Editor's Note: The compensation program reviews concluding at organizations everywhere this fall reveal a labor market where salary growth continues to be dynamic and uneven. With that, the question raised about your pay structure(s) in this Classic post by Stephanie Thomas remain important ones to consider if you do indeed mean for your ranges to be "on the level."
Internal pay equity - and gender pay equity in particular - is a really hot issue right now. I'm sure you know that within a particular job title or job group, pay rates should be equitable and consistent. You may already be examining your pay data to make sure that it is equitable and consistent.
But have you looked at whether your pay structures are equitable and consistent across job titles and job groups?
Do you know if the difference in hourly rates between your production workers and production supervisors is equitable? What's a reasonable difference? $0.50 per hour? $2.50 per hour?
What about the difference between the annual compensation of your Chief Information Officer and your Chief Financial Officer - is it reasonable? Is it equitable?
We're somewhat used to looking for internal pay equity within a job title or job group, but rarely do we look at it across job title or job group. Making comparisons across job titles or job groups is not easy - there are a variety of factors that come into play. Things like job complexity, required skills and abilities, and even (perceived) value to the organization have to be considered.
It can seem like an overwhelming - if not impossible - task. But the Bureau of Labor Statistics does it every day. They compare wage data across occupations all the time. How do they do it? Leveling.
BLS uses the leveling process in their estimates of pay published in the National Compensation Survey. Even though you won't be publishing your own version of the National Compensation Survey, the techniques used by BLS can help you look at whether your pay structure is equitable and consistent across job titles or job groups.
The first step in the leveling process is to assign each job to a job level. Assignments are based on the duties and responsibilities of the position at the full performance level of the job, not the qualifications of the person who currently holds the job.
The jobs are leveled using four factors: (1) knowledge, (2) job controls and complexity, (3) contacts, and (4) physical environment. Each of these four factors are subdivided into components. For example, job controls and complexity is broken down into (a) the amount and type of work directions received, (b) variations in and difficulty of the work performed, and (c) the nature of the work within the organization. Each of these sub-components are assigned point values; the higher the level of responsibility or difficulty, the higher the number of points assigned.
Figuring out how to assign point values is the tricky part. Typically, job descriptions are reviewed; discussions with supervisors and the individuals performing those jobs may also take place.
BLS uses the same set of criteria (and points) for evaluating job controls and complexity, contacts, and physical environment for every job. Knowledge is a little bit different - each group of occupations has a specialized set of criteria. You can find a listing of the occupational groups and the criteria used here.
If it seems like it's a complicated process to assess your pay structure for equity and consistency across job titles or job groups, it is. Is it worth it? It could be a very valuable exercise that will give you even deeper insights into your pay structure. Is it something you should run right out and do? Not before you have a handle on equity and consistency within your job titles or job groups...
Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University. She teaches undergraduate and graduate courses on economic theory and labor economics in the College of Arts and Sciences and in Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals.
Comments