Benchmarking Salaries to Promote Equal Pay
It is Women's History Month in the United States, and this is the first time in 20 years that the gender pay gap has widened. While the news is depressing, it's not surprising. Women took a huge hit in the pandemic with many frontline job layoffs and caregiving facilities being closed. For the record, that's not a gendered take; it's the truth.
Women tend to get promoted into management positions later in life (see here), so they are stuck in frontline and entry level positions longer. This is called the broken rung. Additionally, much of the world is still socialized to believe that women do not deserve the same opportunities as men (see here). Therefore, women tend to carry more of the household and care duties. These beliefs are called sticky floors.
One way to help women experience fair practices and equal pay is building and sustaining a strong salary benchmarking approach in your business. Whether you have 2 employees or 2000, you need to build salary ranges that align with your job descriptions, talent market strategy, and business plan. In this month's newsletter, I will teach you how to do that. Ready?
STEP ONE: CLEAR, RELEVANT JOB DESCRIPTIONS
I always feel like I lose people when I start talking about job descriptions. Who really reads and pays attention to job descriptions? You might be surprised. Ever heard these comments?
"I've got too much going on. I can't get everything done."
"Other duties as assigned is my entire job."
"I am not being paid enough for what I am doing now."
"I'm in a dead-end job. There's no way up from here."
These are all signs that a job description update is needed. While we often use job descriptions for the hiring process, job descriptions are a perfect tool for monthly check-ins and annual performance reviews.
Job descriptions need to be updated annually for several reasons. First, it's best practice to review these annually because we are operating in an uncertain world. Often, we add or change roles based on the business' current needs and forget to update the documentation (job description). An annual job description review minimizes scope creep in individual roles.
Second, job descriptions are individual mission statements for your employees. A good job description outlines the business purpose, where this role fits into the organization, and how this role supports the business goals. Job descriptions are the navigation tool for employees.
Finally, job descriptions are the base component for salary benchmarking. The qualifications in a job description (think education, experience, etc.) are the main drivers of pay in the external job market. It's really hard to argue with an employee who has done their research (according to their job description) and found higher pay is needed.
STEP TWO: CLEAR, RELEVANT TALENT STRATEGY
The external talent market has been all over the place since 2020, and the pace of volatility is ticking back up again. That's why it's really important for businesses to have a clear and relevant talent strategy. What does that mean?
A talent strategy is simply the business' approach to hiring and retaining employees. The strategy needs to include guidance across the employee life cycle, which includes recruitment, onboarding, engagement, accessible culture, development & training, pathways to growth, and transitions. And here is the most important question for your talent strategy?
Where do you go to recruit the best people to achieve the best outcomes for your business?
The approach of generalized candidate recruiting no longer produces the best candidates. Therefore, businesses MUST be clear on who they want and where those people are. Do you need a really strong leader for a new department? Identify five different types of candidates that would fit the need. Incorporate a variety of roles. Examples include:
Military experience
Different abilities
Caregivers (ex. stay at home parents)
Athletes
Innovation starts with diversity. If you want different results, then you need a different approach. Creating a larger area for talent recruitment opens up opportunities for more people, especially women. Once you complete this activity, build a new list of places to recruit candidates. I always encourage clients to think short-term and long-term with recruitment. Sometimes getting the best candidates in the future requires building new relationships now.
STEP THREE: BROAD SEARCHES & DEEP NETWORKS
You've updated the job descriptions and finalized your talent strategy. Now it's time to start the salary benchmarking research. Businesses use several venues for research.
Technology platforms - There are free and paid platforms. I encourage my clients to use the paid versions because then you can get specific with your business needs.
Sector surveys - These are typically conducted by consulting firms and sector associations to accumulate salary data across geography and budget size.
Peer research - These are a combination of contacts within your own networks for information and potentially already established relationships within your network where you regularly share data with each other.
Live market research - This is simply going to the market and searching the current job openings. Ideally, job openings post salary data, but that is not always the case.
While each of these provides salary insights, it's important to build a diverse network of salary data because each of these venues has pitfalls. Technology platforms typically aggregate data based on their clients, and these companies may not have many clients that align well with your business demographics.
Sector surveys are based on data across a wide spectrum. Larger sector surveys will break down data by budget size and specific sector information. The pitfall with sector surveys is the opt in approach to gathering this information. It all depends on who responds to the survey, which means your business may not have many peers in the data. Also, surveys can be outdated due to the time it takes to conduct the survey and publish results.
Peer research is a great data source if you are aligned with your peers around talent strategy. I find peer research to be the highest salary data integrity because you are able to ask questions of your peers that you can't ask on technology platforms and sector surveys. The pitfall is the time to build and maintain these peer relationships, especially when your peers turn over.
Live market research is my favorite salary data source because it reflects what an employee is already doing - searching the market. The pitfall is the data available is based on current job openings. The job market fluctuates at times, which means you may find little salary data. My clients use ALL of these venues in their salary benchmarking.
STEP FOUR: FIND 8-10 POINTS OF SALARY DATA
Let's start salary benchmarking. I'm using an example here (Director of Marketing) to walk you through the detailed process of salary benchmarking research.
For each job description, you want to create potential titles for the role. An example: Director of Marketing. This role may be called Director of Marketing & Communications, Marketing Director, Director of Sales & Marketing, etc. This is where job descriptions are REALLY important. A Director of Marketing at your business may be the Marketing Manager at another business. Don't get caught up as much on matching titles as getting caught up on matching or similar job descriptions.
If you've followed the process I've laid out here, then you already know some places where you will find candidates matching your needs. Start here and record what you find. I use a spreadsheet to note the job opening title, business name & location, business size, posted salary range, and the average of the posted salary range. (Template and instructions are available in the FREE Pay Equity Collective.) You may not have access to all of this information, but it's important to note the title, business name, and average of the range. I also include a link to the job opening for future reference.
I try to find at least 8-10 data points for each job posting. This amount of data offers a variety of sources. It's easy to critique 1-2 data points if you dig into them. However, a data set of 8-10 reflects consistency and rigor. If you can't find 8-10 data points, then consider these:
Is your job description too specific?
Are the qualifications in the job description aligned with the job market?
Where can you find the same job in places with pay transparency laws?
What are some alternate titles that may yield better results?
Salary benchmarking is more of a craft than exact science at times. Some job openings may be more difficult to benchmark if the sector is not transparent. Once I find the 8-10 data points, then I run an average, mean, mode, and median on the data to analyze salary fluctuations in the market.
Using this new data enables you to create salary ranges in your business that are reflective of the market and your business' talent strategy. Rigorous salary benchmarking combined with detailed milestones in salary ranges increases equitable for everyone. This is how a business closes the gender pay gap.
Are you feeling overwhelmed by this information? Maybe you don't fully understand what I explained. It's all good - this work is not easy! If you want to learn more, then let me help you.
Join the FREE Pay Equity Collective, where I share templates, research, and tools to use in your business to achieve equitable pay. Find my recorded workshops about pay in this space.
Book a FREE 30-minute coaching session with me. We can discuss your concerns and see what’s possible. Book now.