There’s a good chance that your company doesn’t currently have pay equity across all employees and teams. That doesn’t mean your organization is intentionally paying certain demographic groups, like women or minorities, differently. However, given the tendency of unconscious bias to play into hiring, promotion, and other talent development decisions, if you aren’t deliberately taking action to ensure your compensation practices are fair, they most likely are not.
The roots of pay inequity often stem from some common, but critical issues:
You don’t actually know what your employees make
It’s surprising how many managers don’t actually know what they pay their employees. Oftentimes, once an offer is made and accepted, leaders pay little attention to the compensation of their team. This becomes a problem when you expand the team, and aren’t paying attention to how your current staff is compensated.
Managers should know what they are currently paying their staff. One suggestion is to make sure every quarter to review both the performance and compensation of your team, so that you can continually track your team’s progress towards bonuses and raises.
Your job titles, levels, and salaries are not documented or organized
Many companies put off formalizing their job ladders until far too late. If you don’t have job titles, levels, and salaries documented, it’s impossible to have a conversation about them with your team. Every person should understand where they currently stand, what they need to do in order to advance, and how to get there.
Your employees expect you to help guide them along their career path. Part of talent management is helping your team understand their gaps, and what it will take to move to the next level. If you can’t have an open and direct conversation about this, you’re definitely missing out on some critical opportunities to develop your team.
You don’t need a big formal process to build career ladders. Work with your department leads to document the career tracks as they exist today, then put milestones in place to grow and improve upon them over time. You should pin market-driven compensation to every granular job level within your organization. There are a myriad of data sources and tools available to help with this process.
You aren’t checking every offer your make for fairness
When adding new members to the team, it’s important to consider their overall experience, education, and skills when making an offer. This is an area that trips up a lot of companies’ hiring practices. Many companies let the candidate dictate what the salary should be for their role, or arbitrarily pull from a pool or budget, without considering the skills, market pay or requirements for the job.
Instead of letting a candidate’s negotiation tactics drive your job offers, you should have well documented job descriptions, requirements, and compensation strategies to match each role. You should also consider the current team’s skill levels, and where this new individual fits in relation to the skillset of the team overall, when extending an offer.
If the person you’re hiring, and the job you’re trying to fill, has unique qualifications that set them apart from the other roles on your team, consider creating a new, specialist role. For example, a Security Engineer requires different skills than a Software Engineer, and likely pays differently.
You pay your most tenured employees less than new hires
Over time, the startup team you hired becomes the most valuable and tenured employees within your company. However, their compensation likely lags compared to newer hires on the team. Employees will ultimately discuss amongst themselves the differences in their pay, which can become significant over time. This disclosure can be a highly personal and emotional issue, and will disengage some of your most loyal and important team members.
Once these team members have enough stock vested, after a couple of years, they will be tempted by offers to switch jobs and get a bump to market pay. The solution is simple: adjust their salaries to match their team members, commensurate with their performance and current job level.
If you’re interested in a business case and plenty of additional reasons why you should adjust tenured employees pay, check out this article on the topic.
Ways to improve your company’s pay equity practices
Consider the following suggestions to improve your pay practices, to ensure everyone is compensated fairly and equally:
- Stop asking salary history when negotiating job offers.
- Document and retain detailed career ladders as a foundation for performance management conversations with team members.
- Price the job, not the candidate. Match a candidate’s skills and experience to your company’s needs and the role they will be hired into.
- Leverage salary data to inform your company’s strategy for competitive market compensation.
- Create a formalized program and budget to make standard market-rate comp adjustments on an annual basis, so that loyal, tenured employees are incentivized to stay.
Of course, we also suggest you use SameWorks to identify current areas of pay inequity on your team, and make adjustments as needed. Then get certified once you’ve completed the process. Contact us for more information – it’s easier than you think!