3 Things To Consider When Setting Your Pay Philosophy

Conducting a Pay Equity Audit annually is the best way to ensure you are paying fairly and equitably. Completing an audit and moving towards pay transparency are the fastest ways to close the pay gap based on gender and race. 

According to SHRM’s article “The Importance of Pay Equity”, and Liz Washko, an attorney at Olgletree Deakins, “An audit is a critical tool that can give employers the information they need to identify pay disparities and opportunities to improve equity.”

If you are interested in learning how to conduct a pay equity audit from start to finish, check out our digital course, Cultivating Equitable Compensation. This 4-week online course will walk you through all the steps including the first step, ensuring your company has a clear pay philosophy.

Here are 3 things to consider when creating or assessing your company's pay philosophy:

1. What does your pay say?

Does your pay philosophy address what you want compensation to communicate to employees about how you pay? If the answer is no, you have to decide  what you want that message to be. Think about whether the message aligns with your company’s values. If your pay philosophy represents a people-first culture, for example, make sure your pay and compensation practices reflect that.

2. Does your pay philosophy consider total rewards?

Base pay is arguably the most important part of compensation, but it’s not the only thing employees consider. Look at what you are offering in terms of healthcare, family care, and retirement planning benefits (the top things most employees care about—surprise, it’s not free snacks and office ping pong). Although these additional benefits don’t pay the rent, they do communicate what you value as an organization. Read more about the perks that can support underrepresented employees.

3. Does your pay philosophy match your practice?

It doesn’t matter what the philosophy is if what you are doing is different. Part of the pay equity audit is to ensure you are paying the way you say you are, based on the factors you claim to be. If you say performance is a factor in how you pay, but don’t rate or communicate performance results to employees, how are you paying based on performance measures? If tenure is a factor, how do you calculate that and how much does it weigh? Think about the level of transparency at which your company operates and implement pay practices that match.

The pay philosophy is the foundation for how and why you pay the way you do. Getting it right can make a world of difference. When done right it fosters a healthy, inclusive, and equitable system that will only benefit your organization in the long run. Learn more by investing in our digital course: Cultivating Equitable Compensation.