As a Compensation consultant at Nua Group and a woman, I am in a unique position to help my clients not only embrace equity but demand it of themselves and their organizations. Equity is defined as “dealing fairly and equally with all concerned”, and this is never more important than when it comes to pay.
I believe that increased pay transparency is a critical driver to achieving equitable compensation. Recent pay transparency legislation is helping to catapult this to the top of mind for CHROs and other C-Suite executives. But, pay transparency laws are only one piece of the puzzle. More importantly, organizations need to put in place the structure, mechanisms, and education to ensure pay equity. Leaders need to advocate for their teams and ensure pay equity in the decisions they make every day, whether it’s hiring, merit, or promotion decisions.
Here are what I think are some of the critical success factors for achieving greater pay equity:
Education
New transparency laws in many states require that companies publish salary ranges in job postings, but are candidates, employees, and leaders really aware of how that range is determined and used? As someone who has worked in Compensation for over 15 years, I see how critical it is for leaders and employees to understand a few key things about salary ranges:
Salary ranges represent only one element of pay (there are typically other pay elements such as bonus targets, equity, and other rewards). For true equity, all elements of compensation must be considered.
Salary ranges are (or at least should be) determined based on a combination of external market competitiveness and internal company value. Companies develop ranges based on market benchmarking for roles in the specific industry and/or geography in which they compete for talent plus how competitive they want to be given the value of that role in the organization. So, similar jobs will have different salary ranges at different companies. What is important for equity is that similar jobs within a company have similar salary ranges grounded in market data.
Salary ranges are just that - a range. It is expected that individuals will fall at various points within a range, based on performance, contributions, time in the role and historical pay movement. To ensure equity, there should be a clear explanation against objective criteria for an individual’s placement in a range and relation to peers performing the same role.
Execution
Leaders are the ones on the front lines making pay decisions, so it is critical they take their role seriously not only as advocates but as the ones accountable for pay equity. I have spent my career working with companies to implement the framework and guardrails for equitable pay decisions, but it can fall down at execution.
Here’s the role I think leaders need to play in driving greater pay equity:
Leaders are stewards of Company culture and executors of Company compensation programs. It is important they understand their role, whether through new manager orientation, regular manager training programs, or a conscious cascade from the executive team. This can be particularly challenging in startup environments where leaders may be asked to hit the ground running before the culture and programs are even fully formed. This necessitates that the executive team prioritizes establishing Company values that incorporate equity as an imperative.
Creating policies and guidelines is never “fun” work and there is a risk that the Company focuses on what is legally required rather than operationally necessary. To ensure equitable pay practices, leaders need guidelines around how to make pay decisions in hiring, how to manage the negotiation process, and what to think about during annual reviews such as individual performance, proficiency, and internal parity. Managers are people too and have inherent biases that can creep into these important decision moments if not equipped with the right tools and education.
Implementing pay equity reviews is no longer something that a company can do as a “one-off” every few years. Implementing regular pay equity reviews (no less than once a year!) ensures the Company is monitoring its progress towards equitable pay practices and can ultimately enable the greater pay transparency that so many employees are asking for (and states/countries are starting to require). Leaders should have exposure to this activity so they understand the broader implications of the decisions they make. Educating leaders on how pay equity is reviewed can build greater accountability for the role they play.
Empowerment
Employees also have a constructive role to play in helping their organization ensure more equitable pay practices. Just like any other seismic shift towards greater equity and equality in our history, change comes not only from our lawmakers and leaders but also from employees.
Here’s what employees can do to help drive greater pay equity in their organization:
Proactively learn how compensation works at your company. Most companies share their philosophy, policies, and guidelines on pay with employees. Some go so far as to share their salary structures. Whatever your company provides, make sure you understand it and ask questions of your leader if you need clarification.
Understand your own compensation. Many employees not only have a salary but also bonus and equity. Understanding how these elements work together to make up your total compensation is key. The value of equity can be particularly complicated to understand, especially if you are in a private company, so be sure to seek out information on how it works at your organization. Different companies also provide different levels of benefits, especially around medical, wellness, and financial programs such as 401K matching. It is important that employees understand the value of each of these programs to understand their total rewards.
Be clear on the expectations of your role, what it looks like to excel, and what it takes to move your career forward. If you have exposure to the salary range for your role, it is important to understand your placement in that range. Your years of experience (in your career, at the company, and in the role) as well as your performance are likely all factors in your pay. To know if you are paid equitably, you need to know how all those factors played into your personal situation.
Women are notorious for not negotiating well for themselves. Especially at the time of hire, it is critical to understand the pay you are being offered and negotiate if you don’t believe it is reflective of the role and/or the experience and expertise you bring to the table. Don’t be afraid to ask how the salary was determined and how it compares to peers performing similar roles. Do a little research on negotiation skills to ready yourself for an effective and productive conversation.
Beware of the internet. There is a lot of crowd-sourced information around pay, but the reality is that many factors go into pay and there are many different components of pay beyond salary that may not be reflected on the internet (such as bonus and equity). Do your research, but make sure it’s credible. More importantly, be an advocate for yourself in terms of the value you bring to the company. Understand the expectations of your role and be able to tell a compelling story about your accomplishments and contributions to the business. Make sure you have open and transparent conversations with your leader about your career goals and ambitions and what it will take for you to grow your career - and your compensation.
If you are interested in learning more about the work we do to help Companies implement equitable pay practices, reach out to us at hello@nuahr.com.
Chelsea Penaloza, a rewards consultant at Nua Group, has spent her career advising clients in all areas of compensation program design including career architecture, strategy and philosophy, salary structure design, career leveling, financial modeling (and much more!). She has visibility into over 15 years of global compensation practices.