5 Ways to Crack the Compensation Code on Equal Pay Day

This blog originally appeared as a LinkedIn post by Thanh Nguyen.

 

International Equal Pay Day is a global call to close the gender pay gap — which at the current rate of change, could take 257 years. Women make 80 cents for every dollar men earn globally and in the US, the gap is only slightly smaller and hasn’t budged in 15 years.1

 

While there’s growing recognition of this universal challenge, and calls to action for gender parity, the slow rate of change indicates a more systemic issue. 

 

The Cause of our Compensation Nightmare

Compensation has been a black box for a couple of key reasons. First, market data is the foundational piece of compensation planning; it sets the guideposts for what is a competitive and fair offer. And yet, employers have been reliant on stale data that isn’t right-sized for their particular industry, organization size or specific roles. Additionally, they have lacked the tools and resources to cull insights to understand, and ultimately address, their existing pay gaps.

 

Possible Solutions for Compensation Intelligence

As the founder of a compensation intelligence startup for high-growth companies, I share below how we approach pay. Our mission is to empower business leaders to make good compensation decisions with leading data and solutions. Clearly, we need to get pay right with our own employees.

 

We set a compensation strategy that promotes both equity (equal pay for equal work) and compensation clarity (communicating clearly about our philosophy which is not the same as revealing every employee salary). We believe a fair work environment where employees feel valued and want to stay not only benefits the individual, but builds a culture of trust that benefits the entire organization. At a more tactical level, this what we practice:

  1. Compensation clarity starts before we hire. We view interviews as conversations to see if there’s a mutual fit between a candidate’s market value and how we as a company value a particular role. As we progress in the interview cycle, we provide insights into the role, the salary and equity ranges associated with it and the opportunity for growth over time. Our candidates understand the range of pay for the role they are interviewing for as well as for future roles with promotions, pay raise potential, etc. 

  2. Compensation intelligence simplifies negotiations. We have the data and tools to conduct the proper compensation analysis to know what to pay our employees against the market. This allows us to set appropriate pay ranges for each role across our company. We can then have clear-cut discussions with our candidates about the pay ranges and where they fall within them based on experience and skills, leaving little need for negotiation. This is important given that negotiations tend to negatively impact women who can be penalized for being perceived as too aggressive or not aggressive enough in this stage2. (Literally can’t win!)

  3. Previous salaries aren’t considered in our compensation ranges. Pay inequity starts early and has a negative compounding effect. Female college graduates are typically paid less than their male counterparts straight out of college, as an example3. We want our candidates to be paid fairly, independent of previous bias so we don't ask for previous salaries in our hiring process. 

  4. New employees understand growth potentials. With reliable and fresh data, we can show our employees their earning potential as they gain experience and are promoted within the company. We show the pay ranges for the anticipated trajectory of their career with us; employees see compensation at each level of experience for their current and future roles. From the beginning, we provide clarity to our employees so that there are no surprises at any stage of their growth. 

  5. Equity gaps are evaluated routinely. With the tools to easily conduct regular diversity, equity, and inclusion (DEI) analysis, we constantly inspect employee pay. If we discover gaps, we quickly model how to course correct. Our employees know that equity is a part of our company fabric and are aware of our ongoing assessments. 

Pay equity can only move forward in organizations with two things: commitment at the leadership level followed by thoughtful, continuous tactful execution over time. That commitment to equity doesn’t end at pay, but must be integrated across a full range of programs that scale beyond compensation for a real cultural impact within any given company - and ultimately, if we’re all in this together, on a societal scale as well. 

 

Need help identifying your compensation gaps? Compare employees' base pay, total cash and equity to market for up to 25 of their key roles - for free.

 

Sources:

1. https://www.pewresearch.org/fact-tank/2021/05/25/gender-pay-gap-facts/

2. https://www.pon.harvard.edu/daily/leadership-skills-daily/women-and-negotiation-leveling-the-playing-field 

3. https://www.epi.org/publication/straight-out-of-college-women-make-4-less-per-hour-than-men-and-the-gap-is-getting-wider/