It’s no secret that the pay gap in the workplace is an ongoing issue. Ensuring compensation is fair and equitable is essential for companies to remain competitive. It is important for companies to understand the significance of conducting compensation analyses, pay equity itself, and discussing pay compression.
Pay compression is what happens when experienced, highly skilled, and typically higher-paid employees are making roughly the same amount or less as newer or lower-skilled workers in the same organization.
It’s a common problem that can lead to low morale, retention issues, and recruitment problems.
It can be difficult to identify pay compression because it is hard to tell if two jobs are similar enough for comparison purposes. There are many factors at play here, including responsibilities for each role as well as requirements, like the level of education needed for the position. This is what makes pay equity so important.
Pay equity is about fairness and equity. It ensures people in similar roles are compensated equally for their work, regardless of gender, race, or ethnicity.
Pay equity requires comparing compensation between similar positions – those with similar responsibilities and requirements. If you find that a pay gap exists between two employees doing the same job (or one employee doing a different but comparable job), then you need to close the gap as much as possible so both employees receive equal pay for their work.
Pay equity is important for morale, retention, and recruitment.
Pay equity improves employee engagement. When employees feel that they are paid fairly, they are more likely to be engaged in their work and committed to your organization’s mission. Employees who feel undervalued or underpaid tend to have lower levels of engagement with their jobs than those who feel valued by their employer (and thus better compensated.)
Bottom line? If you want people to stick around at your company, offering fair wages is a great place to start building loyalty among your workforce.
Perform a pay analysis.
Once you have a clear understanding of what your employees are doing and how they are doing it, it’s time to compare their compensation. Here are steps to take when conducting a pay analysis:
- Create a list of tasks that each job requires and the skills necessary to perform those tasks.
- Calculate how much time each position spends on each tasks compared with peers (e.g., salespeople spend more time making calls than customer service reps).
- Use this information, along with market data, when determining how much each employee should be paid, based on their role within the organization and industry standards for similar jobs in the area.
- Market data needs to be consistent with objective criteria, like experience level or skill set requirements, so everyone has an equal opportunity at receiving fair compensation.
Your employees deserve to be paid based on what they bring to the table, rather than being compensated based on external factors like location or industry type alone.
Ultimately, using market data as part of your pay strategy will give you greater consistency, objectively, and accuracy in setting compensation for all roles across your workforce.
It also helps with recruiting, as candidates will be more willing to take a job offer if they know they’ll be compensated fairly.
The Reserves Network has the market intelligence and tools available to help your company with compensation analyses. An ounce of planning is a pound of production – let us help you create successful search and staffing strategies. Contact us today!