Are Compensation “Best Practices” Equitable?

Are you compensating your employees equitably? If you’re like most organizations, even if you’re committed to creating a more equitable workplace, the answer is probably no. Why? Because you may be relying on the same systems and so-called “best practices” that created pay inequities in the first place.

We’ve put together a list of some of the most commonly held compensation-related myths, along with ways to “bust” them to help your organization value all of your employees equitably and begin to put your core values to work.

MYTH #1: Only leadership and human resources can create compensation programs.

When creating a compensation program, it’s important to include a cross-representation of your organization at all levels, roles, and gender and racial backgrounds. At Edgility this process includes surveys, focus groups, 1:1 interviews and facilitated design sessions before we present a final recommendation to leadership. Our goal is to understand the total value proposition that attracts staff to an organization and keeps them engaged, as well as how compensation fits into that larger picture.

MYTH #2: Market data is a reliable source for determining equitable compensation.

Wage gaps and other inequities inherently exist in the market. So if you’re basing your internal compensation structure on market data, you’re only replicating those inequities and wage gaps inside your own organization. Market rates are just one data point. Then you’ve got to dig deeper.

First, group similar roles with similar scopes and qualifications and craft a structure that values all of those jobs the same. Once you have your subset created, determine the average market value for those roles looking at recent data from organizations around your same size and geographic location. Then you can build your salary range. In this way, you’re relying more heavily on internal equity than external data to create your organization’s compensation structure.

Taking it one step further, conducting a yearly equity analysis by level, department, age, race, and gender—adding performance data and years of experience—can help identify any potential wage gaps so you can course correct early.

MYTH #3: There are exceptions to every rule.

If you’ve created and implemented a truly equitable compensation structure, you shouldn’t need to make exceptions. And if you are, you’re likely undermining the overall equity of your program. We encourage all of our clients to implement a non-negotiation policy. Most employees negotiate because they fear getting low-balled by their prospective employer. Salary negotiations typically overly reward individuals from dominant demographic groups and disenfranchise women and people of color. With an equitable compensation structure in place, you can confidently explain to candidates that pay equity is a core value of your organization and that the salary you’re offering is well-thought out—and also just one piece of your overall value proposition. It’s important to take the onus of ensuring fair pay off of the employee and place it back on ourselves as the employer.

MYTH #4: Compensation is a taboo topic.

A compensation conversation shouldn’t send people running for the hills. The reason many organizations aren’t 100% comfortable with or transparent about their compensation structure is because they haven’t created one they believe is fully credible and are willing to stand behind. Human resources and management teams may also not understand their organization’s compensation program in enough detail to adequately answer staff’s questions. These two things simply highlight that an organization has more work to do, both in building a program that can be implemented equitably company wide, and including robust training as an essential part of a successful roll-out.
Establishing an equitable compensation system requires a lot of hard work and dedication, but the benefits are many—least of all, building an effective, motivated, and loyal workforce dedicated to your organization’s mission.

 

See a compensation myth we missed? We’d love to hear from you. Drop us a line at awyatt@edgilityconsulting.com.