Offer More Than a Pay Bump — Your Team Needs Internal Equity

Offer More Than a Pay Bump — Your Team Needs Internal Equity

May 31, 2023

Building Your Way Out of Survival Mode

To attract and retain the best talent, organizations today need to ensure their compensation strategies are internally equitable. Many employers and HR leaders are still in survival mode to retain employees as the understaffing crisis persists through 2023. REDW’s trusted HR Consulting experts are providing insights to help leaders reassess their approach to employee retention—so that every new hire does not feel like a fire-drill.

Let’s Talk: Internal Equity

It’s more than a pay bump…

To be an employer of choice, attracting and retaining top talent requires much more than boosting starting pay or giving a team member a raise. (Boosting pay as a sole solution to keep good people often leads to problems like pay compression.) Unfortunately, this shortsighted solution is often the first step many leaders take to meet immediate need.
Instead of focusing on one job position at a time, leaders seeking to improve overall employee retention should first seek to improve internal equity to better manage their compensation program and keep their best team members onboard.

What does internal equity look like?

Vertically, progress toward reaching internal equity will show at least a ten percent difference in pay between organization leadership and managers and their supporting staff. Horizontally (between team members of similar rank or title), achievement of internal equity will show custom levels of pay that appropriately reflect differences in essential responsibilities, education, and industry experience. For example, a valuable team member that has been with your organization longer should have a notable difference in pay from a new hire that has joined under the same title. Also, not all managers have equal responsibilities—they may have the same title, but manage different team sizes, project scopes, business development initiatives, etc.

The impacts of internal equity…

When your team members feel appropriately compensated for what they bring to the organization, they experience tangible validation, which, when part of a strong internal workplace culture, stirs up motivation and meaningful impacts for the business—like boosting productivity, ambition, and employee referrals for like-minded, top talent colleagues to apply to the organization. Good employees that feel valued are generally more motivated and empowered to help your organization grow.
Beyond serving to grow the organization and attract and retain quality team members, the organization’s internal equity policy can and should be structured to weather crises. Should your leadership be forced to face layoffs, your policy will help you to make (and have confidence in) strategic choices that will help keep your organization operational through a tough season.

Digging In: Where Do You Start?

How does your organization stack up? It’s time to revisit your overall compensation plan, policies, and procedures. Below are key questions to begin assessing internal equity at your organization.

Ask: Does my organization have structure to uphold internal equity? How are those practices being managed?

To become an employer of choice, instill accountability and confidence in your team by crafting a transparent internal equity policy. A few notes on establishing these best practices:

  • Internal equity policies and procedures should include an annual (or bi-annual) review of the compensation market.
  • Policies should speak to and support internal equity and transparency.
  • Policies and procedures should require a timely review of past decision-making to better identify any reactive decisions that may now be negatively impacting internal equity in the organization.

Ask: Are my organization’s recruiting practices supporting internal equity?

As mentioned earlier, it is incredibly important that earnest recruiting efforts do not inadvertently pave the way for pay compression to become an issue for your team. Compensation offered to new recruits should appropriately compensate them for their skills, while not causing your longstanding team members to feel undervalued or overlooked.

Pro Tip: Well-crafted job descriptions make pricing jobs easier by including compensable factors like education, skills, industry experience, etc. They also are up to date on both what the job requires internally and the external expectations of the talent market (i.e., transparency of qualifications desired, competitive pay and benefits, etc.).

Ask: How is my organization structured and how does that affect compensation?

To establish and maintain internal equity, your organization must have up to date organizational charts and an annual review aimed at closing labor gaps and strategizing company growth. In your annual review, look at each department to assess changes made since the previous assessment. What changes (i.e., new hires, promotions, transitions, long-term projects, goals, etc.) were encountered along the way and how did that affect the department structure?

Consider conducting an executive review of your organization’s current operation regarding reporting structure, growth, and adaptations. Drill down on the impact of micro decisions.

Transform Reactive Decision-Making into a Full-Fledged Game Plan

Beyond being non-strategic, having to maintain a reactive response to employee recruitment and retention is just plain stressful. REDW’s trusted HR experts are here to help employers and HR leaders align with new compensation standards and get on track with internal equity. We provide on-call HR assistance and support, compensation planning assessment, and can even step in as your outsourced human resources professionals, if needed.

Contact us today to ask a question or start a conversation. We’re here to make this easier.

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