Compensation practices that ensure fair pay for employees can lead to remarkable outcomes:
- Reduced turnover
- More productive team members
- Happier people
- Resolution of behavioral issues you didn’t realize were connected to pay inequity
- Better bottom line (more profit, social impact, collective action, etc.)
What is Pay Equity?
Here, pay equity is defined as the fairness of compensation paid by employers to employees – both individuals and groups of employees. We’re not reviewing merit-based systems in this series or focusing on disparities in pay for any particular group (women, people of color, younger workers). Our goal is to provide nuts and bolts guidance that helps you identify and address pay inequity at the organizational level.
The Society for Human Resource Management (SHRM) says, “Fairness in the workplace is a strategic priority for organizations.” We completely agree. For a comprehensive review of this set of issues and some legal background on pay equity, see their Managing Pay Equity Toolkit.
Pay equity has been achieved when an organization’s pay scale reflects consistent wages across positions, departments and classes, and when it is tied to a current, valid wage comparability study.
Key Steps for Organizations
- Understand your current position by analyzing pay data within your organization and comparing it to wage comparability studies with external data.
- Develop a proposed pay scale that compensates employees more fairly and equitably.
- Establish or update policies and follow compensation practices which ban (and actively prevent) discrimination in setting or changing pay for employees.
Note: Changing a pay scale can have a significant impact on finances and operations, and may require months or years to fully implement, depending on the organization’s available resources and changes to be made.
Success is achieved when leadership commits enough resources (time, attention and money) to the process.
For complex projects, it helps to outline discrete, achievable steps:
- Produce the existing pay scale by position with employee class (exempt, hourly) and base wages. Analyze it and highlight any disparities in pay across positions, departments and employee class. Note the spread between the lowest-paid and highest-paid employee.
- Conduct a wage comparability study with compensation data from similar employers; gather regional and national data – Installment #2 will cover data collection.
- Organize and compare this data side by side. Use the results to guide frank conversations among the board and leadership team (Exec. Director, Finance Dir., HR staff, admin. managers, program managers):
- How does the existing pay scale reflect (or not reflect) fair and equitable compensation practices in our organization?
- On what dimensions are we concerned about improving pay equity and reducing disparities? (Across equivalent positions? Departments? Position classes? Part-time vs. Full-Time staff? Admin vs. programs? Gender? Race or ethnicity? Persons with disabilities? Skill level required for positions?)
- Survey employees for input and feedback at least once during this process. Be clear about the goals.
- Design an organizational budget with more equitable pay and total compensation. Focus more on raising money than cutting costs. Test feasibility.
- Include representatives from each programmatic area in budget analysis and related fundraising planning.
- Be creative about how benefits and other perks for the total compensation package might be improved.
- Change policies to reflect the new practices. Use procedures to clearly outline the requirements moving forward with regard to compensation, hiring and retention.
Confession: There are 7 key steps above, but the entire process required for an organization to analyze pay and total compensation, discuss its evolution, and achieve pay equity is comprised of about 35-40 steps.
If you know this work, you’ll know that’s about right.
Thanks for reading! Please leave any feedback or comments below.
Check back next week – we’ll talk about how to do a wage comparability study. Installment #2 will be released here.
We’ll also post via Twitter and LinkedIn. You can follow the company and Andi at the bottom of this page.
Vu Le is a must-read. His blog, Nonprofit AF, is a gem (FKA Nonprofit with Balls). I heard him offer practical tips on this topic at the Oregon Nonprofit Leaders’ Conference last spring. Vu is a leader on the salary range issue and many others.
Here’s a decent article with an overview of pay equity on payscale.com
National Committee on Pay Equity – FAQ and Reports/Resources
Definition of pay equity from the Work and Family Researchers Network, who has an extensive archive.