In the words of the Wu-Tang Clan, “Cash rules everything around me!” So, let’s talk about money!
Here at Esper, we are continually evolving how we take care of our employees’ total rewards, which encompasses salaries, benefits, and perks. Last August, we implemented our first performance review and goal setting cycle. The goal of this exercise was to establish a cadence for reviews and examine and correct any unintended outliers within employee salaries by creating a standardized compensation structure.
Fair pay is fair play
When it comes to employee salaries, there are several methodologies to choose from for salary leveling and for implementing a compensation philosophy. There are a lot of fancy tools you can use to do this automatically via software, but for smaller companies and startups, these tools may not be financially accessible.
Paying fairly is a cornerstone of equitable practices in the workplace, and without a compensation structure, paying employees becomes the Wild West. Salary decisions for identical roles can vary from manager to manager. From an equity perspective, employees with similar skills and experience could potentially end up being compensated differently because of their lack of insight into market trends or ability to negotiate. With many organizations, pay increases are given annually at a certain percentage salary, so employees who came into the company at a lower salary continue to be penalized over the course of their careers. We wanted to pay employees fairly for their contributions at Esper, regardless of how they had been paid in previous roles.
We knew that if we wanted to pay fairly, it was absolutely critical that we approached compensation using a methodology that minimizes bias and favoritism when making decisions. For a small company or startup that doesn’t have the budget to purchase software that can do this type of leveling automatically, it is possible to level employee salaries in an equitable way and without bias, with a simple spreadsheet and a few formulas.
Making the band(s)
The first thing that we did was gather all employee salaries, and then layered this info over the salary bands for their respective roles. Next, we would calculate where each employee sat percentile-wise in their salary band. For example, if a salary band was $45,000 to $75,000, and the employee salary was $55,000, this would put them at the 33rd percentile within their salary band.
Having the percentile of a salary band is great, but what does that actually mean? To solve this problem, we created a percentile key that would help us distinguish the differences between employees in a factual way.
With this key in hand as a reference point, we then created a new spreadsheet that listed the employee name and where they landed in the salary band percentile. Their actual salary was removed. Oftentimes, we have biases (conscious and unconscious), and those biases can unduly influence our decisions. For example, “Bobby makes $70,000. That’s a good salary, so they don’t need a raise.” By taking out the actual salary figure, we were then able to objectively evaluate all employees and make corrections as needed in an equitable manner.
Full disclosure: There were some outliers that challenged us during this process. Some employees came in below the 0% band, and some were paid in a band above their indicated performance and experience.
For employees that were not being compensated in a way that was consistent with the agreed-upon structure, we made market adjustments. For employees who were being paid lower in range than the structure indicated they should be, increases were given to ensure that they were being compensated appropriately. For employees that were compensated more highly in the salary band than their experience and performance indicated, salary remained unchanged. Over time, we can correct these inconsistencies leveraging pay increases.
This exercise helped us make decisions on pay purely based on data as opposed to making decisions on feeling (e.g. “I think Bobby should get a big raise!”).
Starting an equitable discussion
Esper is committed to leveling the playing field by ensuring that we do things the right way when it comes to Diversity, Equity, Inclusion, and Belonging. Lip service is not enough. We are committed to pulling the curtain back and transparently showing how compensation decisions are made, and our goal is to lead and disrupt black-box compensation practices within the tech space by modeling what pay equity should look like in the workplace.
What are you doing to help effect change with equity and inclusion in your workplace? We’d love to hear what other innovators are doing, because the fight for DEIB is a collective battle. Let’s all do our part and build each other up.