What does an equitable and transparent compensation structure look like?
Note: although this post is directed at those responsible for creating compensation structures, I encourage all of you to read and understand what an equitable and transparent compensation structure might look like.
A question that often comes up, especially from our non-profit clients, is on how to retain valuable BIPOC employees so they don’t leave for better paying opportunities elsewhere.
While race and class are not necessarily inextricably intertwined, the history in this country means that a huge racial wealth gap continues to be pervasive, and BIPOC folks, particularly Black people, face inter-generational systemic marginalization that means they are least likely to be able to afford being under-compensated.
In addition, wealth tends to flow backwards for BIPOC folks, meaning that younger generations become financially responsible for the care of their elders, where as for white affluent families, wealth has historically and continues to get passed down to younger generations, creating and advantage that “race neutral” politics do nothing to address, only further perpetuating disparities.
What is an organization to do, particularly a non-profit where funds might be tight all round?
Well, first of all, as in most cases, there is no quick fix.
By the time you realize that you’re about to lose a BIPOC employee where their salary is a factor in them leaving, it’s a little late.
You need a systemic, pro-active, intentional approach to compensation and pay equity that takes an active stance against underpaying staff, especially BIPOC staff.
You are not really doing DEI or anti-racism if your own BIPOC and other systemically marginalized staff’s needs are not being prioritized or met in the process.
One common mistake is assuming that if you are benchmarking against market rates, you are paying fairly.
It’s a good place to start, and certainly could be considered a minimum requirement, but the market is far from fair or equitable. Certain roles in certain industries are undervalued where others are overvalued.
After all, if staff are leaving to earn more elsewhere, you are not actually paying competitively within the wider market that is available to your staff.
Another common mistake is to pay people as little as you can get away with. Actually, calling this a “mistake” is kind. This is a practice that has the impact if not the intention of being predatory. It is the default across all industries and only just starting to shift with laws that prohibit employers from asking for salary history and that require disclosure of salary in job postings.
I can tell you from personal experience that only paying staff what they’re worth to you because you’re afraid of losing them, or in some cases because they have actually threatened to leave or handed in notice is NOT ultimately good for business.
How will that staff member trust your organization if they had to threaten to leave in order to be paid fairly?
And don’t say they were paid fairly before! If you’re willing to pay them more rather than lose them, then you weren’t paying them fairly, you were paying them what you thought you could get away with! You were counting on them not knowing their value to the organization and not being willing to self-advocate!
If business circumstances have changed and you’re able to pay more now than in the past, it is your responsibility to proactively make these adjustments.
Listen, we get it, we’ve seen it over and over - leaders genuinely convinced they have pay equity until feedback from their staff compels then to take a deeper look.
But the truth is, if systemically marginalized staff who are not aligned with power and advantage - particularly BIPOC staff, women and staff who are lower in the institutional hierarchy as well as back of house, admin or frontline staff - do not feel they are being paid equitably, either they’re not, or the equitable compensation structure you have is not being clearly communicated.
Staff should not just BE paid equitably, they should UNDERSTAND the basis of their compensation and what their earning potential is as they develop.
But more often than not, pay inequities are so systemic and engrained, they are not actually being paid equitably.
It’s also important that BIPOC staff don’t feel tokenized.
Are you paying them to stay because you’re embarrassed that you can’t retain BIPOC staff and in a panic because you already have so few of them that it doesn’t look good?
Again, this is not a basis for trust.
It’s also worth noting that equity can feel like oppression to those who are used to privilege and advantage. There are those that feel that straight white men are the most oppressed group in the US today - as much as I may chafe at that (and believe me, I do) that is also by design and requires a cultural shift so there is a shared understanding of the creation of white advantage.
Ok so how can organizations create pay equity so they’re not left wishing they could pay an individual staff member more so they won’t leave, while also wanting to maintain parity with peers and across the organization?
CCI is deep into our second annual pay equity audit. We are not HR specialists ourselves, so last year we hired HR consultant Workplace Changes to partner with us to create an equitable compensation structure, and we are working with them again this year. We are a small team, and less than five years old as a company, which means we aren’t trying to redesign a deeply engrained legacy system, so your organization’s situation may be more complex. However, we have learned some valuable lessons in the process that are applicable at a variety of scales.
The key lesson has been about the value of creating job-based pay bands - in other words, job descriptions and pay ranges for each role, which includes a minimum and maximum salary as well as 7 rates defined as follows:
Rate #1: entry
Rate #2: building proficiency
Rate #3: building proficiency
Rate #4: fully proficient with tenure in the position
Rate #5: fully proficient with tenure in the position
Rate #6: advanced proficiency with tenure in the position
Rate #7: advanced proficiency with tenure in the position
New hires are typically placed at rate #1, 2 or 3 based on expectations for performance or other factors as evaluated during the interview process. Employees then clearly understand how they can advanced to higher rates. All job descriptions and salary bands are published so there is transparency without disclosing exactly what each employee makes.
This approach is becoming increasingly common but I have to say, in the almost 20 years I spent working in architecture, none of the firms I worked for had anything like this, and it would have made a big difference for me if they had.
This kind of clarity and transparency creates trust and allows for open and honest conversations about career and compensation trajectories.
It means that new hires understand what the potential is for career and compensation trajectories and can make decisions accordingly.
It also means that employees with compensation goals can have conversations with their supervisors about what it would take to achieve those goals. Some staff may not have a need for increased compensation and may not want the increased responsibility that comes with it. For others, compensation is something they may want or need to maximize. Priorities can vary over the course of any one person’s career as well.
A few things to note:
At CCI, performance, that is the results, outcomes and impact created for CCI as an organization as well as our clients is the biggest factor in determining the pay rate at which someone is placed. At CCI, we focus on impact and results externally with our clients as well as internally with our team as part of our value system and philosophy.
More traditionally, education, background, professional experience or tenure at an organization might play a larger factor, but this approach, often found in although not limited to non-profit organizations, especially those that come out of academia, does not take into account racial disparities in access to education and opportunities for experience, nor is it necessarily reflective of the value of an employee to an organization. Instead, we believe education, background, professional experience and tenure should factor into compensation only in as much as it adds to the value that an employee can create. At the same time, lived experience related to the work being done can also be compensated for through differential pay, which can be on top of the stated rate, and should be explicitly defined as such. It may be easier within some organizations and industries to take this approach than others.
Market data provides a starting point to understand what similar roles, in similar industries and in similar regions, are paying. Market data is always changing based on the current job market and demand for jobs in different areas. However, as I noted previously, it does not account for roles that are systemically under or over valued.
Therefore internal culture and structure must also be considered, including the way jobs are compensated compared to others in the organization, and the philosophy around how work gets done.
Yes, the organization’s financial health ie budget and what the organization can afford has to be taken into consideration. However, I would say that if your organization is chronically underpaying staff who are leaving for other better paying jobs, even if in a different sector, the business/revenue/funding model needs to be reconsidered.
In conclusion, I’ll say that BIPOC or not, it’s not always possible to prevent staff from leaving to take a higher paying job elsewhere, nor is compensation the only factor in retention. However, if it’s a re-occurring pattern, your compensation structure probably needs re-evaluating.
Having an equitable and transparent compensation structure in place is not only the right thing to do, it makes sound financial sense and benefits the organization as well as its staff.
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