The greatest single source of long-term pay inequity is the job offer. If we are committed to addressing pay inequity in our organizations, we have to start there.
Let’s say you have three candidates of mostly equal qualifications pursuing three identical positions at your organization: Jordan, Prisha, and Bari. You prepare three equal job offers with a starting salary of $100,000 each.
But just before you go to make your offers, someone on your team notes that Jordan is the only candidate who went to an ivy league school—and besides, he is the breadwinner in his family. Afraid that Jordan might not accept, the team agrees to add another $10k to his offer—and his alone.
You extend your offers, and Jordan negotiates. After a few exchanges, you agree to increase his offer by another $10,000. Prisha doesn’t negotiate at all. Bari does not negotiate, and then has a baby shortly after joining your company. She asks to take a one-year leave of absence on top of her paid maternity leave, and you offer to extend the same original offer when she returns.
Fast forward twenty years. Even assuming that promotions and raises were given out equitably, Jordan has now made $400k more than Prisha and $500k more than Bari. Let’s consider the role your organization played. Seemingly small early decisions—one informed by bias and another that was merely reactive to an aggressive candidate—led to a sizable pay equity gap.
The job offer process is rife with potential bias, intentional and otherwise. And if your job offers are inequitable, your entire organization will end up inequitable, with disparities compounding year upon year. Syndio, an HR analytics company focused on pay equity, has found that the initial job offer is the single most significant factor in long-term pay equity. Get that wrong, and the hopes of maintaining equitable pay across your organization are all but lost.
Inequitable offers can also be devastating for culture and morale. When we extend a job offer, we want the candidate to feel welcome and empowered. But the intricacies of that offer—how it’s structured, how it’s negotiated and finalized, how it compares to others—can leave a candidate feeling undervalued. “If, for some reason, people receive a job offer and feel they are being paid less, it is incredibly distracting,” says Mita Mallick, Head of Inclusion, Equity, and Impact at software company Carta.”They don’t feel valued. It impacts their psychological safety.” Getting this right means empowering the people you are hiring from the start.
Assessing your organization’s current pay inequalities
Once you’ve committed to assessing and resolving pay discrepancies in your organization, it can be hard to know where to start. Making that kind of sweeping change is an enormous challenge with very high stakes, so it’s not unusual to feel a bit paralyzed at the outset.
As always, you want to start by identifying who at your organization influences pay decisions. This may seem tricky in this case, because the issue affects everyone your company pays. But typically, there is specific staff with access to company-wide compensation data and oversight on salaries, hiring, and promotions, such as HR and finance leads. To start the process, you should assemble a centralized and streamlined team of people who are capable of assessing old problems from new angles.
As you assess, here are a few questions you can use to determine if you have an equitable approach to your job offers. Also consider who should be owning and supporting each of these:
- Overall, do your people feel fairly compensated and empowered by what you pay?
- Who at your company influences pay equity and are they aware of pay inequity that exists in the workforce?
- Have you assessed the current pay inequity within your organization?
- Do you make your salary ranges transparent internally to your organization’s leadership and hiring managers during the hiring process?
- Do you make your salary ranges transparent to candidates?
- Do you offer holistic compensation and benefits?
- Do you have ongoing systems in place to assess and maintain pay equity?
If any of these areas aren’t yet part of your efforts to ensure equitable job offers, you have an immediate opportunity. We recommend re-evaluating the internal decisions that have a direct effect on your process and determining what you can personally influence.
Performing pay equity audits
Pay equity audits (or PEAs) not only shed light on disparities, but also clarify why pay inequities exist in your organization. For example, some discrepancies can be explained through seniority, education level, or job experience, all of which are tangible issues to address. Pay equity audits will also illuminate inexplicable differences that are more likely connected to biases.
Logistically, PEAs encourage organizations to make adjustments moving forward; trying to provide back-pay is generally not considered a best practice.
When considering data analytics, it’s important to remember that your results are only as clean and accurate as your data. This means that before your audit even happens, your organization will need a team of people working to ensure all data on employees, job titles, benefits, and so on is fully up to date. It may feel like a lot of work up front, but the process will be more effective with this updated content. Once the team has clean data, auditors will run regression analyses to find outliers in your organization. The outliers will identify individuals and overall trends in pay inequities, so you can consider all of the factors that affect job offers, promotions, and pay scales.
In addition to Salesforce, Adobe and Intel are great examples of organizations that have achieved pay equity as a direct result of their PEA. After two years of audits, Adobe celebrated pay equity on the basis of gender and race. Intel achieved pay equity based on gender for its entire global workforce.
A pay equity audit is a clear way to demonstrate to your organization that you are actively committed to addressing compensation disparities. According to a 2020 study, only 28% of organizations are planning to conduct such audits in the next couple of years, giving you a real opportunity to stay ahead of the curve by taking action now. Regardless of how or why you conduct the process, you will likely see eye-opening results.
Pay equity audits aren’t available only to large organizations. Companies of any size can perform such an analysis. According to Payscale, after briefly analyzing pay history, organizations can get started by looking at these four areas:
- Pay gaps hidden in certain job titles or departments
- Underpaid high performers and overpaid low performers
- Significant differences in promotion rates, raise frequencies, and bonuses
- Men and women who do similar work but are not at the same job level
Copyright © 2021 John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc, Hobken, New Jersey. Published simultaneously in Canada.
Arthur Woods is the cofounder of Mathison, a digital platform for employers to manage their diversity recruiting, reduce bias from their hiring systems, and organize teams around diversity hiring efforts. He is also one of the authors of Hiring for Diversity, a guide for employers to manage their diversity hiring.
Susanna Tharakan is a leader and researcher focused on advancing diverse, equitable, and inclusive workplaces by understanding human behavior. She leads diversity initiatives Sisense and is the coauthor of the book, Hiring for Diversity.