Insights from “Racial Pay Equity: Putting Your Money Where Your Values Are”
With the new Pay Transparency Law slated to go into effect in New York City in November 2022, many employers are reexamining how salaries align with their values, and whether race has played a historical role in determining compensation practices.
In early June, funders and members participated in a workshop facilitated by Dr. Meredith Reitman. Attendees ranged from funders seeking to integrate more equity in their compensation practices to those seeking new tools to impact systems of change within their organizations. Reitman, president of Reitman Research and Strategy, led participants through an interactive workshop that allowed them to examine their own practices and mindsets, as well as equip them with practical tools to conduct a racial pay equity analysis.
Pay Equity Analysis vs. Benchmarking
When considering a Racial Pay Equity Analysis, it is important to differentiate this process from that of benchmarking. Although they both consist of a reevaluation that will dictate compensation, they are nearly polar opposites in every other way.
Benchmarking is a great way to ensure that your organization is paying employees at a similar rate as others in their field. It is an external comparison based on job characteristics. In contrast, a Racial Pay Equity Analysis is an internal comparison, which examines the characteristics of your staff, most often including their skills and experience. It is also worth noting that such an internal analysis frequently requires the support of an external specialist or objective body to support this process.
What Should and Shouldn’t Count Towards Compensation
An organization’s internal analysis hinges on a clear articulation of how the organization's values are reflected in its compensation practices, namely what should and should not count when deciding what to pay employees.
Deciding what factors shouldn’t affect compensation is relatively straightforward. During the workshop, participants shared examples of these factors, including race, gender, sexuality, marital status, gap in employment, age, past salaries, and likability.
On the other hand, deciding what does count toward compensation can be a lot trickier. A good starting place is to reexamine your organization's values. An organization's values can help an organization determine whether or not tenure matters, what kind of experience matters, or what skills everyone in the organization should have. For instance, many equity-focused organizations interpret their values to mean eliminating any requirements for formal degrees, as this requirement may increase barriers to employment or promotion due to structural racism in the education system. However, if Black women are the most credentialed staff in the organization, not rewarding for this achievement might increase racial inequity. This realization may lead to a richer and more nuanced discussion of rewarding directly for skills rather than proxies for skills.
The Role of Management
At any given organization, Senior Leadership plays a critical role in hiring, compensation and promotion recommendations, and building a diverse and equitable workplace. Through policies, processes, and a keen evaluation of internal data, managers have a responsibility to ensure that disparities do not exist across race, age, gender, or other identities, and show their commitment to racial equity through the establishment of sound compensation policies and ongoing analysis.
One way management can ensure fair and equitable compensation within their organization is to develop a compensation philosophy, which is a statement of what and how staff is compensated, in direct alignment with an organization’s values. Traditionally, employee compensation is an ambiguous process that can be changed at will by Senior Leadership. But by codifying your compensation policies as part of an agreement with your staff, you can increase organizational transparency and foster employee trust and engagement.
Tackling Retroactive Correction
In the event that results of an analysis show that there has been racial disparities in compensation, it is important to not only take corrective action but do so with transparency. Doing so may be a source of anxiety, especially when determining how to navigate sharing information that may make your organization look bad. Despite this, it is vital to practice organizational accountability. The first step for this is implementing a greater level of transparency within your organization, which will be the foundation on which trust can be gained and nurtured moving forward. Adopting an organizational accountability framework is a critical step to putting a commitment to racial equity into practice.
Whether you are an administrator looking to integrate more equity in your compensation practices or a manager seeking new tools to impact systems of change, addressing racial pay inequities within your organization starts with taking a closer look at your organizational values. Compensation practices also acknowledge the role race has played and continues to play in systems embedded in our organizations. By aligning your compensation practices with your values, having open discussions on bias, practicing organizational transparency, and sharing power with your employees, you can put your money where your values are.