4 Steps for Small Businesses to Achieve Gender-Neutral Salaries
Numbers do not lie, and the statistics are in -- there is a gender gap in salaries. There are varying statistics with different percentages, but the discrepancy is out there. Data from PayScale shows the difference in parity between controlled and uncontrolled pay gaps. The World Economic Forum shows gender gaps is a problem on a global level. But, how do employers structure and communicate salaries without any inequality?
After leading a small business's human resources and operations department for 13 years, I know the answer is simple: Keep your policy simple and communicate it well.
Here are four steps to structure pay and promotions with equality in mind:
1. Define pay structure.
First, document each job description based on level. Be sure to include all skills necessary from accountability to job specific technical skills. For example, at Actualize Consulting, being able to take full accountability of a project is a skill needed at our manager level. Then, utilize national averages or benchmarking reports from your industry. Take time to do a comprehensive market pay analysis to develop a pay scale by level.
Next, standardize annual pay adjustments. Using nationwide averages and your own firm's necessary targets, establish salary and bonus levels associated with reaching each target. Communicate to your team monthly so they are abreast of firm progression and what they can expect.
2. Establish promotion criteria.
After you have fairly set your pay structure, the next step is to clearly define and communicate what it takes to get to the next level.
With each level defined, document the skills needed to be promoted to the next level. Going back to the example above, managers take full accountability of a project. However, the ability to take accountability for and manage multiple projects, and take on more direct reports is at the level of a senior manager. At Actualize, we show our employees each level and the skills needed in an easy-to-read chart so there's no confusion on what the required skill mastery is for moving forward.
After you have the promotion criteria defined, work with each team member to develop a career plan on the steps required to obtain their desired aspirations. It takes all types of people to make your organization function. Recognize not everyone wants to be on the fast track. Having a clearly defined path on an annual basis limits any gray areas for equality issues.
3. Pay for performance.
Start with a standardized performance review process where each person is measured by the same criteria. As a small business, we found setting goals at a firm level and then having our team members align individual goals works well. We conduct reviews twice a year to keep our communication open from leadership down, and award employees hitting benchmarks with bonuses.
You can motivate your team by defining levels of bonus payouts based on performance. Firm-wide, at the beginning of each year, we define our bonus payouts based for on-plan performance. Those that are performing above plan are given a higher bonus and pay increase.
We have a numerical model to ensure equality, but keep in mind that there will always be some human element in the decision on the exact amount. For example, one component of our bonus amount is formally surveying our clients. Some clients are more difficult graders than others, and many times, we will adjust the number up if we have data to support a higher rating. In one case, we had a client send an email saying they could not live without our team member and their service. That wasn't reflected in the score given, so we bumped it up.
Communicate the entire process to your firm on a regular basis. Begin each cycle with a refresher on the process and parameters. Be open and transparent and allow for questions. The more understanding your team has around the how and why of their annual compensation, the less likely they are to complain or feel they are being slighted based on anything other than performance.
In conclusion, clearly define your pay structure and criteria for promotions, and annual compensation. Share your research and firm goals on how you are making pay decisions. Understanding the process and having visibility into the "why" of salary and bonus figures is a sure way to keep your team feeling adequately rewarded for performance. The main issue is how we feel and if we feel informed and empowered to earn based on how we perform, it takes gender out of the equation.