers are above average, pushing wages up.
Think about it: prices are transparent in most markets and that doesn't seem to generally lead to anti-competitive prices. In fact, it seems to encourage companies to compete.
You're assuming that it would depress wages, which is not necessarily true. A more likely scenario is that such a thing can slightly depress wages in low-skill, low in-demand jobs but is more likely to slightly increase wages in high-skill, high in-demand jobs. Companies that are growing and want to be the best and are flush with cash will happily pay premium wages to premium employees based on salary data. Other companies won't. So that's the big difference between the two companies. The "collusion" doesn't necessarily cause lower wages, that's just a big assumption that some people are making. Whereas RealPage was specifically touting and actively encouraging increasing rents.
It’s new so the government hasn’t caught on yet. They probably also need a larger market share to be considered fixing.
I found that salary data for some of my employees was being leaked and very accurately reported by a now defunct company called Paysa. We determined that the employees who had their data leaked had recently applied for mortgages and auto loans. Your bank could be selling your data.
> helps startups with compensation
It's not only startups - I know decades-old, listed firms that use it too.
Well, I wouldn't mind getting my wage fixed, if that works both ways, down _and up_, because then I would be guaranteed to never earn less than average for my skill and experience. Assuming, that those things of course factor into the averaging. Person X with experience Y in position Z. However, something tells me, that there is a tendency towards the downwards direction and none towards wage increase.
(Background: In Germany not so many companies pay competitive wages for their software engineers, especially not, once you worked for some years and are no longer a bloody junior. So I calculate it would result in a wage increase for me, since everyone says I am underpaid for my experience.)
> My question is, isn't this specifically anti-competitive wage fixing? This seems exactly like RealPage but for employee compensation. As far as I know, colluding on wages like this is illegal.
As long as Pave just helps employers look backward in time so to speak I’m not sure I’d call it collusion. But if they enable some kind of coordination between future potential employers, then yes, maybe it is.
In the RealPage case the coordination aspect consisted of providing a recommended rent for the property if I understand it correctly. I guess the equivalent for Pave would be if they gave a recommendation on what compensation to offer.
So, I'm sure the format and medium is different, but companies HR depts have been sharing notes and checking on what the market compensation is (for any given job and experience level) since forever. IANAL, but this is not a new thing.
I've even known co-workers who said "I deserve more $$, I'm underpaid for my experience and job" and supervisor repeats this to HR, then HR checks on it, and a few days later says "true, here's a raise". This was in the 90's, btw. Not a new thing.
“I’m not punching you in the face, I’m just putting my fist on a movement vector that happens to intersect your face.” I hope these guys get their shit rocked in court. I’m tired of a world run by cartels.
FWIW, I believe that Pave works to raise engineering salaries. Every company wants to say, "We pay above the 50% mark", thereby steadily raising it over time.
I hear the complaint but it's a bit of a trap to just seek protection.
Yes, the law on point is permissive. That goes with the evolution of law.
But assuming for the moment that we want not just avoid injury to ourselves but to create the world now and to come, what are we called to do?
- What exactly do you, or employees, want in this situation?
- What would Pave do if they wanted to take the high ground? Could that be a business differentiator?
- What law could you write and enforce, to protect what interest, without also damaging other interests that are socially beneficial?
I think the organizational evolution towards having loose laws with tightening enforcement, or tight laws with lax enforcement, give way too much latitude to policing/enforcement and create a corrupting political franchise of affected stakeholders taxed with managing regulators.
My hope would be that internet-scalable transactions have similarly scalable regulatory solutions: dead-simple to detect and assess, finely-tuned to the balance of interests, and so patent as to be indisputable. Then people can get stuff done without dealing with the shadows and forces of ambiguity.
Is something like that possible here? Could Pave be a champion of it?
This already existed for decades. It's called "Radford".
Sharing data about wages, I think, is not wage-fixing. Agreeing not to go higher than a particular wage is. What got RealPage into trouble was the fact that, in order to use the system, you HAD to use their algorithm for selecting rental prices. You entered into a legal agreement not to compete on the prices that RealPage provided.
I had the same concern where I work. They told me data are aggregated anonymously, so no risks, in any case it's useful to compare yourself with others when your salary is below average, so you can ask for a raise (which I will do next salary-review cycle) :)
if y'all think that being in the dark about market wages is going to result in employers offering higher salaries then I don't know what to tell you
From a US perspective, if Pave existed in a market where salaries weren't transparent, I would say yes, it's veering into being an anti-competitive/wage-fixing tool.
However, more and more states every year are introducing laws that require salary ranges on job listings. What that means is that Pave is basically just organizing the data that's already becoming public for job applicants and employers alike.
My guess is that they would argue that most of the data they use is public, just go on LinkedIn and look at 10 job listings to have a range.
It's almost certainly illegal, but it benefits the capital class, so it's going to get a pass for a long time.
That said, it's exactly the same thing that landlords were doing with that pricing software and the government is coming after them, so maybe pave will get hit with a big lawsuit sometime soon.
Here's hoping this sort of thing gets regulated down into the earth.
I'm not sure about the legal aspects in your jurisdiction but in many others it is common for unions to aggregate this information and there are usually companies that do this or hook into the books and compare what different companies are paying for services and material they use that then sell back information about whether they could cut costs.
There's a lot of technically legal anti-competitive behavior. We need our legislators to get off their asses and legislate.
Salary surveys are not new. Robert Half does this already, and has for decades.
What RealPage does is sell a pricing algorithm using that data, which is the bit DoJ and Congress has an issue with.
Carta has a similar product, and Radford is a popular one as well. These things have been around for decades. Nothing new.
Isn't this just salary benchmarking. It's been happening for ages. As far as I know they submit the data anonymously with only your job title. so that companies can benchmark their pay ranges against others for the same role. It forces upward pressure on wages for some companies too.
Huh, looks like they've pivoted (or is that a different Pave?).
> Pave: We turn your Google Analytics data in actionable insights + reports with our data science AI algorithm.
https://www.ycombinator.com/companies/pave
Yep,this sounds like something that will be judged to be illegal once the right people see it.
If this were illegal, so should the KornFerry Hay system be, and that system has existed for decades.
This is exactly what Pixar/Disney and Ed Catmull got sued for.
Apple, Google and FB as well.
Apple and Google got sued and lost because they were colluding, strange to see that a YC would get into that business because discovery seems pretty much "let's see how you run" then the prosecutors can sue you out of existence
The funniest thing about all this is that everyone around knows about the employees’ salaries, except the employees themselves, and at the policy level it is often written that you do not have the right to disclose this information.
Because it's not wage fixing?
To be competitive you need to be paying more than others not the same as them. This is why FAANG got themselves into a fix of paying 500k for people they would have paid 200k for a year or so beforehand.
The "funny" thing really is the fact that most company forbid you from discussing your wages with your coworkers, but this seems like an automated way for companies to discuss the salaries they pay with other companies.
1) Salary surveys for local or national startup scenes have been a staple for decades. Here in Waterloo (Canada), there was a dominant local survey that all tech companies participated in annually with results being shared. Then, as you get bigger, you come across larger versions of the same thing.
2) VCs are often the vector by which this all happens. They ask their portfolio companies to pull together the info for their employees, presumably submit it into the companies aggregating everything, and then the startup gets a copy of the recent data.
3) Even done the old way (Excel), the data was incredibly detailed. You can slice and dice by startup stage (series A vs series B vs seed), employee count, region, sector, etc to determine if you're paying market rates or not. This is particularly useful for growing startups, where the founders have no idea what to pay, say, a VP Marketing at their pre-revenue mobile gaming startup in Helsinki.
4) Obviously whether or not this is bad for employees themselves is debatable, but I think people are missing the point that these surveys are ALWAYS skewed UPWARDS due to the much higher volume of data from the large tech companies (because they have far more employees and tend to be offering significantly higher comp). So in practice, the impact is likely to RAISE wages at earlier stage startups who are competing for the same talent as later stage tech.
Hm, sounds like the recent rent fixing collusion. Which was ruled illegal.
They already expect people to work for next to nothing simply because they're "startups". Instead, maybe they should focus on hiring decent people AND paying them industry-fair wages.
This sounds very obviously illegal. Where is the local DA on this?
The fundamental difference between something like Pave or Radford is that, AFAIK, they are simply providing companies with information.
I am not a lawyer, but I believe the fundamental issue with RealPage is that by entering into a service agreement with them, you agree not to violate their price “recommendation” and so you are centralizing actual pricing power into a single entity.
I believe RealPage has some way to negotiate out of this standard deal but it’s not common.
Companies likely insist on staying within certain pay bands for a whole host of legal and HR reasons but they aren’t getting a specific salary from Pave that they are contractually obligated to use in their offer.
Collecting and sharing data is in itself not illegal. RealPage was also using the data to algorithmically generate a rent number and encouraging landlords to automatically use that number with no room for negotiation. It literally branded itself as a service that would prevent landlords from bidding against each other. That part is what pushed it into collusion.
And regardless of whether it is legal or not, the problem has to go beyond a handful of small startups for the DoJ to get involved. RealPage is used in 80%+ of multifamily rental buildings in the US. What is Pave's market share? How many employees are affected by their practices?
I've been hired to a startup that uses Pave - they mentioned that they paid at the 75% percentile, and my offer ended up being more competitive than others I was getting. I think that while obviously some companies can use this data to pay less, the more likely outcome is that they pay MORE. You forget that companies are competing with each other for talent, they are not in the business of colluding together. So if I can see that other companies are paying X, I am more inclined to pay X + Y
They provide benchmarks, before them was Radford. They’re just taking a tech-first approach of an age old product.
IANAL so i don't know the actual legality, but it certainly seems like it should be. Definitely immoral.
I have to say I am pretty surprised to see the negative sentiments toward Pave and salary benchmarking data in general here. Why is the assumption that salaries would always be lower given this data? It seems just as likely to inform companies that what they had in mind is below market or that they are under-compensating someone in light of market changes.
Yep all of these compensation intermediary are basically supporting illegal collusion
I'm guessing that this practice is not possible in the European Union?
All tax data should be public. Then we would know exactly what everyone makes.
Probably not, but it doesn't matter until there is a complaint (lawsuit)
It shouldn't be, and neither should The Work Number.
Uber and AirBnb are essentially illegal taxi and illegal hotel services. Remember taxi medallions? Remember zoning laws? Being illegal is not a showstopper for a startup because they are under a radar, being illegal is not a problem for a large business because they have enough power to not get prosecuted.
Yeah this is borderline. It probably won't fly in California. In the past big tech companies (like Symantec) used to require you to submit your last W2 or tax return for a job offer. Credit card companies also sell your salary information etc...
I cannot fathom how any organization would willingly allow such a trojan-horse operation to see internal data like this. What possible value is there to add such an enormous vulnerability surface for such laughably tiny, if any, benefits. That this company raised $100M+ at a $1.6bn valuation is...bizarre.
This feels like one of those things where VCs (including YC and A16z) force this nonsense on their other startups in a circle-jerk sort of pyramid scheme fashion. There is no universe where this makes sense as a product.
Legal or not, Pave is unethical.
In the UK and EU it would be outright illegal on GDPR grounds (unless you consented to it, which would be unlikely without coercion — also illegal)
This sounds like levels.fyi for companies? As long as they are selling aggregate data and not data specific to an individual (e.g. for determining an offer for a particular person) it seems reasonable.
I assume that as a European our GDPR laws would make this highly illegal if it were operating inside the EU?
a lot of companies already do this - in the UK they call it benchmarking. they get data from companies they compete with for talent, from data-brockers i.e people who buy compensation data from companies. then set your pay based on what those companies are paying.
collusion in another name if you ask me.
Wow first we got our rents fixed, now we're getting our wages fixed. Awesome
Anything that keeps the code monkeys in line is legal.
> Pave is a YC-backed startup
This thread is getting removed from the front-page in 3... 2...
It's legal the same way Airbnb and Uber are legal.
If you've ever worked for a YC or Sequoia company, you're in a secret database with who you worked and how much you made that is accessible to other founders. The additional context is critical for startups to make competitive offers to startup employees. I don't see what the big deal is. If a worker is working at a company A making $80k, and they try to get a job a company B making $90k, the owner of company B needs to know they were only making $80k at their last firm, so they can make a good offer of $85k. $10k would be too much.