Mastering Compensation Strategies in 2023

In celebration of National Small Business Week, Kristin Russum, Director of Organizational Development at TriNet sits down with Ken Clemens, Solutions Consultant at salary.com, to discuss compensation in today’s environment. They discuss the labor market, effective compensation strategies, job descriptions, promoting pay equity, pay transparency and how these strategies weave into your HR strategies overall.

Please note that these sessions are for educational purposes only. TriNet provides HR guidance and best practices. TriNet does not provide legal, tax or accounting advice. The materials in this presentation and the products, advice and opinions expressed in this presentation are solely those prepared by the presenter salary.com The materials in this presentation and the products, advice and opinions expressed in this presentation are solely those prepared by the presenter, salary.com.

Kristin Russum:
Hi and welcome, everyone, to National Small Business Week. We are here today with our partner, salary.com, and we're gonna be talking about mastering compensation strategies in 2023.

So with me today, I've got Ken Clemens and I'll allow him to introduce himself shortly. My name is Kristin Russum. I'm a director of Organizational Development here at TriNet. We work with our clients in uncovering those obstacles or challenges that they're facing surrounding their human capital demands and issues that are coming up.

Compensation is always a hot topic with our group. So I'm looking forward to facilitating this conversation with you. Ken, I would love to have you tell us a little bit about you and your background.

Ken Clemens:
No, absolutely. Thanks for having me and thanks to the TriNet team for inviting us to join today.

My name is Ken. I'm a Solutions Consultant at salary.com. I've been with salary.com for just about five years now. My background is in software. I've been in the compensation space for a while now and my kind of day-to-day work revolves around helping our existing customers, in our compensation tools and using our market data as well as working with prospective customers to determine what their challenges are and how we might be able to help.

So I'm really excited to join and talk a little bit about some of the things that we're seeing out in the market today.

Kristin:
I love it. Well, we're glad to have you here. We deal with compensation challenges all day long and so it's nice to have a real expert from salary.com joining us.

Ken:
Perfect. And I know, today, there are a few things that we're gonna be covering and just some of the areas that salary.com touches on overall. I think, you know, we're working on mastering compensation in 2023. We could obviously spend a long time talking about a lot of different aspects.

So, what we're gonna try to cover today are some of the highlights, some of the main points and some of the things that really make handling compensation in kind of a modern context important and what makes it different from, you know, what it might have looked like in the past. You know, I think some of the main points I wanted to make sure we covered today are just a little bit about the labor market today.

I think folks in the space, the viewers here, are probably pretty familiar with a lot of the challenges that we're gonna bring up. But we'll talk a little bit about some of the goals of putting together effective compensation strategies and really what we want the outcome of this work to look like.

We'll talk about some tips for market pricing effectively, making sure you're competitive with the outside market. We'll definitely spend some time talking about job descriptions, which is an increasingly important part of getting pay right. Then of course, promoting pay equity and pay transparency kind of across the board and weaving it into, not only your compensation strategies, but also your HR strategies overall.

Kristin:
I love it. We've got a packed agenda today, Ken. I hope we'll be able to get to all of that. I know I've got a few pent-up questions that I wanna make sure, and I'll prep for those as we go through the rest of your presentation.

Ken:
Fantastic. That sounds great. Awesome. And just kinda starting off talking about the labor market today, salary.com runs a number of pulse surveys and obviously there are a lot of folks that are interested in what we're doing and just what, you know, the labor market looks like.

What we've found is that in one of our more recent pulse surveys, 63% of companies say it's more difficult to hire new employees and 20% of those report that they are really struggling. On the other side, on the employee end, according to a Harvard Business Review study, we found that 41% of employees in the global workforce are considering resigning from their roles.

And 36 of those are leaving roles to do so, without having their next job in place. It's interesting we're continuing to see this kind of post pandemic to a certain extent. But it leads to, you know, a number of issues, obviously around a labor shortage. Inflation's continuing to put pressure on wages and of course the regulatory landscape on top of that is continuing to shift—so consistently difficult to kind of hire and retain. Make sure you're competitive and sort of balance all of those different pieces.

Kristin:
It's tough when you think about these three things here—what is within a company's control and what things are outside of their control.

And you know, being able to focus on those things they can do and being able to have an eye towards those things that they can't control, but knowing how they're gonna influence what are their next actions, what are their next steps. So I love our topics today. It's fantastic, Ken.

Ken:
Awesome. Yeah, it's definitely relevant, I think for just about every company we talk to these days. I think to your point Kristin, you know, some of the things we need to think about as we're putting together a strategy; I love the idea of controlling what we can control and trying to kind of make the rest work.

But the goals here of an effective compensation strategy are, of course, we wanna be externally competitive, we wanna make sure we can hire people from those around us, but more importantly, from a retention and a hiring standpoint and a compliance standpoint in a lot of situations, we want to make sure we're internally equitable, making sure that we're not just taking people, paying them what we need to pay them to get them in the door and then, you know, cleaning up a lot of pay equity and pay compression issues down the line. You know, that's a really important part of an effective compensation strategy. It's being ready to continually analyze that. And pay needs to be transparently communicated. People now, more than ever, need to understand and you need to be able to explain.

Your managers need to be able to explain why they make what they make. That's gonna be a really important part of this. And a lot of companies we've worked with, we've found it's very difficult for them to do. And of course the important part here is doing this all while being cost effective.

We can't just throw money at the problem forever. So making sure that we're prioritizing where our dollars need to be spent, what jobs are gonna have the biggest impact on the business and making sure we're really competitive and know exactly what it means to be competitive.

Kristin:
Well, you know, it's interesting, Ken, you brought up two things that I was hoping maybe we could just spend a quick few minutes with. One is pay compression and maybe if you could just give a definition of that. We do see a lot of clients with the volatility in the compensation space right now that they've inadvertently created pay compression. So if you could talk about that.

And then secondly, I'd love to just dialogue a little bit about why it's so important for managers to be able to have these kinds of conversations and be really well versed in what is the structure. So those are my two questions.

Ken:
Yeah, absolutely. And I think, pay compression in general, and I think most folks, even if not by name, are familiar with the idea if anyone's had to hire in the last several years here. But, pay compression is the idea that you are hiring someone who might be less qualified than some of your existing employees, might have less tenure with the company, they might potentially have less experience, or, you know, regardless, just tenure overall.

You know, having to pay someone 20% more just to hire them in the current labor market, whereas you have loyal employees who've been with you for a long time, who are very proficient at their jobs that might be making less than that. And you need to address that very, very carefully because you're still gonna need to hire the other folks to make sure you get that new talent in the door. But making sure you're in a position to ideally correct the employees that have been with you for a long time and make sure their pay's in line with that as well. And absolutely make sure that you can explain to them, if not why they make what they make, what the plans are and incentivize them in other ways. Hopefully that's helpful on the pay compression front.

Kristin:
Yeah. Thanks so much,Ken.

Ken:
Absolutely. And I think it leads into the transparently communicated part of this, like you mentioned, making sure that managers are equipped to have conversations about why people make what they make. That's really important because employees are always gonna talk to each other.

Employees, especially today, there are legal protections in place in most areas where employees need to be protected and they need to be allowed to talk to each other about pay. So, you know, management needs to have a response to that. If someone says, "I'm making this much, this person's making this much, why is that?"

And if they don't have a great explanation, best case scenario, you have an employee that's probably upset and at risk of leaving; worst case scenario, you have a lawsuit. So making sure that you have that taken care of and your manager equipped is really important.

Kristin:
No, I think that's an important element, especially when we think about newer generations don't often have some of the same sensitivities or same restrictive constructs around discussing compensation. Their entire lives have been an open book. Everybody knows everything. And so the idea that they wouldn't discuss compensation with their coworkers and colleagues is often a concept that's pretty foreign to a lot of folks who've been in the workforce for a bit. So I think it's an important call out. Thanks, Ken.

Ken:
Yeah, no, definitely. There's so much, and it's important too, and it's good to have a lot of this in the light. In a lot of ways transparency is a good thing; it helps to shed light on potential pay equity issues.

But a lot of customers we work with, we share, you know, transparency is a journey, especially if you've been in business and you've got decades of trying to untangle why people are making what they're making. It can be a long process. So it's a lot to keep in mind.

Kristin:
Very true.

Ken:
But awesome. And I think the other thing I wanted to talk about, one of the big pieces that I'll kind of move on to next, is that externally competitive part. And this is one of the first things people think of with comp. It's the most reactive, it's the most kind of, how do we get someone in the door? How do we keep someone from leaving?

And you think about the reason people leave and join companies; pay is usually in the top three reasons for that. So making sure that you're paying competitively is really important. So market pricing effectively, again, another topic we could probably spend a day going through in full detail, but just overall, thinking about how you're keeping track of what other companies are paying and what's the best way to do this, what types of data sources make the most sense for you and having timely, accurate compensation market data is critical. And for folks who've gone out to, you know, Glassdoor and tried to figure out what other companies are paying, for folks who have tried to use more kind of crowdsourced or even, in some cases maybe, picked up the phone and tried to figure out what other organizations are paying.

It can be really difficult, time consuming. There are also antitrust laws around sharing compensation to avoid price fixing. So the four main compensation data sets that we see out there and some of the ones we recommend, they all have their pros and cons. No one's perfect, but, you know, formal compensation surveys have kind of been the gold standard for accuracy with your large kind of survey vendors, consulting houses out there, even local associations, folks like that; where you might be able to say, "Hey, here's what I'm paying for these jobs."

Let's get some aggregate data back from the group. And finding a survey that really captures kind of the folks you're competing with for this information and for this talent. If you can find a formal compensation survey, that's a great way to get some very accurate information that's vetted, that's HR reported, that is employee reported.

It's being divulged by folks who actually understand the difference between base and bonus and incentive and all those other pieces. So formal compensation surveys are fantastic; they're very accurate. However, it takes time to run them, they're often much less timely, and by the time you get the data, sometimes it's up to six months old. So it's just kind of bridging that gap between knowing this was extremely accurate six months ago. Do we feel confident we can bring that up to the current point in time? So that's one of the main ones.

There's also a new kind of string of payroll driven data that's out there today. And this is very timely. It's basically where there's some tech companies that are syncing up directly with people's HRIS and payroll tools and saying, "Hey, for this software engineer title, let's just pull what everyone's actual payroll is for this job and aggregate that." And that's great because it's super timely. It's instant, more or less because you're kind of pulling from real time payroll information.

However, you're usually just working with job titles and there's some limitations around that because even a software engineer, that title could mean a lot of different things at a lot of different companies. So it gives you some good timely data, but the accuracy isn't quite as close as you'd see within a survey where they actually take the time to make sure a sales manager at company A is the same as a sales manager at company B.

Kristin:
Yeah, that's specific job matching where they're looking at the functions that are doing versus some of the creative, I'm sure you've seen, we've seen some very creative titles out there.

Ken:
Oh yeah.

Kristin:
People trying to set themselves apart from the competitors often doesn't translate very well.

Ken:
Right, that's a huge pain for all of our customers trying to figure that out. Absolutely. So making sure you're substantively matching based on the job and the functions of that position, looking at what that job does instead of what it's called, is really important.

And of course, there's your crowdsourced data. They all have their pros and cons. Crowdsourced data is typically free or very low cost. There's also little to no transparency. It's employees reporting their data. Best case, you've got employees reporting who might not understand kind of the nuances of their comp. They're certainly not doing that job matching that we talked about and aligning that.

And your worst case scenario, we've seen it with some of these crowdsourced data sets, is that you could have HR folks actually going in and misreporting information to skew the data. So not a great source, but again, if you're strapped on time, strapped on money, it's out there and it's usually pretty readily available.

The other piece I'll mention here is aggregate survey data. There are some tools. Salary.com has one of these called CompAnalyst® market data, where we actually purchase the results of hundreds of surveys. So those formal compensation surveys aggregate those into our tool and give folks a quick and easy way to access that data. It updates a little more frequently. They don't have to provide their compensation data in return, which is huge. And compared to a normal survey, you don't get to see that participant list of other companies. You can still get specific to certain industries and locations. You lose a little bit of transparency, but you still gain a lot more convenience and a lot more data at the end of the day. So that's another great option for market data out there as well.

But those are just a few types of market data I think are worth kind of paying attention to. When it comes to benchmarking overall, regardless of the data set, you want to make sure you understand the location that you're competing in, the industry, the company size. And a lot of folks, if they're in a certain type of business, maybe a manufacturing company in Minneapolis, for example, they might think they're only competing for labor with other manufacturing companies in Minneapolis. But the reality is they're HR folks, they're accountants. Those folks could work just about anywhere, so making sure you're really thinking about where your employees are coming from when you hire them and where they go when they leave is crucial.

And what types of jobs overall are gonna be really competitive within your certain industry? Which ones are broader? What types of executive positions, for example, are typically gonna be priced? You know, those folks are way more mobile. You might be competing with the whole country versus your line level employees, where you might be competing in your ZIP code.

So keeping in mind for every job those different components is really important.

Kristin:
Well, I think an important element here also, Ken, is that these questions will change regularly. And so this is something that we would want to encourage, you know, our clients and small businesses to look at routinely, not just look at it one time and think that that's gonna be how they operate for the next two years, especially with the market being as it is, that you're constantly evaluating these questions and really continuing to refine what is the true market of where I'm pulling the talent from.

Ken:
Absolutely. And it's changing faster than it ever has, to your point.

Kristin:
It's whiplash.

Ken:
Yeah.

Kristin:
It really is whiplash.

Ken:
Absolutely. And then on top of that, you have the nature of the jobs themselves changing to a certain extent, which we'll talk about a little bit more in a second, but I think a perfect, kind of segue from what you just mentioned, Kristin, is kind of the difference in geography and this applies to remote work, which significantly changes the types of companies you're competing with.

A lot of organizations, in jobs that could potentially allow for remote work, you're no longer competing with the few companies around the corner from you. You're competing with the entire country and the entire world for this talent now. And even with folks who aren't remote, you know, still figuring out how to pay based on location, even if they have on-site locations in different areas, it takes a lot of strategy and a lot of decisions you have to make, and there's still no right answer on how to handle that. And our customers ask us all the time, "What should we do? How should we tackle this?" and we give the annoying answer, "It depends."

Kristin:
I know. Our clients love it when we do that too. They, everybody wants that, "Should we do geographic regions, you know, et cetera and so forth?" And we're like, "Well, it depends, you know. What is your labor market? So let's figure out where you're getting your talent and then make some determinations." And I know you'll talk a little bit about this later. I think this is when creating a talent or compensation philosophy can be a really helpful, so essentially, it's sort of a North Star.

Like how do we as an organization approach compensation? And having some structure around that can help land on where this needs to be and also with the transparency elements.

Ken:
Absolutely, half the strategy is having a strategy.

Kristin:
Having a strategy.

Ken:
Yeah. So, and making sure that it's gonna be consistent and applicable. And that's gonna, even having some type of consistency, regardless of what that plan is, is gonna help to solve a lot of potential problems for you. So, you're exactly right. And that's the case with geographic pricing. And we'll see. I won't go into too much detail on this, but kind of the general approaches like we're looking at here, it's gonna depend on who you're competing with.

This approach might vary based on the types of jobs you're working with. You might have a different approach for different areas of the company. But you could say, "Hey if we have our headquarters location in a few other locations or remote employees, are we gonna pay everyone at that headquarters rate?"

This works really well for folks who are in, for example, salary.com is based out of Boston, pretty competitive market. So if we pay folks based on Boston rates, we're gonna be competitive in most places. That can be a great option for that. It also works well for folks, where maybe you're not in a high paying area, but all of your areas look the same. Maybe you've got a few locations across the Midwest where you know the pay doesn't really vary that much, location by location—another great reason for having good market data to help to figure that out. And for situations where you say, "Hey, actually we do need to vary pay by location. It's gonna be harder for us to retain and attract talent."

You could say, "Hey, we're gonna get really specific. We're gonna price every employee down to their specific city or their ZIP code, and we're gonna make very finite adjustments for them," which can be effective, but super time consuming.

Kristin:
Very time consuming. I'll be candid, I don't see a lot of clients doing that. I do think that they land on, "Either we're gonna have a single rate, sort of a national rate based on headquarters or a national thing," or, you know, they look at some sort of zoning differential. So, let me ask you this question—I've had some folks we've advised that maybe as part of their comp philosophy, depending on those roles that are really tough to find, that they have a one geographic strategy for those roles and perhaps a different geographic strategy for maybe some of your lower cost roles or easier to fill roles that might have a little more flexibility with. Have you seen that to be a trend?

Ken:
Yeah, absolutely. And again, it comes back to that core question—where are these people and who are we competing with?

Do you have a job that's pretty ubiquitous across the country? We see this a lot with a customer support type roles. Where it's a pretty ubiquitous one and a job that's really friendly for remote work. In those cases, there's a pretty big labor market out there, pretty big labor pool and you usually don't have to get quite as specific or competitive in a lot of those situations. And you can get by with a pretty nice national structure in a lot of those cases. Again, not to paint it sort of too broadly, but in a lot of those cases you don't have to be quite as targeted just because of the volume of people out in the market, whereas if you're dealing with a special breed of software engineer that knows the newest AI technology and all of that, and needs to have experience with three other unrelated industries. In those situations, you're probably gonna wanna get very, very targeted to that role and even sometimes to the person.

Kristin:
Yeah. So you can recruit the four people that have that particular skillset. Right?

Ken:
Exactly.

Kristin:
Absolutely.

Ken:
So that's huge. And I completely agree with you by the way, the metro-specific. We have a few customers that have tried that. We usually advise against it in retail for retail locations. Sometimes, that's the only time I've seen that done effectively. Again, not remote employees. Most folks are gonna take a zone approach.

Kristin:
Well, but the metro specific tends to be also very compliance driven based on specific cities, for example, have enacted minimum pay requirements. And so that makes a big difference on, again, it goes back to the previous slide about where's your labor market? Who are you having to pull from? What are your competitors doing that you need to be mindful of?

Ken:
Absolutely. Especially if you've got big populations in those areas. So yeah, another area where we could go on all day on each one of these slides.

Kristin:
I know. We really could. We could in the rabbit hole, as it were.

Ken:
Definitely. But yeah, just a few things to keep in mind as folks are pricing jobs.

I know it's opening a lot of doors, but some things to think about in terms of really doing that effectively. And kind of changing gears here, you know, we're talking, we've been talking a lot about the competitive data, really focusing on the employees and what we pay, and the market data to be competitive.

But, a huge, really important kind of fundamental step that should, in practice, come before that. And that is really clearly defining these jobs and making sure that we understand what these jobs actually do, the requirements that it takes to do them, not only looking at those jobs in isolation, but how they compare to other jobs internally and figuring out kind of what that value looks like.

So, it is impossible in 2023 to have a conversation about comp strategy without talking about job descriptions.

Kristin:
It's near and dear to my heart. One that we talk about, I've been talking about for 25 years, but always difficult because it's a time-consuming process to put job descriptions together.

And I'm glad that you're bringing it up again and maybe, we'll get to see some people making some strides in this area.

Ken:
I know we always joke that there's, you know, you can have a director of HR if you're a big enough company, you might have a director of compensation, you might have a director of recruiting. There's no director of job descriptions.

Kristin:
There really isn't. There really isn't.

Ken:
It usually falls on the HR folks and it could be a full-time job if you wanted it to be.

Kristin:
It really could, especially keeping them updated, current and relevant with what's going on in the market right now.

Ken:
Absolutely. And it's so important, I think, like you said, it's not usually the fire that people need to put out. The fire is this person's gonna leave; I need to make a counter offer or we need to hire three of these people before the end of the year if we're gonna hit our targets.

Job descriptions are such a crucial first step to that. But you know, a lot of times, you can get pretty far without them and end up making some wrong decisions. So having consistent documentation on these jobs is critical. Again, not just for understanding what you need to pay because you know what that job actually entails, but also when it comes to figuring out how these jobs compare to each other internally, what their internal value to the organization is, and making tough potentially budget decisions too to say, "This is a core job for us. We need to be targeting maybe the 75th percentile of the market. We're willing to pay more because this job is crucial to our business versus other areas where we don't want to, but turnover wouldn't be quite as detrimental."

Kristin:
Those mission critical roles where you really understand and divvy up your population to understand, which ones, where if they walk out the door, we're gonna start to hemorrhage and we need to understand what those are.

Ken:
Absolutely. I think a big part of this, with job descriptions too, is, and what we're encouraging folks and we've seen a lot of our customers starting to move towards is, not just building a description with a job summary, with responsibilities—that's all really important—but also understanding the skills and competencies that are required for those jobs and making sure that we have a good accounting of that, too.

This is gonna be really critical for your jobs for a few reasons. First, making sure you can hire people that actually have the skills you need and be able to objectively measure and say, all right, well this person has customer facing experience. That's a pretty broad requirement.

If you can drill down and say, for us, a competency in customer facing skills is going to mean this, this, and this specifically. You can get much more granular, hire much more effectively, and make sure you're paying for the skills that you're requiring at those levels. So really defining those qualifications and making sure that you're using a consistent framework across those is gonna be really crucial too.

It's also gonna be important for identifying skills gaps and thinking about, not just what skills do we need today to do these jobs, and are we able to train and hire for those skills, but also everything is evolving faster than it ever has. What skills are our employees gonna need just to do their same job tomorrow, a year from now?

Making sure that we have those gaps. And I've got some info from Gartner here, just talking about, you know, 58% of the workforce is set to need new skills to do their exact same jobs successfully today.

Kristin:
That's a staggering percentage that when you think about it and you know, that last statistic that you have there, that 47% don't know what skill gaps their current employees have, that's a little scary to think that folks may not have complete awareness of really what it takes to be successful in individual roles.

Ken:
Yeah, no, absolutely. And I think it's hard when you don't have an inventory. And again, it all starts with job descriptions.

Kristin:
Really does.

Ken:
And you need that to be able to build that out.

So having an accounting of skills, keeping skills and competencies in mind as you're defining these jobs is critical. Making sure that you're using a framework where they interconnect, where you can take a job and say, hey, if someone wants to move and progress in a career from one level to another or they're an accountant today and maybe they don't want to become an accounting manager, maybe they want to become a tax accountant.

Being able to spell out for them, hey, here are the different skills you'd need if you wanna move to a manager role. If you wanna move to a different type of individual contributor role, here's what you'd need and how can we help make you successful and develop you in those areas and also make sure that aligns with the company's future needs as well.

Kristin:
Well, those are the things that we find that employees really want. They wanna know, "where do I go next?" And those organizations who are providing that level of support and guidance are having a lot greater success retaining those people. Then because otherwise employees go, well, if you don't know where I'm gonna go, I'm gonna go somewhere where I can figure out where my next role is.

Ken:
Right. And these days they're probably willing to pay more and it just snowballs on itself.

Kristin:
It does. Gets ugly really quick.

Ken:
Absolutely. And you think, we always call back to kind of the big three reasons why someone leaves a job and obviously compensation's a huge one.

And then there's more, the interpersonal stuff, they don't get along with their manager, the culture's not a good fit. But the other big one is career development. If, to your point, you can't tell them exactly what their options are, give them multiple options and then help them understand how you are gonna help them to get there and what they need to do to meet you halfway.

That's all really critical, and again, just about impossible to do without a strategic look at job descriptions, skills, and competencies. Then I've just got a quick slide here and I think we've touched on all of these different pieces so far.

Kristin:
We have. Yeah.

Ken:
But all really important, critical, aspects and I think the one we didn't touch on here was performance management, where even an employee in an existing job, being able to say, "This is exactly what it looks like for you to be doing well and be successful. This is an objective standard for us to measure against and something we actually are built to help people improve on," is critical too.

Kristin:
Well, and the converse side of that is when somebody's not performing well, to have the language around, you know, what does that look like and what exactly do you need to do to be successful? All really important elements of that employee experience.

Ken:
Definitely. And I think one of our directors talks about taking the emotion out of performance reviews. That's impossible. I always laugh at that a little bit.

Kristin:
But, yeah. It is a funny one, but maybe taking some of the angst out of it is probably a better way to say it because when you equip managers with, "Here's what it looks like and it's success. Here's what it doesn't look like," it does tend to remove some of that emotion.

You can have a more pointed conversation without getting into, "Well, you're not doing what you need to do." It's like, "Well, these are the skills that you need to develop."

Ken:
Yeah, no, that's a much better way to put it, I think. But awesome. So that's a little bit on skills and I think, just keeping an eye on the time here, but I think skills, job descriptions, absolutely critical.

And at the very least, especially for smaller companies, a mission that we kind of put out for folks is, at least be in a position where if an employee asked you for a job description, make sure you could give them that. That's a good situation and something where you're probably gonna run into at some point in the near future.

In all of this, really everything we've talked about so far starts to tie back, has downstream effects for pay transparency and for pay equity. I think we've been talking around a lot of this already, but pay transparency and pay equity are top of mind, not just from the perspective of the retention, making sure that employees understand why they make what they make, making sure they feel comfortable that they're being paid and taken care of fairly, but also from the legislative perspective as well, as we're seeing a lot more, you know, legislation around this, we're starting to see a lot of regulation.

I am not a legal expert in this area. We have folks on our team that are, so I'm gonna try to keep myself out of any hot water there. But what we can help talk about here is just some of the broader compensation strategies you can put in place to make sure that you are in a good position to deal with those conversations and deal with those issues as they come up.

Kristin:
I love your three bullets on the requirement. You know, that leadership buy-in, really your leadership needs to understand the criticality of this and just some of the downstream risk associated with not having this in place. I love that compensation philosophy.

It's near and dear to my heart. And then that last one of having some formal training for your managers, equipping them with the right words, language, whether it's policy driven, whether it's formalized training where people understand like how to have those conversations, how to look at a total compensation statement, how to address those concerns that employees have is really all critical. So, great, great points there, Ken.

Ken:
Absolutely. And I think just coming back to leadership buy-in, that's one where we see that it's so easy to stumble on the first step in those cases. And companies can be in real hot water if they, let's say that their team is trying to be proactive and they uncover some pay equity issues.

If you don't have the leadership buy-in to follow through and make those corrections, first of all, that doesn't put you in a good position morally, but that also opens you up to legal action in a lot of cases too. Making sure that you have the buy-in to not only discover what the issues are, but fix what needs to be fixed, is critical. And we'll talk more about the compensation philosophy and strategy. Half the strategy is having a strategy in a lot of these cases.

Kristin:
I might quote you on that one, Ken. We might wanna include that in our conversations with clients.

Ken:
Awesome. Yeah. We say half because we do wanna make sure it's a good strategy.

Kristin:
Well, yeah, there's that.

Ken:
But consistency is important, so those are crucial. But with pay transparency, and again, I think the point here, we've talked about this, but managers need to be able to have conversations, employees need to understand why they make what they make. And it's tough, most HR profession, well, you know, one third of HR pros say that any manager in their company can explain why their employees are paid what they are paid, which is terrifying because you can do as much work as you want to in HR, making sure you're setting up the strategy; if that's not communicated downstream, it doesn't matter. So, transparency, understanding why they make what they make is important. And then pay equity, of course, making sure that you're looking at protected groups like gender and ethnicity of course.

And there's a lot of legislation around those pieces. And of course, you wanna make sure you're keeping track of your gaps and making sure you're not consistently paying men more than women or you're not consistently paying people of certain ethnicities more than the others. That's really important.

It's a problem that we see a lot of our organizations facing that we work with. But from our perspective, from the salary.com side and what we build into all of our consulting and our solutions around this is: we wanna address pay equity and pay fairness at the individual level before you even get to the point where you have issues around you know, paying men more than women or those types of situations.

If you were looking at every employee objectively understanding where they fall within the organization, what they bring to the table, making sure that they are being paid fairly at that individual level. Those downstream issues around pay gaps go away. So having a strategy that says if this person has this type of performance rating, if they have this type of tenure with the organization, we're comparing them to their peers and we know that this is where they should fall. You can go over a lot of big issues that way just by paying attention to the individual people.

Kristin:
Good, really good call out there.

Ken:
It's easier said than done, of course. In these common pay equity laws that we're seeing at the state level, I think we're gonna start to see more at the federal level at some point too.

But making sure you're paying comparable, paying appropriately for folks who are doing comparable work, not just people in the same job making the same amount of money, you know, based on the same factors, but also saying this gets into job descriptions. Again, being able to look at jobs and say, hey, these jobs are of equal worth to us in the company.

They might not be doing exactly the same thing. One could potentially be in an entirely different job, family, and function, but it is a similar level of skill, similar level of effort and responsibility they're responsible for. And that can be hard to define in figuring out what comparable work looks like.

Again, job descriptions are the first step to doing that. And of course, protecting workers' rights to share information, like we talked about, there's a lot of laws that say people need to be able to talk about pay, and not suffer any type of repercussions, and having ranges on postings as well.

I think one of the big areas we talk about having a strategy, building out these salary ranges is important. And this goes a long way. From a pay transparency perspective, being able to definitively say as a company, anyone working in this job is gonna be making between this amount and this amount. It's a simple step, but it can go a long way in saying, all right, first of all, you know, we've gone through and we've figured out that this is a competitive range. It's also something we can afford to pay.

We still leave some variation in that range for individual performance and things along those lines, individual attributes where someone might be paid more. Still leaves a little bit of room if you need to pay a premium to get someone in the door. But it limits your exposure because you know that even if there is a pay equity issue, you're dealing with a confined range where those issues could take place.

We always say setting salary ranges is one kind of crucial step you can take to help figure that out.

Kristin:
It really is. We've seen, and I think some folks have come to us and jest, but we've had some like, "Well, we're just gonna set a range of zero to $100,000 as the range." And we go, "All right," scratching your head, "It's not really the right way to do that." Do you have any best practices around creating those salary ranges? I know that a lot of it is, "It depends." But any best practices there that you can share?

Ken:
Yeah, I mean, I've seen some of those examples too. And you see those pop up on LinkedIn and a few other things where someone's posting some crazy range and it just doesn't look great to the people you're hiring either.

Kristin:
It really doesn't, and they know what you're doing, so, you know, they're like, "Well, next. I'm just gonna go to the next employer."

Ken:
Right? I don't want someone to work for someone that's already floating legislation. But no, and I think the best practices too there, it depends on so much, but there are, when we're talking about building out salary ranges, we talk about range spreads, and sort of, identifying a market midpoint and saying, "Hey, here, overall, maybe based on our market data, here's the median what folks in our competitive market are paying," and then saying, "What's our tolerable range around that? What are we comfortable paying around that?"

And I think at a broad level, we see a lot of folks using like a 50% spread, meaning that, you have a minimum and then you add kind of 50% of the minimum and it gives you a confined space. And that's kind of a good rule of thumb.

It's still pretty wide. For some jobs you might have it tighter. Some folks will want closer to a 40 or 30% range spread. But that can be a nice rule of thumb just to make sure it's not too wide, but it's still targeted.

Kristin:
Great advice. Thanks Ken.

Ken:
Absolutely. And that of course helps transparency because you can explain to people, "Hey, this is the range for your job. You're in this range. Here's why you're not at the top or here's why you're lower than this other person." The other big piece of this too, and kind of, the next step from just a range for every single job is setting up salary grades, and actually grouping jobs into similar value to the company into a salary grade. It's been a practice for a long time. You always hear the phrase, " It's above my pay grade." It's something companies have done for a long time and it helps to simplify things quite a bit because you could have a hundred jobs and a hundred different salary ranges. Or you could have a hundred jobs and they could be grouped into 12 salary grades. So it makes administration a lot easier. And when we talk about defining comparable work and what that looks like to a company, you've done a lot of that work already. And that's not to say your comparable work groups for pay equity or your every single job in the same grade is gonna be equal or comparable to one another, but you've got a lot of that framework already done, and you've done some work to identify what these jobs are worth, externally and internally. And it can be a really nice shortcut down the line when you have to do more of that in-depth analysis.

Those are some of the key pieces there. And then of course there are the individual factors with pay equity. There are legitimate reasons why one employee might be paid more than another employee, regardless of their age, their gender, their ethnicity, things like tenure, things like performance, experience, education. You know there's a lot of worked on out there on legitimate drivers of pay.

Kristin:
Absolutely.

Ken:
And making sure, that's honestly the most complicated part of pay equity analysis in a lot of cases, is figuring out what these comparable work groups are, but then saying, okay, how do we control for this?

How do we take all of these different factors and say, you know, across all of these different figures, this person is paid fairly compared to this person? And there's strategies out there using statistics. There's strategies around, like regression analysis; a lot of consultants and outside councils can help you with that type of thing.

Salary.com has some tools, of course, that can help you control for these, but that's really where you enter the most complex stage of pay equity, at least in my opinion.

And kind of again, maintaining the six steps to doing this, securing that leadership mandate, making sure you have the backing of leadership, group incomparable work like we talked about, modeling this out and starting to understand the individual level factors that impact pay, doing that benchmarking and market pricing to make sure the changes you're making are still in line with the market, communicating that transparently, arming your managers to have these conversations, then continuously running this, not just doing a pay equity analysis once every three years, is the second you run one, it's out of date as soon as you hire somebody or give someone a raise. So those are kinda the big pieces on pay equity.

Again, spend a lot longer talking about it, but, hopefully that's helpful.

Kristin:
Very much so. Thanks, Ken.

Ken:
Absolutely. And I think the last piece I'll quickly mention, quick plug here for salary.com. Of course, we have a lot of areas of our business. Most of what we do revolves around our CompAnalyst® product line and our different modules that include aggregate market data, where we have, you know, data that we're purchasing from hundreds of surveys, giving you a quick database where you can get accurate information on competitive pay across different locations, sub industries, company sizes, that's a huge part of it, you know, tools that can help you to build out salary structures and ranges, compare your employees to the market, compare your employees to each other for pay equity, and of course, we also offer comprehensive consulting services and teams that can actually do this type of work for you.

And yeah, we're already partnered with quite a few TriNet customers. Excited to get a chance to share all of this with you today.

Kristin:
I love it. Well, Ken, thank you so much. Just really, really impactful and important information and I really appreciate your spending some time with us today.

Ken:
No, thanks so much for having me. This was great.

Kristin:
Thanks. Take care.