To achieve the maximum benefit from a mature pay equity practice, human resource executives will need the right technology to generate critical data that, when analyzed, can determine how to arrive at equal pay and compensation for employees. Employers must also commit to making pay equity core to their operations, which can be difficult to do.
Ask Julie Harding, senior vice president of people at Veritone, a Denver-based artificial intelligence company that provides an array of prebuilt and custom applications for its customers.
When Harding started working at Veritone in late 2019, pay equity was a concept the company discussed, but as the company's revenue grew and the demand for AI projects increased during the pandemic, the company focused more intensely on building out a true compensation philosophy—with pay equity as a component.
During the height of the pandemic, Harding and her team sought executive and board member alignment on the company's pay equity philosophy as it designed the foundation of a pay equity program that will grow with the company over the next five years.
The company began evaluating the different components of compensation, such as variable compensation, bonus and commissions in spiffs, equity in stock options or shares, and long-term incentives.
"It takes a lot of time, discussion and analysis to align where an employee fits and who their peers are within the market so that we can analyze and actually vet equitable compensation bands by role, by function and by level," she said. "That alone took us about two quarters. At that point we had not started to assess actual internal employees."
Veritone uses Workday's human capital management and payroll system as its primary data source for information such as gender, ethnicity, tenure, education, time in the role, and performance, which are some of the factors included in the company's assessment.
The company also uses the Radford Global Compensation database to benchmark rewards and monitor workforce salary and compensation trends worldwide.
After defining the company's philosophy and rewards strategy, bringing company leaders together to get behind the project, conducting job evaluations, performing skills assessments, and selecting the technology it would use to build out its pay equity practice, Veritone finalized its compensation bands in October 2021.
Harding added that individual employee analysis occurred in the last quarter of 2021 and the first quarter of 2022.
"We are constantly looking at pay equality and we are constantly reassessing the program, the practice, and the philosophy as we continue to evolve as an organization," Harding said. "It doesn't stop after you've got people equally paid. It's something that you constantly have to assess if it's going to makes sense for the employer and the employee."
How to Build a Pay Equity Framework
Analytics and technology are a critical part of building a pay equity framework, according to a report titled The Definitive Guide to Pay Equity, published by The Josh Bersin Company.
The authors recommend HR and other company leaders involved in a pay equity project use analytics and technology to:
1. Analyze internal and external equity. Define a process of reviewing both internal equity (i.e., comparisons to others in the organization) and external equity (i.e., comparisons to the broader market). Analyzing both these areas can result in more actionable outcomes, and technologies like Salary.com provide this capability in a single solution.
2. Define demographic categories. The report notes that organizations should determine which demographics will be used for pay equity audits (e.g., gender, ethnicity, nationality, sexual orientation, disability status, etc.). Data from The Josh Bersin Company reveals that 84 percent of companies don't expand their demographics beyond gender. However, high-performing companies are 34 times more likely to consider a multitude of demographics in their pay equity analysis.
3. Conducting ongoing statistical analysis. Conducting statistical analysis to isolate issues and applying advanced statistical concepts and dedicated technology to scale the process will help companies gain a clearer picture of their pay equity issues.
"Since this process is complex, companies are well served using specialized technology for scale (e.g., Salary.com, Syndio, or Trusaic). Only 14 percent of companies use specialized technology for pay equity and those that do are 3.2 times more likely to engage and retain employees and 7 times more likely to attract needed talent," the report stated.
Where to Find Vendors
Vendors are angling for a larger piece of this market. Meg Bear, president and chief product officer, SAP SuccessFactors, said pay equity tools are embedded in her company's core human capital management product. She said the company's data model understands all the layers such as the demographics and the actual data on pay.
Bear also explained that SAP SuccessFactors gives customers the tools to generate data and to use the tools to layer on the other pieces of their pay equity practice.
"Our tools help customers answer questions such as, 'How do you think about where you want to be within the pay range? How do you think about hybrid work? And, how do you think about regional pay bands.' We are not in the business of market data," Bear added.
Data from Stamford, Conn., based research firm Gartner Inc. shows that pay equity is already on the radar of most organizations. In the 2022 Gartner Pay Equity and Transparency Survey, 72 percent of respondents said pay equity is a high or very high priority for their senior leaders.
Seventy-six percent said they understand that pay equity is more than just a compliance issue, and nine out of ten total rewards leaders said they are addressing role-to-role pay equity. Among HR leaders polled, 84 percent said they've already taken action on pay equity.
Ron Hanscome, research vice president, HCM Technology Transformation at Gartner, noted large HCM vendors don't have all the tools to build a mature pay equity practice.
Hanscome said the response to the market from large suites like Workday or SAP "is a complicated intersection between compensation administration or planning—which the suites don't have—and compensation allocation—which the suites provide in varying degrees of depth—along with payroll, and talent analytics."
He added, "HCM suites are currently focused on pay analytics, meaning they can slice and dice compensation data based on diversity factors, but most don't have regression analysis on pay equity to show the defining factors of pay equity or pay equity built into other functionalities beyond compensation."
Hanscome said he believes there are enough specialist vendors like Syndio, ADP, Trusaic or PayAnalytics in Europe and an increasing array of compensation management vendors like Payscale, HRSOFT, Salary.com and Opencomp that can support a more proactive and systematic approach to pay equity.
As companies increasingly look to technology to find pay equity tools, Hanscome said many organizations chose point solutions versus using the suites for pay equity, and this trend will continue.
"Like many niche markets, point solutions operate to deliver deeper support than what the larger suites provide. We expect this will continue for the foreseeable future," he said.
Nicole Lewis is a freelance journalist based in Miami.