7 Steps Toward Pay Equity – Installment #2 – Data Collection Begins: Pay Scale
We’re on the topic of developing fair and equitable pay in organizations. For background on the series and the importance of pay transparency, please see Installment 1: Overview and Key Steps.
Examining the current pay scale (sometimes called a salary schedule) is the first in-depth activity for leadership in understanding how employees are paid. If none exists, create one.
Here’s a sample of what we include at Upward Development when building pay scales to document current pay in an organization:
Note: I’m recommending a pay scale by position first, without naming individual employees. This supports more consistent budgeting, pay transparency and equitable compensation practices for organizations.
Establishing pay ranges and grades by position is a more objective and evergreen exercise, because the pay scale applies to an organization regardless of the people occupying each role.
A second phase of analysis might include a by-name pay scale, which would highlight disparities in pay for people holding the same positions. This is a far more complex technical exercise because seniority, expertise, and other issues must be taken into account. Of course, the human aspects of reviewing and adjusting pay are also very personal; it’s best to tread carefully on this ground.
Once the pay scale is complete with current and accurate data, it’s possible to identify:
- High & low wage points for the organization, as well as in each department and/or functional area
- Difference (%) between high/low points for the organization and positions within each department
- Mean (average) wages for positions, functional areas and the entire organization
- Median (middle) wages “” “”
- Outliers – highly overpaid or underpaid positions compared to peers in similar jobs
- Disparities in pay for departments or positions (specialists of one kind paid far less than others, etc)
- Equity across salary bands
- Turnover issues related to significantly underpaid positions
- Lack of depth (or too many positions) in key operational areas
- Workforce characteristics:
- Salary vs. hourly positions
- Part-time vs. full-time staffing
- Administrative vs. program/direct services positions
- Calculate the average wage for the bottom 50% of compensated employees
- Calculate the average wage for the top 50%
- If doing a by-name pay scale:
- Add a column to identify gender for each person; review and correct any disparities noted.
- Include additional demographic characteristics, such as Veteran status or race/ethnicity.
Check back next week for tips on how to complete a wage comparability study (external data) to go with your pay scale (internal data). Comparison of the two will ultimately lead to a new pay schedule, which outlines the desired wages and pay ranges for each position.
Thanks for reading!