How to address an internal pay disparity dilemma

Posted by | September 7, 2021 | Employers, Recruiting tips, Retention

internal pay disparity blog header

By Jane Riley

You may have seen that this month Do Good Jobs has brought in a mandatory salary range field to support the global #showthesalary movement. A simple task to tackle the pay gap in the charity sector. ‘Show the salary’ is about fairness and transparency.

I recall once seeing a role advertised and rang to ask what the salary range was (as no indication was given on the advert), the response was, ‘we don’t discuss that until someone gets to interview stage’.  I didn’t want to go through the application and interview process only to discover that the salary offered and my expectations were worlds apart.

One method organisations use to determine a salary is to ask during the interview and offer process what candidates are currently being paid or what they expect to be paid. This is not a recommended practice. It is not based on any reputable method or metrics, it’s not a fair salary process, and it opens you up to pay disparity.

In 2019, Statistics New Zealand indicated that the gender pay gap has remained unchanged since 2017 at 9.3 per cent. Whilst this varies between occupations and age ranges, it does give an indication that inequity still exists in pay.

In brief, by showing the salary when you advertise a role, you help to ensure that everyone – regardless of gender, ethnicity, age, or disability – is paid fairly. 

 

Internal pay disparities

A common reason given for not wanting to show the salary on job listings is that it will highlight current internal pay disparities. Making it explicit that people doing the same or a similar role are being paid differently (and usually less than is being offered!). If this is the case you need to:

 

1. Acknowledge and address the issue

The first recommended step is to conduct a pay audit and benchmarking exercise to get an overarching picture. This can be done either by an external expert – or if budget constraints don’t allow – a good DIY approach can be utilised. See the Do Good Jobs blog for more info on benchmarking salaries. NZ Government organisations are making good strides in this area too and you can read more about this process at women.govt.nz

You may want to join forces with others in your sector to gather and share information and costs in this respect too.  Going through this process will uncover what others are paying for the same or similar roles and will highlight if and where the greatest discrepancies exist. Discrepancies can occur both within your organisation and between what you and other organisations pay for similar positions. This is a good starting point for you to begin setting salaries in a structured way.

2. If pay discrepancies are revealed, this is something that needs to be recognised, then dealt with quickly.

Start working through an approach to address and resolve pay discrepancies within a set time. This may necessitate communicating with individuals or your staff in general, and putting in place a strategy to resolve pay differences. This may mean putting in place incremental increases over a set time period.

3. Develop a remuneration policy

If you don’t already have one, develop a remuneration policy – this has many benefits. 

A detailed remuneration policy shows that the organisation has consulted industry data and benchmarked appropriately” (Management co.nz,  Jan 2020). 

It allows your teams to have a clear understanding of pay structures. and will give them confidence that they are being paid fairly compared with their colleagues. This in turn increases trust.

Have the evidence to back up your proposals if you need to present this to your board for approval. The information collated/documented from your pay audit and benchmarking exercise should provide this data. As part of this, propose how you will set salaries against the benchmark. For example, as a not-for-profit do you want to aim to sit at 25 per cent, or maybe even closer to 50 per cent of the pay range for similar corporate or non-charity roles? Find a percentage that you are happy with and apply this across the board.

 

Budget buts ….

I can hear you saying, “But we don’t have any budget this year for these kinds of salaries”. You might not be able to make changes this year, but work out a plan to rectify this. This might mean setting in place incremental increases and incorporating the increases into future funding applications for the true cost of the work, which includes a fair wage for your staff. (A clear rationale from your benchmark and/or remuneration policy can show how you peg your salaries).

 

Other rewards

Consider the other ways in which you can reward staff, such as flexible working and working from home options. Where applicable, additional leave in the form of annual, sick or ‘duvet’/mental health days, professional development opportunities, gym membership, mobile phone contract, use of a car, etc. can make up a person’s total remuneration, rather than just the salary.

Again, have evidence ready to present to the board – including the cost of recruiting and training new staff if people leave.

 

The performance factor

Whilst conducting a pay audit might reveal discrepancies, it might not reveal the reasons behind these differences. For example, are some individuals being paid less because they are not performing? If this is the case, you need to stop putting off a conversation and address it. 

Does your organisation have a performance management process? Are staff aware of this? Do they understand how it works?  For example, do staff members and managers work together collaboratively to create a ‘performance improvement plan’ if required in the cases of under performance? This should outline the specific areas that need improvement, including timing and giving staff members the relevant support and resources to help them improve. 

 

Keeping it fair 

How will you do this on an ongoing basis? 

  • Ensure that role descriptions are up to date and accurately reflect what the position entails, together with the knowledge, experience, skills, and abilities required. Don’t include unnecessary requirements as they might prevent a perfectly good candidate from applying (for instance, listing a degree as a requirement for the role, if the equivalent experience is also acceptable). Ensure that staff are consulted if changes are made to their roles.
  • Ensure regular benchmarking takes place at least every two to three years.
  • Regularly review your policy and ensure that it is communicated to and understood by your staff, as well as by managers responsible for implementing salary increases.

 

To summarise

Workers should be paid fairly for the work they do. Salary transparency is one of the most effective ways to achieve this. Recognise and address internal disparities (and the reasons behind them, such as underperformance) and put policies and systems in place that are regularly reviewed, to ensure salaries changes are applied equitably into the future. 

 

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Jane has over 15 years of experience as an HR generalist working in sectors including education, international development, local government, and television production. She has worked in HR related roles in NZ, the Fiji Islands, the USA, and the UK. She has also volunteered in the HR department of a wildlife conservancy in Kenya for three months.

Her areas of interest include policy and process development, supporting employees’ mental health and wellbeing in the workplace, and capacity building.

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