Pay equity issues, rising pay rates, more job vacancies than qualified workers to fill them, and inflation. These are all consistent themes we’ve been hearing for some time that affect organizations, regardless of the industry.
What can you do to address these issues and related concerns? Reviewing your pay practices is a great place to start!
Let’s discuss three common questions and provide insight to hopefully move you in the right direction.
1. Are we paying the appropriate wages for each position?
To determine if you’re paying employees appropriately, you must first complete a job analysis. What is a job analysis? The process of deciding what the job entails, including tasks and responsibilities, and what knowledge, skills, and abilities are required to perform the role successfully. Think job description, only more extensive and inclusive.
The next step is to group comparable jobs with similar levels of responsibility and value to the organization.
The ultimate goal may be to establish pay bands or salary grades that provide a structure and a system that assists organizations in paying employees consistently for the work they perform. In that same vein, the following may be your next question.
2. Do we have internal equity in our pay practices?
There are so many factors that play into internal equity, more than we can address here! We’ll focus on a few core principles to get you started.
To evaluate internal equity, employers must first gather and evaluate employee data, such as:
- Years of experience in the job – not just with your company
- Education and training – that are relevant to the role
- Job performance level
- Employee demographics – age, ethnicity, gender, etc.
- Compensation level – including all inputs, such as bonuses and commissions
Next, analyze the data and compare individual pay rates within each job group and/or salary range. Look for inconsistencies that cannot be explained by job-related factors such as years of experience or job performance.
This process is a pay gap analysis, and the purpose is to determine if there are pay disparities within your organization and, if so, to address them appropriately.
3. Is our organization paying competitively?
If you cannot attract and retain high-performing employees, the answer may be no. You may have low turnover to date but are worried about the employer down the street or across the country stealing away your valued staff members.
How do organizations determine if their pay rates reflect the current market? Benchmarking.
Benchmarking is a process that matches internal jobs with market pay data through salary surveys or other means to identify the market rate for each position. Staying current with the market is crucial, as we have recently seen pay rates increasing rapidly in response to market forces.
As we know, pay is not the only reason employees stay or leave an organization. However, being paid fairly — meaning internal equity and at a level that accurately reflects the value in the market — is essential in our current employment environment.
Yet another integral aspect to mention here is educating your workforce on how their compensation is determined. What factors are included, and how can they develop and grow within your organization?
If you’d like guidance on pay equity and conducting job and compensation analyses, contact us for a complimentary consultation.