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Are Your Organization’s Pay Practices Equitable?

/ February 1, 2019 February 1, 2019

Historically, employers and employees never spoke about salaries in the workplace. However, given the current business environment and the accessibility of information, times have changed. There are no laws that prohibit employees from sharing salary information, leaving organizations vulnerable to issues that may arise around pay equity. Whether intentional or not, your organization could be at risk of a compliance issue or even a lawsuit if you don’t have clear and equitable pay practices.

The Pay Equity Commission defines pay equity as “equal pay for work of equal value; The value of jobs is based on the levels of skill, effort, responsibility, and working conditions involved in doing the work.”  Protected classes vary by state, but some of them include: , race, creed, color, national origin, ancestry, nationality, disability, age, pregnancy or breastfeeding, marital, civil union or domestic partnership status, affectional or sexual orientation, gender identity or expression, military status, and genetic information or atypical hereditary cellular or blood traits.

To understand if your organization’s pay practices are equitable, it is essential that organizations examine job salaries annually at a minimum. One way to do this is through a pay equity study. In this study, each employee’s salary is examined and recommendations are provided based on the salary of employees performing like work, following an examination of both internal and external comparable factors. After a pay equity study is completed, organizations must come up with a strategy to fix inequities if there are, in fact, unfair pay practices.

Pay equity begins with a thorough understanding of the organization’s pay philosophy. This philosophy establishes the foundation for salary structures and at a minimum should define the competitive market for talent, (where you recruit from) and the desired pay position for the organization (top of market, mid-market, low market).

One strategy that we recommend to ensure your pay practices are equitable is to create ranges for job families, or jobs with the same level of responsibility, based on the compensation philosophy and market data. For example, a range for a specific role might be $75-$125k and each employee within this job family would get a salary in this range based on experience and performance. There are several benefits to this strategy, including:

1.Transparency

Organizations who create job ranges will often publish these ranges, allowing both prospective employees and current employees to have a clear understanding and expectation of what they will be paid. They will also be able to understand what their salary growth within the organization will look like if they are promoted to a new position.

2. Attraction, Retention, & Motivation

By publishing salary ranges, your current and perspective employees will see your transparent, competitive rates versus competitors. Additionally, positive equity experience will promote the employer brand and make the organization more attractive from a recruiting perspective.

3. Avoid Compliance Lawsuits
Job ranges allow employers to be upfront about salary regardless of sex, race gender, etc. By doing this, employers are protected from lawsuits, which can involve back pay and treble damage awards.

4. Budget forecasting
Organizations with job ranges can more accurately forecast costs associated with salaries, helping them better plan their finances and budget allocation.

5. Consistency

Organizations with sound salary structures can better manage consistent pay practices between departments as well as equitable practices on an individual job basis.

 

Pay equity laws have already been enacted in 40 states. If you haven’t looked at your current pay practices, now might be a good time to assess your organization’s compensation practices.

Don’t know where to start? Exude can help! We’ll perform a pay equity study specific to your organization to make sure there are no unfair pay practices and that your organization is in compliance. If there are things that need to be fixed, we’ll see where your biggest opportunities are and find a way to make appropriate adjustments. Contact us today for more information.

 

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