Building a More Equitable Pay Program - S. Drohman.pdfBuilding a More Equitable Pay Program Shannon...

Building a More Equitable Pay Program

Shannon Drohman & Erin Wolford

Compensation Connections LLC

September 2018

Shannon Drohman, MS, SPHR, SHRM-SCP, CCP

20+ years in HR and Compensation

Shannon has developed compensation strategies and designed comprehensive total reward

programs as an internal partner and external consultant. She serves a variety of clients, including non-profit organizations.

Shannon is the immediate past president of LWHRA. She taught the Compensation course for the UW HR Certificate Program.

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Erin Wolford, SPHR, SHRM-SCP

10+ years in HR and Compensation

Erin has experience in all elements of human resources with a multitude of small to medium

size companies in varying industries, including government, non-profit, for-profit, and start-up environments.

Erin received her Bachelor of Arts degree in Comparative Ethnic Studies from Washington State University, where she double majored in Women’s Studies and double minored in Psychology and Sociology.

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What do you think about when you hear the phrase Pay Equity?

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What’s the issue?

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What’s the issue?

Compensation Connections LLCThe State of the Gender Pay Gap 2018, PayScale

What’s the issue?

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Industry Uncontrolled Gender Pay Gap Controlled Gender Pay Gap

Healthcare $0.812 $0.989

Manufacturing $0.830 $0.972

Nonprofits $0.853 $0.981

Transportation & Warehousing $0.837 $0.960

The State of the Gender Pay Gap 2018, PayScale

What’s the issue?

Pew Research Center, 2015 Compensation Connections LLC

What’s the issue?

Compensation Connections LLCDisappointing Facts About the Black-White Wage Gap, FRB San Francisco, 2017

What’s the issue?

Compensation Connections LLCWomen in the Workplace 2017, McKinsey & Company

Women in the US Population vs. Women in the C-Suite

Total US Population C-Suite Roles Total US Population C-Suite Roles

---- All Women ---- ---- Women of Color ----52% 20% 19% 3%

What’s the issue?

Compensation Connections LLCPopulation in management by gender and race; Women in the Workplace 2017, McKinsey & Company

Why should we care?

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Employer Brand

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Income Inequality a Top Concern

2018 Millennial Survey, Deloitte

Diversity Linked to Employee Loyalty

2018 Millennial Survey, Deloitte

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Washington State Pay Equity Law

• Covers all employers• Prohibits discrimination based on gender for compensation

between “Similarly Employed” workers• Work for the same employer• Job requires similar skill, effort and responsibility• Job performed under similar working conditions

• Cannot deprive employees of “Career Advancement Opportunities”

• Retaliation prohibited• Violation occurs at adoption of a discriminatory practice and each

time compensation is paid thereafter

Oregon State Pay Equity Law

• Covers all employers

• Salary history inquiries prohibited

• Update employment posters prior to January 1, 2019

• Prohibits discrimination of all protected classes in compensation between “Comparable Character” work

• Work that requires substantially similar knowledge, skill, effort, responsibility and working conditions

Oregon State Pay Equity Law (cont’d)

• Compensation includes • Wages, salary, bonuses, benefits, and equity based

compensation• Allowable pay differences

• Safe Harbor for employers that conduct a pay equity analysis, at minimum every 3 years

• Seniority or Merit System • Experience

• Work Location • Piece rate work or similar

• Education / Training • Combination of above

What can we do?

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Understand the organization’s current state.

Population Snapshot

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58%

42%

Gender Snapshot – Organization

Women Men

50%50%

Gender Snapshot – Seattle

13%

18%

10%

3%1%4%6%

49%

Ethnicity Snapshot – Organization

African American

Asian American

Hispanic

Native American

Pacific Islander

Two or More

Unspecified

White

7%

14%

7%

1%1%

7%

0%

63%

Ethnicity Snapshot – Seattle

‘Uncontrolled’ Pay Snapshot

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Average Pay by EthnicityAverage Pay by Gender

FT PT

Average Compa-ratio by Ethnicity with Tenure

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Compa-ratio

• Compa-ratio = comparing employee pay to a data point, often pay range midpoint

• An employee whose pay is the same as the range midpoint has a compa-ratio of 100% (or 1.0)

Average Compa-ratio by Gender & Ethnicity

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Average Compa-ratio by Job Level & Gender

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Average Compa-ratio by Job Level & Ethnicity

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Pay by Job Ethnicity with Tenure

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Avg Compa-ratio by Job, Gender & Ethnicity

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Female Male

Average New Hire Compa-ratio vs Existing

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90%

95%

100%

105%

Admin Production Supervisor Manager

Co

mp

a-ra

tio

New Hires Female New Hires Male Existing Female Existing Male

Merit Pay Increases by Ethnicity & Job Group

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2.3%

2.5%

2.7%

2.9%

3.1%

3.3%

3.5%

Job Group 1 Job Group 2 Job Group 3

African American Asian Hispanic Native American Pacific Islander Two or More Unspecified White

Average Promotion Pay Increase

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Job Group 2010 2012 2014 2016

Nonexempt 7.0% 7.4% 7.6% 8.1%

Exempt 8.3% 8.7% 8.8% 9.3%

Management 9.5% 10.2% 10.1% 9.6%

Promotional Guidelines Report, World at Work, 2016

• By job or job grade• By gender and ethnicity• Include supervisor, years of service and performance data if

available

Is there a glass ceiling?

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Bonus Pay by Gender

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5%

8%

11%

15%

5%

9%

8%

16%

0%

5%

10%

15%

20%

Admin Professional Supervisor Manager

Act

ual

Ave

rage

Bo

nu

s as

% o

f B

ase

Pay

Bonus Category

Female

Male

13 10 24 9 12 8 4 7

Voluntary Turnover with Average Pay Growth

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0%

1%

5%

8%

11%

1%

2%

9%

12%

16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

< 6 Months 6 Mos-1 Year 1-2 Years 2-3 Years 3-4 Years

% o

f Pa

y G

row

th O

ver

Ten

ure

Years of Service Prior to Separation

Female

Male

What are you doing at your organization?

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What can we do?

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Rethink...

Equality vs. Equity

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What happens when we change the fence?

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Review Required Job Qualifications

Compensation Connections LLCLlamas-Blogger

Job Qualifications and Degree Inflation

Compensation Connections LLCHarvard Business School, 2017

• Jobs that used to require a high school diploma now require a bachelor’s degree

• 61% of employers have rejected applicants with the requisite skills and experience but no degree

• College grads in “middle-skill” positions:• Cost more• Less engaged• Higher turnover

Is a degree absolutely necessary?

Compensation Connections LLCU.S. Census Bureau 2015 Report

22%

52%

15%

36%

AFRICAN AMERICAN ASIAN HISPANIC WHITE

Percent with Bachelor’s Degree

32%US Population

with Bachelor’s

Hiring Sources

Compensation Connections LLCSources of Hire 2017, SilkRoad

New Hire Pay Placement Process

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Merit Increase vs. Pay Range Placement

• Annual assessment of pay in range• Tied to quartile (more general) or compa-ratio (more precise)• Demonstrated skills• Overall relevant experience• Demonstrated knowledge, certifications or other education• Short-term and long-term job performance• Other job-related factors important to the organization

Promotion Pay

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1. Follow something similar to the new hire process + performance2. Establish promotion increase guidelines

• Move to minimum of the range or …• By job group, FLSA, etc.

Job Type < 5% 5-9% 10-14% 15-19% 20-29% 30% + No Limit

Nonexempt 4% 29% 29% 20% 11% 2% 5%

Exempt 3% 19% 35% 24% 13% 1% 4%

Management 4% 11% 24% 24% 18% 0% 19%

Promotional Guidelines Report, World at Work, 2016; Maximum Promotional Increase

Mentorship/Leadership Development Program

77% of companies with mentoring programs say they improve retention and job performance

• Supported by senior leadership• Formal program with mentors and role models• Program offers:

• Ability to gain experience relevant to advancement• Access to visible, challenging assignments• Development of informal and formal networks

Association of Training and Development. Millennial Survey 2018, Deloitte

Consider Non-Traditional Work Schedules

Compensation Connections LLC2018 Washington State Employee Benefits Report, WA SHRM

Employee Retention Programs

Compensation Connections LLCDiversity & Inclusion Employee Network Groups @ T-Mobile, Strike Out The Gap, 2018

47%Lower Attrition

2014-2018

Change the Fence

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View HR programs and process through an equity lens • Recruitment and hiring• Pay actions• Performance management and merit systems• Retention and development programs

Think long-term, holistic solutions

Engage employees at all levels to help deconstruct and rebuild systems

What other ways are there tochange the fence?

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What can we do?

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Communication

Transparency Spectrum

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Transparency Matrix

Compensation Connections LLCInspired by Sandrine Bardot, Compensation Insider

Education for Managers

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• Unconscious bias training (individual behaviors)• Race and social justice training (systemic/processes)• Gender and racial/ethnicity wage gap information

• Big picture data• Your organization’s data

• Hiring and implicit bias training• Pay administration guideline training

• New hire, promotion, merit, etc.• Employee conversation training

• Pay and career advancement

Employee Perception of Pay Gap

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“I believe men and women at my company are paid equally for equal work”

• Men = 78% agree• Women = 60% agree

Global Gender Pay Gap Survey, US Data, Glassdoor, 2017

Employee Communication

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Consider…• Total compensation statements• Career advancement and pay progression conversations• Unconscious bias training• Race and social justice training• Sharing organization’s pay equity data

➢ Keep it simple➢ Personalize the message

➢ On-going➢ Think like marketing!

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Final Thought

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“I do not demand equal pay for any women save those who do equal work in value. Scorn to be coddled by your employers; make them understand that you are in their service as workers, not as women.”

Susan B. AnthonyThe Revolution, Women's Suffrage Newspaper

October 8, 1868

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Thank you!

Shannon DrohmanPrincipal

Erin WolfordConsultant

www.CompensationConnections.com206-946-8056