Pay is personal. It’s how many people measure their worth to their workplaces, and it’s how people fund and build their lives. Yet many businesses don’t have specific guidelines for employee compensation. Many companies and managers can’t answer why a given employee is paid what they’re paid, or why they’re paid more or less than a peer in the same role.
According to PayScale’s recent State of the Gender Pay Gap report, women still only earn 82 cents for every dollar earned by men. Those differences get more extreme when factoring in other intersectionalities of identity. When companies don’t have a plan to prevent this, it leaves them at risk for creating and perpetuating inequities in compensation—intentionally or not—and can have a dramatic impact on the culture of the organization.
Recently, I was speaking to Colin Dinnie, my cohost on our diversity, equity, and inclusion (DE&I) podcast, A Better Workplace, about a past experience he had dealing with pay inequity. A post-work drinks conversation led him to find out that he was being paid significantly below his colleagues with similar roles and levels of experience. Colin was the only Black person on the team and had to ask himself if that played a factor in his compensation level. In his own words, it was “a gut punch.” Colin’s experience highlights the importance of working to ensure our pay processes are consistent, transparent, fair, and equitable.
At my company, Wistia, we knew we wanted to launch a new framework that would ensure pay equity while also balancing the needs of growing our privately owned small business and delivering value to customers. Our talent and culture team’s goal was to remove affinity and unconscious bias from compensation decisions, but we needed ideas on how to do so. We looked to companies in different sectors for inspiration before ultimately landing on a system used by Buffer, a social media software company, which shares very similar values to Wistia.
Buffer’s system leverages market data and data about performance, and then factors in location and other elements specific to its values and culture to determine compensation. We knew we wanted to start even simpler than that. We began by researching regional compensation benchmarks and creating our own internal growth framework to determine slightly more flexible compensation bands for each role at Wistia. Therefore, compensation ties directly to regional compensation data, how an employee is performing in their role, and where they are relative to the next level above them.
For other companies looking to implement an equitable compensation model, here are two suggestions on how to proceed that were helpful for us.
- Research market data to set compensation ranges: First, our salaries are set based on paying competitively relative to companies similar to us in terms of size and industry in our regional market. Then, we set a philosophy on where we want our overall compensation to fall relative to the ranges seen in the market. For example, maybe you determine that you want all roles to track to at least the 50th percentile of compensation data for your market. By setting ranges up front, you are removing opportunities for bias to influence your compensation decisions—whether through a new employee offer, or an annual salary or bonus increase. Decisions become less a factor of employee negotiation skills, and more about properly assessing individuals within a framework. With these set ranges based on market data, it leads to more equitable decisions that you can be transparent about with employees. It’s also important to revisit these ranges regularly, on an annual or semiannual basis—the market changes!
- Create a rubric to determine where individuals fall in their role’s compensation range: While we were working to define ranges for all roles across the company, we were also working on a rubric to articulate the criteria for different levels within the organization. For example, what are the criteria that differentiate a senior engineer from a staff engineer? What differentiates a manager from a director? These criteria will be unique to each company, your values and how you operate. Wistia values a mix of technical skills unique to each team or role, along with soft skills we think are important across the organization (like collaboration across teams). Once you have a strong rubric, compensation decisions boil down to creating a chart and ensuring that any minor differences between peers are merited, such as amount of experience.
Now, all of our managers can transparently explain to people on their teams exactly why their salary is what it is. We feel confident that where differences exist, we can explain them, and conversations about growth and how to get promoted to the next level have also become easier to handle.
Transparency and fairness are obvious benefits to an equitable compensation program, but there are unexpected business benefits, too. Employees are more likely to stay in a role where they can anticipate their salary growth and understand their development path to get there. From a budget perspective, knowing exactly how much each employee will be paid as they’re brought into the company and as they get promoted will create more predictability for the finance team. Plus, while you may miss the mark at the beginning when you’re figuring out the right benchmarks for a role (which has happened to us at Wistia and we’ve had to adjust), it feels incredibly good and reassuring to know that your compensation policies are applied uniformly across the business.
At the end of the day, when you get compensation right, as a business, it has a really positive impact on people and lets them better focus on the work.
Jane Jaxon is VP of people at Wistia, a leader in the video and podcasting space focused on fostering a diverse and equitable workplace where people can bring their full selves to work. She is also the cohost of A Better Workplace, a podcast focused on DE&I topics.