During our own audit of our pay for salaried workers, we discovered some discrepancies that I think might be questionable if someone were to sue us for discrimination. Statistically, it appears that we may be underpaying women as compared to men in the same job groups, but regional pay differences and other factors such as education and tenure make it a somewhat muddy picture. Anyway, my question is, if we think there’s a problem, do we give all the lower-paid people a big raise to get them even, or do we do it gradually? And do we tell them what we are doing? — Anonymous
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
First, you need to establish the basis on which your organization wishes to determine wage and salary amounts. This is sometimes called a pay philosophy. Typically, base pay is first linked to the value of the job itself. Secondarily, base pay may be determined relative to performance, tenure, education, and/or skills. Without specificity in terms of these factors, you do not have a basis for justifying why some individuals are paid more than others.
Jobs are usually evaluated and classified into grades in a salary structure that represent how much the organization is willing to pay to anyone in that job who demonstrates competent performance. Generally, individuals are paid based on such factors as performance, skills, and sometimes, tenure, in relation to the value of the job. Often performance is the only factor used.
Next, remember that salary administration should be a process that results in actual pay being set at the appropriate levels consistent with your philosophy. It is not about the percentages of increases granted. Focusing on increase percentages typically perpetuates pay inequities, and that may be the reason for your apparently inequitable salary levels.
With respect to geographic differences, these should be reflected in the job classification process. The labor market indicators for jobs in different work locations may be different enough to create separate salary structures (grades) for those locations. This can be determined by using salary surveys that report labor market differences for different locations.
If, based on your own internal audit, you can justify current pay levels based on objective criteria, such as the job values, performance measures, or tenure, you may be OK. However, if you cannot, and there appears to be adverse impact on any protected class employees, you should make special equity adjustments to bring pay that is too low up to where it should be in accordance with your organization’s policy/philosophy.
Such adjustments can simply be communicated to the employees as resulting from an internal review of pay equity. In my view, such adjustments should be made all at one time, if possible. In some cases, you might even consider retroactivity, although the explanation for that may be more difficult.
If you choose to use this situation to justify the establishment of a new or updated salary administration plan, you can make the adjustments in the context of that new plan without having to explain any particular employees’ situations.
Shari Dunn is managing principal of CompAnalysis, a compensation and performance management consulting firm in Oakland.