Why every organization needs a salary structure: Understanding the problem
Tuesday, February 05, 2019
Does any organization really intend to discriminate against women and people of color by systematically underpaying them? Hopefully not; yet it is happening across organization size and industry.
Part of the problem is that even well-intentioned organizations do not realize their internal systems may support unfair pay practices. This two-part article will explain the practices that may undermine fair play and how salary structures are a simple step to prevent and address underlying issues.
Fork in the road
Regardless of organization size or industry, recent research and disclosure requirements have shown women are paid less than men and non-white women are paid even less. The problem is pervasive and can be attributed to a number of factors.
The first issue this article will address is that no company is immune from potential pay problems. In other words, any organization — even the best-intentioned, smallest firm, with no two employees in a similar position — can have a systemic pay issue. Once we realize this, we can drop our assumptions, grab a payroll report and begin to address potential problems.
And those potential problems with pay disparity often begin in three areas: upon hire, at promotion and with incentive pay. For example, we have probably all experienced directly the importance of strong negotiating skills.
Regardless of industry, gender or race, candidates with better negotiating skills are better positioned to start at a higher salary that other candidates or current employees. Because such skills are also valuable when asking for raises and promotions, good negotiators continue to be better positioned for pay acceleration.
He who must not be named…
In addition, there are other places for the seeds of disparity to grow. Specifically, an organization’s approach to salary conversations may undermine fair pay practices.
To understand the potential problem, consider two California regulations aimed at addressing salary transparency. Focused on employers, in California, it is unlawful to ask job candidates for their salary history and it is unlawful to forbid discussion of pay within the workplace.
By eliminating the candidate’s pay history from the discussion, she presumably starts on equal footing with the other candidates who may have been better negotiators, may not previously have been fairly paid or who may not answer pay history questions accurately.
Further, the idea is, by not being able to forbid employees from discussing their salaries, practices like inconsistent pay, incentives or promotions among colleagues in similar positions could come to light — or be avoided altogether because of the prospect of everyone finding out.
Organizations outside the Golden State could follow these paths; however, neither would be easy to implement. Further, transparency alone is not the complete solution. Instead, transparency coupled with a formal salary structure can address many unintentional pay issues.
In part two of this article, we will look how implementing a salary structure can help organizations with hires, promotions and incentive pay.
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