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.
Compensation Connections LLC
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.
Compensation Connections LLC
What do you think about when you hear the phrase Pay Equity?
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What’s the issue?
Compensation Connections LLC
What’s the issue?
Compensation Connections LLCThe State of the Gender Pay Gap 2018, PayScale
What’s the issue?
Compensation Connections LLC
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
Compensation Connections LLC
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?
Compensation Connections LLC
Understand the organization’s current state.
Population Snapshot
Compensation Connections LLC
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
Compensation Connections LLC
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
Compensation Connections LLC
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
Compensation Connections LLC
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
Compensation Connections LLC
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?
Compensation Connections LLC
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
Compensation Connections LLC
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
Compensation Connections LLC
“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
Compensation Connections LLC
Thank you!
Shannon DrohmanPrincipal
Erin WolfordConsultant
www.CompensationConnections.com206-946-8056