Originally published by Payscale.
As a compensation professional, I work with a variety of companies in the technology industry. One of the biggest concerns I consistently hear from my clients is the struggle with attracting and retaining top talent. It’s no surprise that increasing demand combined with the talent shortage in tech is making competition fierce.
To combat this, many companies are becoming more strategic with their compensation practices overall, and aiming to exceed the market for key positions like software developers. Although this is an important step in the right direction, I think this is only one piece of the puzzle. If this is where the compensation conversation stops at your organization, then you might be missing the mark, especially when it comes to your female employees.
Don’t fear diversity!
The truth is that the workforce is becoming larger and more diverse every year, so ignoring diversity isn’t really an option anymore. In fact, ignoring diversity is actually doing companies more harm than good. As a woman of color, I could say a bunch of warm and fuzzy things about diversity here, but when it comes right down to it the bottom line is: diverse teams lead to better business outcomes.
If your goal is to have a high-performing organization, then group diversity is key to fostering an environment that values diversity of thought. In other words, diverse teams bring more creativity and innovation to your organization’s products and services, which ultimately impacts your bottom line. When thinking about diversity, gender is an important factor, but it’s also important to think about the diversity of ethnicity, age, education, experience, industry knowledge, personality, and even communication style.
For tech companies, it’s also particularly important to acknowledge that women are a minority in your workforce. As a result, this can make a lot of women feel very isolated. If you want to diversify your workforce and retain your talented female employees, it’s simply not enough to tell your hiring manager to “hire more women.” Everyone at the organization, from the top down, has a hand in creating a welcoming, inclusive environment that encourages diversity of opinions, and makes everyone feel comfortable in the workplace.
Have a compensation structure in place
By now, you’re probably familiar with the statistic that women earn 78 cents for every dollar a man earns. This is what we refer to as the uncontrolled gender pay gap, and it is calculated by comparing the average earnings of all working men to all working women.
Taking it a step further, PayScale recently released a new study, Inside the Gender Pay Gap, which looks at the controlled gender pay gap. The data found that when we control for all factors that influence compensation outside of gender (i.e. job tasks, geographic location, years of experience, education level, organization size, skills, etc), women still earn 2.7% less than men. While this number is significantly smaller, it is equally concerning, especially given that the pay gap widens as employees progress up the corporate ladder.
If your organization doesn’t have a compensation plan in place, this leaves you vulnerable to discriminatory pay practices, even if they aren’t intentional.
Every compensation plan should contain these five elements:
- A compensation philosophy, which sets the intention for your overall compensation plan and explains what your organization is trying to accomplish with your compensation budget.
- A compensation strategy, where you define which market(s) you want to compete with, along with how competitive you want to be.
- A compensation structure, which may be job-based ranges or a set of grades and ranges competitive with the external market and aligned internally.
- Compensation policies and guidelines to ensure that your organization is carrying out your compensation plan fairly per your philosophy, strategy, and structure.
- Internal processes that define how to keep your compensation plan up-to-date, such as how to add new jobs to your structure or allocate increases to employees.
When it comes to practices that ensure fair pay, having a compensation plan and ranges setup are key, but you also have to make sure that your ranges are being used appropriately, as well as identifying and resolving pay inequities on a regular basis.
Don’t ignore pay disparities—have a review process in place
Hopefully, you’re reviewing your compensation practices at least annually, but in a fast-moving industry like tech, it may be appropriate to evaluate them more frequently depending on your organization.
When reviewing your compensation plan and conducting a pay audit, here are a few places to start:
1. Does your compensation strategy still make sense for your organization? Is it competitive enough to help you attract and retain the talent you need?
2. Are your ranges still relevant to the market? Make sure that your overall structure is aligned to the market(s) you’re aiming to target, particularly for any hot jobs.
3. Review employee pay:
- Are there any employees falling below range or above range?
- Do you need to do any equity adjustments to ensure that you have fair pay for all employees?
When you conduct a pay audit, the most important thing is that you must be prepared to act on any issues you find. For example, if you discover that for your two Sr. Software Engineers, one is green-circled (below range) and one is red-circled (above range) and the green-circled employee just happens to be female while your red-circled employee just happens to be male, this is a red flag. In this case, you would want to perform a deeper evaluation as to why each employee is at their current range penetration, and if you determine an equity adjustment is needed, this should be done ASAP.
If you have set-up ranges for your jobs and you have ensured that employees are at the appropriate range penetration (depending on skills, experience, and/or what factors your organization has determined you want to reward), this should take care of any pay disparities. However, if you have any specific questions or concerns, you may want to do a more formal equity audit with an attorney. This is an excellent way to determine whether pay inequities exist and, if so, to correct those inequities proactively instead of in response to a legal action.
Adopt a level of transparent pay practices
After you’ve gone through the hard work of setting up a compensation plan, performing regular equity audits, and trying to create a more inclusive and diverse workforce, it’s time to share this with your employees. I know that transparency around pay practices is a hot topic right now, and I understand why some companies are hesitant to share information. However, choosing to remain silent about compensation is a lose-lose situation. From the employer’s perspective, you are missing the opportunity to brag about all of the hard work you have done to advocate for your employees and pay fairly. From the employee’s perspective, without accurate information and an understanding of why they are being paid what they are, employees are more likely to feel underpaid and go elsewhere.
So, what should you share regarding compensation? This is different for every organization, but some things you may consider sharing organization-wide are:
- You have a compensation plan in place
- Your compensation philosophy
- Your compensation strategy and which specific markets you are aiming to compete with and pay like
- You’ve performed a market study and evaluate compensation on an annual (or more frequent) basis
- The results of your market study (explaining how competitive your organization is on a high-level to the market(s) you’re targeting)
- The process and cycle for increases
As part of your overall transparency and communication plan, I would also recommend having managers meet with their direct reports to discuss compensation, preferably separate from annual performance reviews. In these meetings, your managers might discuss things like:
- The employee’s range and how this was determined
- The employee’s salary and how this was determined
- How the employee’s salary compares to their range (i.e. range penetration)
- Grades ranges (this may be grades and ranges for all jobs, only for jobs up to a certain level, or only for jobs in the department or career path relevant for the employee)
Transparency doesn’t necessarily mean sharing everything. Notice that nowhere above did I mention sharing each employee’s salary in the company. Of course, your organization may choose to share more (or less) information depending on what is relevant for you, but if you are regularly reviewing your compensation practices and treating equal pay as a priority, make sure your employees know!
Address unconscious biases and the leadership gap
So you’ve developed a compensation plan and adjusted any outliers or concerns. Maybe you even made diversifying your workforce a priority and had discussions with employees about their individual pay and how the salary range for their job was determined. Unfortunately, your work still isn’t quite done. If your organization truly wants to achieve gender equity, you must address the leadership gap and unconscious bias.
All of us have our own set of biases based on the culture we grew up in, and it’s human for us to feel more comfortable around those we perceive to be “like” ourselves. Having a bias isn’t the same thing as being prejudice, but when we bring our biases into the workplace this becomes problematic.
We know that the uncontrolled wage gap exists become women and men aren’t equally represented in high-paying fields like tech, but it’s also because women and men aren’t equally represented in leadership roles within companies. “In fact, it has been estimated that, at the current rate of change, it will take until 2085 for women to reach parity with men in key leadership roles in the United States.” (Center for American Progress)
What can your organization do?
- Make diversity and inclusion a priority at your organization. Train your leadership and managers to become aware of their unconscious biases and create a welcoming, diverse culture from the top down.
- Ensure performance is evaluated based on employee achievement and their progress towards the goals for their position, not favoritism.
- Provide learning and development opportunities, ensuring room for growth and learning for all employees on the team. This includes sharing the “good” work assignments and projects across the team. And, if you notice that you are always delegating these projects to the same person, evaluate if this is truly about stellar performance or if it is actually favoritism.
- Provide fair opportunities for promotions across each team and for all people in the organization. Ensure promotions are based on merit and skills, not unconscious biases.
Change starts with us and whether we like it or not, we all have a hand in fixing this gap. After all, your organization will be better for it.
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