Tuesday, December 17, 2013

Getting the most from your pay system

Employers must be prepared to defend their pay systems. Put a company-wide system in place so that decisions about pay are not made in a vacuum and are aligned with the company's strategic purpose. 

We suggest the use of multiple tools for pay setting: 1. "market rates" derived from salary surveys; 2. "performance pay" derived from assessing individual employees; 3. "job evaluation" ratings which provide internal equity by comparing levels of skill and responsibility across all jobs in the company.

Problems can arise when those systems are not well documented and objective - and since that information (about the tools or the salaries themselves) is usually not transparent either within or outside the company, very few people even inside the company can be sure the system is fair, objective, and has gender-neutral impact.  That factor alone explains why employers are vulnerable to lawsuits, in which a complainant can ask for more information about the process which may have resulted in large-scale inequities with regard to gender, race, etc.   "We did not intend to discriminate" is not going to be a satisfactory response.

While all those systems, presumably well documented and explained to everyone, are perfectly legal, one reason for the rising interest in job evaluation is that it has been proven as a useful and well-documented tool for identifying and eliminating gender pay inequities in Minnesota's public sector. In contrast, it appears that "the market" (often not well documented) is the primary system used. Minnesota's two public sector laws state that "compensation relationships are equitable" when "the primary consideration in negotiating, establishing, recommending, and approving compensation is comparable worth value in relationship to other employee positions within" the company.  In other words, state law requires that job evaluation (internal equity) takes precedence over salary surveys ("the market") is pay setting.  Of course exceptions are allowed for "recruitment difficulties" or "retention difficulties," when supported by facts.  

Most companies now use three systems, and that's OK if they can be documented & assessed to make sure there's no pattern of lower pay for women. But we advocate for much greater reliance on job evaluation than on salary surveys, which are more likely to import the kind of sex bias (however unintentional) that has perpetuated the earnings gap.  

Bonnie Watkins, Pay Equity Coalition of Minnesota member.

No comments: