A Startup-Focused ‘How To’ For Achieving Pay Equity in the Workplace

By Leanne Langer

 

Last September, the United Nations established International Equal Pay Day to call global attention to the gender inequities surrounding compensation in the workplace. A year later, with an enduring pandemic that has only exacerbated issues surrounding equal pay for equal work, owning and reassessing your company’s compensation strategy is more important than ever.

 

Let’s look at the big picture. 54 million women dropped out of the global workforce last year. More recently, in August 2021, only 11.9% of the 235,000 U.S. jobs added went to women. The negative impacts of Covid-19 have been felt most acutely by working mothers, women in senior management positions, and Black women, a group that was already coping with the most extreme inequities, earning 63-79 cents for every dollar that men earn. Additionally, the hyper-feminization of certain society-critical jobs, especially during a pandemic, such as education and care-giving, are often devalued, with many of them unable to earn a living wage

 

While the realities of these global statistics may feel far and away from the day to day of your own organization, they may hit closer to home than you think. Asking yourself how you can better show up for your female employees is a great place to start. And most importantly, how can you signal support, and proactively safeguard against perpetuating these inequities? 

 

Helping young startups answer questions like these is why I am thrilled to be joining OpenComp as VP of Customer Success & Community. To address the potential gender pay gap within your own organization, benchmarks are essential. Compensation intelligence helps fast-growing organizations understand where their blindspots and unconscious biases may lie, and provide the necessary insights to help drive change.

Here, I share my advice for how pre-IPO companies can begin to answer this call on International Equal Pay Day and beyond. 

 

Identify Your Organization’s Equity Gaps 

The distribution of jobs, seniority, and pay are all highly relevant pieces of data that can help a company understand where they may be adversely impacting a particular group of employees. Performing a diversity audit is often the first step in creating a truly equitable work environment, and analyzing these organizational dimensions along gender, race, ethnicity, and sexual orientation can provide leadership with the first steps in addressing diversity, equity, and inclusion (DE&I). 

 

OpenComp’s data shows that women are more likely to be hired for entry-level roles, while men are more likely to be hired for expert-level, SVP, and C-Suite roles. This supports the existing narrative that while there are plenty of women in the pipeline, few are promoted or placed into the executive ranks of their industries. 

 

However, we do see signs for hope. Nationally, women make $10,157 less than men in the same role. At companies who use OpenComp, women only make $2,538 less than men in the same role. That’s a 75% decrease in the disparity between men and women.

 

"Employers who use OpenComp to inform their DE&I and compensation strategies have closed the pay gap between women and men by 75%."

 

This progress is largely due to OpenComp’s benchmarking process, which automates the comparison between employee and market data, then makes data-based recommendations for compensation adjustments. Benchmark data is the non-negotiable foundation of your compensation programs and financial planning. Faulty data sets you up for problems well into the future that will impact hiring, retention, DE&I initiatives, and ultimately company performance. If more companies had access to these sorts of impartial and credible data sets, this gap would continue to shrink.

 

Adhere to The Going Compensation Rate 

Knowing how you measure up to other organizations within your startup peer group can be an incredibly powerful way to ensure you hand out equitable offers. When it’s time for salary increases, employees can expect, on average, a 3% raise. If men and women consistently start off with disparate levels of pay, then your female employees will always play compensation catch up. 

 

One tactic that can help companies ensure equitable pay from the start is a no-negotiation policy. Women are less likely to ask for a raise or negotiate their offers when compared to men. By doing the due diligence to fully understand and present the most reasonable and competitive compensation, then a no-negotiation policy can protect against the persistent wage gap. Additionally, you can set distinct salary ranges that leave less ambiguity surrounding potential earnings, creating less pressure for candidates to negotiate. 

 

The growing preference for remote work among women creates additional factors for consideration, too. Many companies now allow their employees to work from anywhere, and if your organization is going to start calibrating compensation by region, doing so across the board, and communicating the pay philosophy behind the change, is critical. 

 

Examine The Employee Lifecycle 

As mentioned, women rise through the ranks at a slower rate than men. Honestly evaluating whether all of your employees are being held to the same performance standards or receiving adequate opportunities for career development are important insights to determine additional equity efforts. 

 

Human capital decisions such as compensation, promotions, recognition, and rewards have, for too long, been practiced as an art rather than a science. Determining an employee's worth within an organization based on anecdotal evidence, intuition, likability, and other biased and non-performance based metrics perpetuates the gender pay gap and leaves many women feeling undervalued and unsupported. 

 

In 2020, according to McKinsey, Black women in particular reported the least amount of support felt by their direct managers, citing a lack of interaction with senior leadership, allyship, and mentorship. Given that this cohort continues to be disproportionately affected by Covid-19, they may need even more support in their jobs than ever before. Equity, by definition, is providing fair opportunities for all of your employees based on their individual needs.

 

Commit To The Plan  

Having a compensation philosophy that you stick to, and compensation benchmarks that you reference consistently, is crucial to creating lasting equity. Companies will benefit from defined, end-to-end processes that tie compensation and stature to performance and growth. Keep in mind, these programs cannot be static. Stakeholders should revisit compensation and promotion plans as the company evolves, and at least on an annual basis. 

 

While International Pay Equity day is an excellent catalyst for asking the big and necessary questions, at OpenComp, we believe that founders should be as proactive as possible when it comes to equity at work. I am personally excited to support them on their journeys, and to help them develop their own fair, accurate, and action-oriented compensation philosophies that truly reflect their company cultures, values, and strategic objectives.

 

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