3 ways to ensure fair pay in your organization

How to ensure fair pay in your organization

*Originally appeared on Payscale

Fair pay is important — but what does it mean to pay fairly?

If the opposite of fair pay is biased pay — pay that is unfairly prejudiced against someone or something — then fair pay practices should focus on removing bias. Simply put, paying fairly means ensuring that pay decisions are made objectively and based on measurable factors like skill or experience.

Read below for three ways to start defining pay parameters that ensure fair pay.

1. Paying to market

One key way to ensure fair pay is to align pay for a given role with the market value of that job. Paying to market does not have to mean aligning every single person’s pay to a certain percentile of the market. Rather, paying to market involves benchmarking a job to market and setting a salary range that aligns with that market data. Paying to market means allowing the market value of a job to be the determining factor for the pay range for that position. An important factor to benchmarking is to ensure a job is being compared to others like it in the market, as it aligns to the appropriate skills, experience, and key tasks of the role.

2. Paying for skills and experience

Speaking of skills and experience — these are two important deciding factors in not only how to benchmark and set a pay range for a job, but also how to determine pay within a pay range. Setting specific parameters around the “weight” for a given set of skills, specialties, or experience level creates an even playing field for determining pay.

This may be more formal, like a step structure, with standard progression rates established within a pay ranges for a job, or, less formal like an experience spectrum, with more flexible increase milestones for each role at given points on the spectrum. The key here is quantifying how your company chooses to award pay for skills, experience, degree, or expertise in each role, and to have that in writing and communicate it to all interested parties.

Tip: Paying for skills and experience may include allocating a pay premium for hot jobs or hot skills that are really moving in your market. Don’t hesitate to set up a temporary premium for highly coveted skills or offer a signing bonus or salary booster for hot jobs. It may feel counter-intuitive, but this is still considered fair pay if — you guessed it — it’s well-documented and communicated what skills or jobs have a premium, why, and how someone may gain that skill or become eligible for that higher paying role.

3. Paying for performance

Another important way to ensure fair pay is to determine pay increases by standardized performance metrics across a given role or team. Performance-based pay decisions should be like experience- or skill-based increases — performance metrics should be objective and measurable, as well as communicated and documented to all. Performance-based pay may be specific to base pay increases or align with incentive or bonus pay on top of annual or hourly salary.

Tip: Paying for performance also enables organizations to “put their money where their mouth is” when it comes to performance reviews, feedback, and correlating pay to business performance.

In summary, paying fairly means determining, articulating, communicating, and measuring the market value, skills, experience, and performance metrics that are appropriate for a given role in your organization, and paying accordingly.

Who knew it could be that easy?

See also:
5 steps to a compensation strategy that helps your company thrive
Want a better culture? Set compensation strategy accordingly
Common compensation conversation pitfalls (and how to avoid them)


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