7 Steps Toward Pay Equity – Installment #7: Presenting and Implementing a New Pay Scale

Happy New Year!

Here’s the final post in our series on creating more equitable pay in organizations. Please see Installments 1-6 on the right sidebar for practical steps leading to this point.

In an ideal world, I would have closed 2017 with this and started 2018 with a new post…c’est la vie. Now you can guess some of my new year’s resolutions.

At these final stages it becomes clear – a valid wage comparability study is crucial. Leaders must prove that decisions about pay are not subjective or arbitrary, but rather based on careful research of marketplace wage data and benchmarks for similar positions, regions and organizations.

When this happens, employees are more willing to accept pay adjustments and appreciate the effort toward transparency and pay equity. Also, good leaders understand it’s in their best interest to treat employees well and pay them fairly, because happy employees are more loyal and productive.

Presenting a new pay scale to employees

Once the board and its relevant committees have reviewed and approved the new pay scale, your best bet is presenting it to staff before making changes.

Develop clear and consistent messaging with a small team of leaders about the goals and outcomes.

Offer a 1-2 page summary of key points to all staff on the pay scale revision process and a timeline for moving forward with changes.

The organization’s most senior employee should present the new pay scale. It may be appropriate for 2-3 top leaders to make a joint presentation, depending on the size of your organization and team dynamics.

Ideally this discussion includes all staff members. However, it may be necessary to speak to a management team and ask them to relay information to their departments. In this case, over-communicate details of the pay equity project to non-management staff who did not hear the initial presentation.

For greater transparency, share a copy of the wage comparability study (or at least an executive summary of its findings – especially as they relate to your current pay scale). This will help staff understand the drivers behind decision-making, and where disparities in compensation were addressed.  You might make this required reading before the meeting, so the resulting discussion is more informed and productive.

Allow time for Q&A (at least 15 minutes), so employees can provide feedback on the process and you can practice inclusive leadership. This will also help clear any misunderstanding and improve accountability by preventing a few staff members from telling their own version of the how, why and when changes to pay are being made.

Implementation

Make the new pay scale effective immediately at all levels if possible. Begin changes within 90 days at the latest, or you risk losing momentum and credibility.

If putting a new pay scale in place right away is not possible, convey a clear plan for phased implementation over multiple quarters. Then stick to it.

This will help employees maintain trust in the process and good working relationships with management and leadership.

Notes on Salary Reductions

In most cases, the wages of some positions will be adjusted upward while some remain the same and others are adjusted downward. This is the often most challenging aspect of the entire exercise. Be measured in your approach and the amount of time that’s spent addressing employees’ concerns; some time is necessary, but it can easily become a distraction.

When salary reductions are called for in positions with lower wages (<$30,000 annually), a few options should be considered to soften the blow:

• Budgetary constraints may require the current employee to accept a pay cut immediately. This should only happen if all higher-paid employees in the organization also receive pay cuts.
• Pay decreases for a position can be phased over several quarters.
• That person(s) maintains their current level of pay. The next hires come in at the lower level.
• Offer a flex schedule or other non-monetary compensation.
• Offer a lateral transfer or promotion to a higher-paid position the employee is qualified to fill.

In some cases, wages for the highest-paid executives should be reduced to achieve more equitable conditions.

Sometimes, they’re just overpaid. Other times, there are budget constraints that didn’t exist when their pay was set. This is seriously worth considering, though rarely a popular suggestion for those directly affected – usually CEOs and CFOs (or equivalent positions) – who also have the most power in organizations.

Another complication with executive pay – board members are often reluctant to give pay cuts to the one staff member they directly supervise – even when it would be in the best interests of the organization.

I’ve seen nonprofits ignore auditors’ and CPAs’ advice for years on the matter of overpaid executives and inequitable compensation. The results? Financial instability. Huge turnover. Sometimes, insolvency.

There are better ways. I hope this series has helped illuminate a few paths for your organization.

External Resources

SHRM – Updating Salary Structures: When, Why and How

SHRM – How to Establish Salary Ranges

University of Texas at Dallas, Human Resources Page, Compensation Standards and Practices

Thank you for reading this series! Your comments and feedback are welcome below.

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