Standing up a pay equity and fair pay program can feel like navigating a labyrinth of data, policies, and entrenched practices. You face the daunting task of balancing budget constraints, regulatory compliance, and the urgent need to attract and retain top talent. All the while, you know that unaddressed pay inequities can erode employee trust, fuel turnover, and tarnish your company’s reputation.
Nearly three-quarters (71%) of employers rank pay equity as a key element of their people and business strategy, yet 95% struggle with getting pay-equity efforts off the ground, according to Josh Bersin’s Definitive Guide to Pay Equity.
This guide provides a detailed roadmap to help HR leaders like you implement fair pay in your organization, from initial preparation to maintaining ongoing compliance.
First things first, you need to get your senior leadership on board. Their support is crucial for allocating the necessary resources and ensuring the program’s success. Present the business case for both pay equity and fair pay to them. Show how it aligns with your company’s values and how it positively impacts employee retention and recruitment. Use data and case studies to highlight the benefits, like increased employee satisfaction and reduced turnover. Schedule regular meetings with your executives to discuss the initiative, set clear goals, and outline expected outcomes.
Next, you’ll need to define your pay objectives. A clear pay philosophy will guide all your compensation decisions. Work with your leadership team to outline your company’s pay structure and principles. Make sure these align with your organizational goals and market competitiveness.
Develop a written pay philosophy document that includes:
To effectively audit pay practices in your organization, begin by collecting comprehensive data on your employees’ compensation. Also gather demographic information like gender, race, age, and years of experience. Pull this data from your HRIS, payroll systems, and performance management tools, making sure it’s current and inclusive of all employees. Accuracy is key, so cross-check this information with department heads to eliminate any discrepancies.
Next, decide on the statistical methods you’ll use to analyze the data. Regression analysis allows you to control for variables like experience and location, providing a clearer picture of whether pay disparities exist. Use software tools to run your regression analysis, as these can efficiently handle large datasets and uncover insights into potential pay gaps. For example, if you find that women in similar roles are paid less than men, dig deeper to understand whether this is due to differences in experience, education, or other factors. Look for consistent patterns — are certain groups regularly earning less? Are there specific roles where discrepancies are more pronounced?
Once your analysis is complete, summarize your findings in a clear and concise report. Highlight any key disparities and seek explanations for these gaps, whether they are justifiable or not. Prepare this report for senior leadership, and use visuals like charts and graphs to make the data more digestible. Alongside your findings, provide actionable recommendations — these might include salary adjustments, changes to your compensation policies, or other measures to address the identified inequities.
Brief your HR team and managers on both the audit process and the findings. Make sure they grasp the significance of the audit and the steps needed to correct any issues.
Our pay equity checklist can help ensure fairness in your compensation structure - download today.
Once you’ve identified pay disparities, it’s time to take action. If you identify any disparities in pay based on subjective factors like race or gender, correct these disparities by adjusting salaries immediately.
Your audit may surface discrepancies in pay data that don’t necessarily signal disparities. Discrepancies tend to result from inconsistent practices (such as different managers using different criteria to set starting pay) or documentation errors (such as assigning someone the wrong job title).
Standardize the criteria for setting pay levels to prevent future disparities. Develop clear guidelines for setting starting salaries and pay raises.
Review and update job descriptions to clearly outline the duties and responsibilities for each role and list the required skills, education, and experience. Establish pay ranges for each role based on market data and internal equity considerations. Regularly review and update these job descriptions to reflect changes in job functions and market conditions.
To ensure your pay rates are competitive and fair, you need to benchmark your compensation levels with industry standards. Start by selecting reputable industry compensation surveys that align with your organization’s size, location, and specific sector. Look for surveys from well-regarded professional organizations or industry-specific consulting firms that provide the most relevant and accurate benchmarks for your roles.
Compare your compensation packages against those of similar organizations. Focus on the median and quartile data to get a sense of the compensation range for each role. Identify any positions where your compensation lags behind the market. For example, if certain roles are earning less than the industry median, consider adjusting their salaries to stay competitive.
After analyzing the data, set target pay ranges for each role. Decide whether you want to position your salaries at the median, 75th percentile, or another point, depending on your organization’s compensation philosophy and goals. Make the necessary salary adjustments to align with your target ranges, and ensure these changes are communicated clearly and transparently to the affected employees.
Prepare a detailed report summarizing your benchmarking analysis and the recommendations you’ve developed. Present this report to senior leadership, emphasizing the importance of staying competitive with market rates to attract and retain top talent. Work closely with leadership to secure approval for any budget adjustments needed to implement these changes.
To keep your compensation data current, repeat the benchmarking process annually or biannually. Regularly adjust pay ranges based on new survey data and evolving market trends. Stay informed about industry changes by attending conferences, joining professional organizations, and networking with peers. This ongoing effort will ensure your organization remains a leader in fair and competitive compensation practices.
Develop a formal pay structure with clear progression paths. Establish pay grades or bands that categorize jobs based on their level of responsibility, complexity, and required qualifications. Define criteria for moving between pay grades, such as performance metrics, additional skills or certifications, and years of experience. Clearly communicate this pay structure and progression paths to your employees, ensuring they understand how they can advance within the organization.
Educate your managers and HR staff on both pay equity and fair pay principles. Offer regular training sessions on topics like pay equity, unconscious bias, and fair compensation practices. Provide access to resources such as guidelines, checklists, and toolkits to help managers make equitable pay decisions. Establish a support system where managers can seek advice and clarification on pay issues.
Conduct regular pay audits and reviews to ensure ongoing compliance and address any emerging disparities. Perform annual pay audits to review your compensation practices and identify new disparities. Implement processes for ongoing monitoring, such as tracking starting salaries for new hires and reviewing pay decisions made during promotions. Make necessary adjustments based on audit findings and take corrective actions promptly.
Communicate openly about your pay efforts. Transparency builds trust and reinforces your commitment to fairness. Share the goals, processes, and outcomes of your pay equity and fair pay program with employees through internal newsletters, town hall meetings, and intranet updates. Establish a feedback mechanism in which employees can voice their concerns and provide input on pay matters. Consider publicly reporting your fair pay efforts and progress to demonstrate your commitment to fairness and accountability.
Fair Pay and pay equity are the cornerstone of a productive and motivated workforce. By following the steps outlined in this guide, you can build a strong foundation for equitable compensation practices.
Remember, fair pay is an ongoing process. Regularly revisiting your compensation strategies and staying informed about industry trends will help you proactively address any disparities that arise. Now is the time to take action — use the tools and strategies provided here to make meaningful changes in your organization.
And remember, you’re not alone on this journey. Whether through internal collaboration, expert partnerships, or peer networks, support is available to help you navigate the path to fair pay. Together, we can create workplaces where fairness and trust are the norm.
If you are interested in beginning your fair pay journey, contact OutSolve for support and expert guidance. We have Fair Pay packages to help both companies just starting to standardize their pay to companies looking to maintain compliant and fair pay practices.