Pay equity has been in the headlines for years and remains an important topic in 2021. As states enact new laws, and the government focuses on pay discrimination for federal contractors and other employers, it is more important than ever to review your compensation and develop a strategy around managing pay equity.
Here are five things to consider when addressing Pay Equity:
- Develop a compensation strategy and structure. By developing a compensation strategy, reviewing the market data, and creating pay bands, you will build a solid foundation from which to manage compensation. A well-designed structure is based on both the external market and the internal goals and unique considerations for the organization.
- Increase pay transparency. Pay bands and a corresponding compensation strategy will guide your leadership and managers in their discussions with employees around compensation. We all know compensation can be a difficult discussion to have, so having detailed information backed by data allows for better transparency that will be a platform for these conversations. Frequent discussions with your employees also provide them the opportunity to request additional responsibilities and training, which allows them to take some ownership in their earning potential.
- Conduct pay audits annually. While best practice is to review the market data every one to two years, at a minimum, companies should review internal compensation annually. If you do not have a formal compensation structure or merit process, pay equity issues can arise when one employee requests a raise, and another does not. When hiring new employees, it is important to review how current employees are paid to maintain equity, as some candidates may negotiate while others aren’t comfortable doing so. It is also important to review job descriptions as employee roles change, and validate the market data for new positions. Documenting performance also allows for a methodological determination of compensation levels.
- Create a budget or plan for addressing inequities. As companies grow and add positions, they often are focused on hiring the talent they need. At the same time, companies should continue to review current employee compensation to avoid creating internal inequity. It is important to develop a plan whether it is in your annual pay audit or on another schedule, as well as budgeting for any pay equity issues that may arise through the process of acquiring the talent you need to grow. Conducting a market review allows for organizations to build the potential pay changes into their annual budgets.
- Stay up-to-date on compensation regulations. Laws are enacted or changed regularly and staying informed and compliant on laws related to compensation including minimum wage and salary, salary history disclosures, disclosing pay in job postings, and other pay equity regulations will save your organization future headaches.
If you need help managing your compensation program and strategy – or with any other HR issues, call KMA today.