10 Steps to Ensuring Fair and Equitable Pay Practices in Your Organization

Fairness and equity are key to ensuring your employees feel supported and encourage productivity in your workplace. When you don’t value these, you allow toxic work culture to cultivate. This will increase absenteeism, reduce productivity, and ultimately, push workers to leave.

Ensuring fair and equitable pay demonstrates that you respect the needs of your employees and don’t discriminate. Importantly, it’s also helping you meet your legal obligations on equal pay. So, how do achieve such pay practices? We’ve broken it down into 10 steps.

Step 1. Understand Compensation Research

To guide your pay practices, you’ll need to conduct compensation research and understand what’s considered fair and equitable in your industry. This requires a broad look into what’s happening within your industry.

Look at competitors in your industry and any relevant job titles found in your company. Get an idea of median wages and take note of the location and minimum wage requirements there. Ensure you’re using quality sources including public records, salary surveys, or even compensation consultants.

Step 2. Establish a Compensation Committee

You can’t achieve pay equity and fairness alone. A compensation committee should consist of members from management to the frontline. This will ensure different perspectives to help you produce appropriate compensation packages for everyone regardless of their title.

Important contributors to your compensation committee are your HR and finance departments. Work closely with them to ensure you’re within budget and know when there is leeway for bonuses or raises. Allocate who will be responsible for collecting market data, conducting surveys, and discussing salaries with the team.

Step 3. Utilize Data-Driven Approaches for Improving Equity

Improving equity requires data-driven decision-making. To do this effectively, you need to collate your organization’s internal data and use external market data to make comparisons.

Analyze how compensation is being distributed within your organization. What trends can you see in your pay practices over time? Are there any gaps in your pay structure? This information will require input from your existing employees. Use surveys or focus groups to gain insight into how satisfied your team is with their pay.

Step 4. Invest in Systems to Ensure Accurate Tracking of Employee Pay

It may seem like spending money to figure out how best to spend your money is counterintuitive, but investing in systems to accurately track employee pay is essential.

The right software will include reporting to track data such as average salaries by job title, department, or other variables like gender. It will create custom reports detailing pay discrepancies within specific groups of employees that could create discrimination issues. An automated system can track bonuses, adjustments, or other changes made to accurately record all compensation activity in the organization.  Most importantly, everything will be up-to-date.

Step 5. Analyze Salary Data to Identify Patterns of Inequity

Analyze the salary data your software provides you. Can you see any patterns of inequity? Pay grades throughout the organization will of course vary, but the reasons should include skills, location, and responsibilities, not race, gender, and age. You’ll get insights into how you pay your new hires compared to long-term employees.

This is also a good time to revisit job descriptions. Make sure your job titles and descriptions match and that you know exactly what responsibilities your employees have. Often new skills and tasks are acquired with long tenure. Note these in your data and update them when necessary.

Using this information, consider revising some salaries to ensure pay equity across the board.

Step 6. Implement Equitable Pay Ranges Across Functions & Levels

Creating pay ranges is one of the most difficult tasks in achieving pay equity and fairness. You need to account for various levels and functions within your organization. Consider individual functions, levels of responsibility, and market comparisons.

Look at the unique tasks and skills required in individual positions within each function. Then, identify the level of responsibility required for each job. As roles become more complex, so should their compensation packages. Higher decision-making authority, for example, requires more compensation.

The final step is researching what similar positions offer in your industry and location. This way you can ensure what you offer is fair and competitive. Remember that a role in one company is different from another, so use this information to guide but not decide.

Step 7. Ensure Consistent Practices Are Followed Throughout the Organization

Consistency is key. Once your pay practices are established, they must be carried out consistently across all levels and functions within your organization. You’ll need to create criteria for evaluating performance, document your pay decisions, and train managers appropriately.

A standard set of criteria used to evaluate each employee’s performance will ensure equitable evaluation across the board. Any pay decisions should be recorded to give you an audit trail if any inquiries arise down the line. Your managers, therefore, require thorough training to make these decisions when it comes to evaluating performance and determining pay increases or bonuses.

Step 8. Assess the Effectiveness of Internal Policies & Procedures

So your policies and procedures are set – but you can’t sit back and relax just yet. You need to ensure everything is being followed accordingly and that it’s effective.

Analyze the data that shows how effective your policies are in delivering fair and equitable pay, including performance reviews and promotions.

Conduct employee interviews for various departments to get first-hand insight into their experiences with pay equity. Ask for honest feedback about how they feel their compensation compares to others in similar roles.

Remember to request feedback from managers who are enforcing the policies. Be open to suggestions on improving it or changing things due to obstacles they’ve encountered.

Step 9. Review, Refine & Repeat

The cost of living, inflation, and the market is constantly changing. It should come as no surprise then, that your pay practices will require reviewing. Revisit your policies regularly and ensure they’re still relevant to the job market. Scan your data for any new and unexpected pay inequities that could result from previous changes.

Another indicator that something may need refining is high turnover or low satisfaction rates. Has a manager inaccurately assessed an employee’s performance and therefore underpaid them? Is a certain department unhappy and underperforming as a result? Find the problems and adjust accordingly.

Step 10. Monitor Pay Equity Regularly

The final step is knowing that this is an ongoing process. Achieving fair and equitable pay requires regular monitoring. Your organization will need a pay audit process that looks for disparities that could cause issues. Evaluate performance data and salaries against budget spending. You constantly need to ensure you’re not overspending and that you’re offering what your workers deserve.

Remember that pay equity is also about career progression. You want to ensure your employees have equal opportunities to progress in your organization. As with any relationship, communication is crucial. Discuss salaries with fairness in mind. An employee’s salary should reflect market value but also individual merit. It’s your job to reward hard workers who bring value to your organization fairly and equitably.