Here is an example of internal equity: “Employees with similar jobs, performance, skill sets, and experience within a company are paid similarly. This includes salary, benefits, and other forms of rewards.”
Let’s look at that definition in more detail.
$ “Employees with similar jobs,...
Similar jobs can be further defined as (a) same job title, (b) same job family and career level, and/or (c) same job family and pay grade. Of course, an employer’s job architecture may provide other ways to create comparator groups.
$ “...performance, skill sets, and experience within a company...”
Employers typically consider factors like relevant years of experience, skill sets, education, training, seniority, performance, quantity/quality of production, and/or work location when making pay decisions. So, having these factors as fields in your HR system is helpful to ensure consistency in your pay decisions.
And if you want to go further include the things you would NOT want to make pay decisions on like race/ethnicity, gender, and other protected class factors. That way you can do a pay equity analysis to determine if any of these things are influencing your decisions in a discriminatory way.
$ “...are paid similarly. This includes salary, benefits, and other forms of rewards.”
This means looking at base pay, bonus, sales commissions, overtime, spot awards, stock, paid time off, sign on bonuses, etc. in comparison to employees with similar jobs, performance, skill sets, experience and other factors like those above.
Look closer at reward differences that are plus/minus 5% from the average or median of the comparable group. Can you explain the differences with factors that aren’t discriminatory?
If you want to win the war for talent, determine if you are paying equitably and fairly based on your internal equity definition. Fix the pay disparities you find and include internal equity in each pay decision.
Let’s talk if you need help with a pay equity audit or how to use internal equity in your pay decision making processes.
Pay decisions need to be competitive, equitable, within budget, compliant, and transparent.
#pay #compensation #rewards #totalrewards #payequity #paytransparency #fairpay #jobarchitecture #internalequity #basepay #bonus #incentives #payforperformance #STI #LTI #compensationconsultant