Here's a step-by-step guide for conducting an internal equity analysis:
1. Define Job Comparator Groups: Start by categorizing jobs into groups based on similarity in job responsibilities, required skills, knowledge, education, and other qualifications. Consider factors like Career Level (e.g., entry , intermediate, senior), job function (e.g., sales, marketing, engineering), and job family (e.g., administrative, technical, managerial).
2. Create Employee Comparator Groups: Within each job comparator group, categorize employees based on relevant factors such as seniority, performance, production/output, work location, education, training, experience, and travel requirements.
3. Gather Pay Data: Collect salary data for each employee within the comparator groups, including base salary, bonuses, commissions, and other compensation elements.
4. Analyze Pay Data: Calculate the median, average, and range (high/low) of salaries within each job and employee comparator group. Do the same for other compensation elements. Identify any significant pay disparities or outliers that may indicate inequities. Use statistical tools or software like Excel to analyze the data and identify trends or patterns.
5. Compare Pay Equity: Compare the pay levels of employees within the same job comparator group to ensure equitable compensation based on factors like seniority, performance, production/output, work location, education, training, experience, and travel requirements. Evaluate whether any pay differentials are justified based on objective criteria or if they indicate potential inequities that need to be addressed.
6. Addressing Inequities: If inequities are identified, develop strategies to address them and plan for this in your budgeting process. This may include adjusting base salaries, short-term and long-term incentive changes, revising pay policies, implementing audits of performance and potential assessments, or providing additional training and development opportunities to impacted employees. Communicate transparently with employees about any adjustments or changes to ensure fairness and build trust.
7. Monitor and Review: Regularly review and monitor internal equity to ensure ongoing fairness and alignment with organizational goals and market trends. Adjust compensation practices as needed to address changes in organizational goals, job requirements, external market conditions, and employee performance.
By following these steps, you can ensure that new hires are brought in at equitable salaries and that existing employees are fairly compensated based on their performance, contributions, and qualifications.
And if this sounds daunting, let’s talk.
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