Compensation Strategy and Pay Equity · •Sally’s compa ratio: 65/70 = .93 or 93% •Tom’s...

Compensation Strategy and Pay Equity –

The Secret Weapons of Highly Effective Organizations in the War for Talent

Built on Integrity

June 28, 2018

© Gallagher, Flynn, & Co, LLP 2018.

1. VT Labor Market & Why Pay Equity Matters

2. How Are We Doing with Pay Equity in VT?

3. Tools for Addressing Pay Equity in Your Business

4. Q&A

Agenda


AND WHAT DOES THAT HAVE TO DO WITH IRRESISTIBILITY?

VT Population

~625,000

<18 years old: 19%

18-65 years old: 62.9%

22-44 years old: ~23%

>65 years old: 18.1%

Sources: US Census Bureau (2016); Vermont Future’s Project


Vermont

2.8%

Burlington / S. Burlington

2.2%

<<U.S.

3.9%

Unemployment

Sources: Bureau of Labor Statistics, June 25, 2018


The US is Facing a Major Talent Gap & Skilled Labor Shortage

Sources: Bureau of Labor Statistics

~7M Unemployed people

Talent Gap

~6M Unfilled jobs


VT is Also Facing a Talent Gap We Need ~11K New People / Year to Maintain

Sources: Vermont Future’s Project

~7M Unemployed people

Talent Gap

~6M Unfilled jobs


So what?

What Does This All Mean??


•We have a skilled labor shortage in nationally

and in Vermont

•The “War for Talent” is real

•People are leaving “good” companies for

“better” companies

•There will be winners and losers

So What?


Who Is Winning?

...And What Do We Do About It?


4

5

Focus on Becoming an Irresistible Company

Engagement

People

&

Purpose

Culture

Career Pathways &

Coaching

Transparency

MentoringHonesty Autonomy

Inspiration Recognition

Innovation

Positive

Environment

Growth

Opportunit

ies

“Slack

Time”

Meaningful

Work

Ingredients for Irresistibility:


Mckinsey:

• Companies in the top quartile for gender diversity are 21% more likely to have financial returns above their respective national industry medians.

• Globally, companies in the top quartile for executive-level gender diversity are 21% more likely to outperform their fourth-quartile peers on EBIT and 27% more likely to outperform them on longer-term value creation (measured using an economic profit margin).

What Does Diversity Mean for Your Bottom Line?


HOW ARE WE DOING ON GENDER EQUITY?

The Wage Gap

14¢

The Wage Gap Exists in High-Wage Fields

Office and Administrative Support: 16%

Nurses, Technologists, Technicians: 17%

Education, Training, + Library Occupations: 22%

Nonprofit Executives: 25%

Education Administrators: 26%

And in Traditionally Female Fields

On the other…

How are you doing on pay equity?

…Do you know?

VS.

Types of Pay Inequity

Different types of pay inequities require different strategies to correct them. Today’s discussion will focus on “Job-to-Job Differences in Pay”.

1. “Career Clustering”

Higher incidence of women in lower paid professions

2. “Job-to-Job Differences in Pay”

Equal pay for equal work


Compa ratio:

The ratio of an individual’s pay to the median of the of the range for their position.

• Typically expressed as a number or percent

• A compa ratio of 1 or 100% means the individual is paid at the mid-point of the range

Company Size & Compa Ratios

Example:

• Company’s pay range for a position: $60K - $80K

• Median: $70K

• Sally’s pay is $65K and Tom’s pay is $75K

• Sally’s compa ratio: 65/70 = .93 or 93%

• Tom’s compa ratio: 75/70 = 1.1 or 110%

The methods for assessing pay equity vary significantly depending on the SIZE of the company. Large companies can use regression analysis. For small to mid-sized companies, compa ratios are a key tool.

$60K $80K$70K

Sally$65K

Tom$75K


• A simple way to determine if you have “job-to-job differences in pay” in a small to mid-size company is to chart your compa ratios and experience by:

• Job

• Department

• Pay Grade

• Full Company

…Very quickly a picture will emerge if there are potential gender pay gaps that need to be addressed

How Do You Know If You Have A Problem?

The majority of job-to-job differences in pay arise from inequities in starting pay and/or how performance is evaluated and corresponding pay raises are given out over time.


How Do You Know If You Have A Problem?Scenarios that Signal an Issue (1 of 2)

Graphing compa ratios & experience reveals situations &/or patterns that could be indicative of pay inequities. These situations require deeper investigation to determine if there is a “reasonable” explanation or if pay inequity exists.

Experience (yrs)

Co

mp

a R

ati

o

Compa Ratios & Experience

MM

M

F

M FF

FFF

M

MM

M

F


How Do You Know If You Have A Problem?Scenarios that Signal an Issue (2 of 2)

Graphing compa ratios and experience while also including performance ratings (if you have them) paints a more sophisticated picture of what is going on with pay equity.

Experience (yrs)

Co

mp

a R

ati

o

Compa Ratios & Experience with Performance

M2

F2F2

F3

F2

M2

M2

M3

F2F2


• Some reasons may include:

• It’s the right thing to do

• Increases the bottom line via increases in :

‒recruitment of top talent

‒retention of top talent

‒Diversity of workforce

‒Employee Engagement

‒Branding / Marketing / PR

Why Fix the Gender Wage Gap?

Determining the “why” for your organization will help inform your strategy and align appropriate resources with the effort.


1. Define Organization's Compensation Philosophy

2. Determine Current Competitive Range for Each Position

3. Determine Your Company Range for Each Position

Closing the Gap

While every organization’s process for closing the gender pay gap needs to be tailored to its unique situation, the following high-level process steps can offer some initial direction:

4. Conduct Current State Analysis

• Current pay

• Compa ratios

• Position• Pay grade• Full company

5. Identify Potential Macro & Micro Issues

6. Analyze (can the issues be explained?)

7. Identify Needed Adjustments

Pay for Experience

8. Prioritize Adjustments

9. Plan

▫ Implementation Plan

▫ Change Management Plan

▫ Communications Plan

10. Implement

11. Monitor & Evaluate

4. Update Job Descriptions to Define Excellence & Performance Standards in Four Brackets

5. Divide Competitive Range into Quartiles & Map to Job Descriptions

6. Conduct Current State Analysis

• Current pay vs. performance level

6. Identify Needed Individual Adjustments and Organization Trends

Pay for Performance


1. The “War for Talent” is real; it is an employee’s market.

2. Pay equity is a critical ingredient in building an irresistible company.

3. Pay equity requires intention and attention to achieve and maintain.

4. There are tools, resources, and methods to do this in a structured and

sustainable way so that your business comes out on top.

Four Things to Remember:


On the other…

What would it mean for your

company to have pay equity?


?Q & A


Thank you! Please Reach Out With Any Questions:

Krysta Sadowski [email protected]


Compensation Strategy and Pay Equity · •Sally’s compa ratio: 65/70 = .93 or 93% •Tom’s...

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