How to Create a Blueprint for Pay Equity That Works

Pay equity is one of HR’s biggest goals and priorities — but it’s also one of its biggest challenges.

There’s managerial pushback on pay transparency, based on the longtime practice of keeping pay secret. There is the fact that pay gaps persist, particularly for women and people of color. There’s the reliance of basing salaries on past salary history, resulting in inequitable pay following people from job to job. There’s employee confusion and dissatisfaction about how pay decisions are made. And significantly, there’s an overreliance on market benchmarks when it comes to pay decisions.

That’s all according to Nicole Armstrong, founder and CEO of employer software provider Ellequate, who spoke at SHRM25 in San Diego.

“When employees see behind the curtain, they may understand why you’re making certain decisions, but they don’t ultimately think they’re fair — particularly if they’re rooted in market value that devalues certain roles,” she said. 

“You could be a social worker and completely understand why you’re getting paid what you’re getting paid. But if you’re working 50 to 60 hours a week and you’re critical to the organization, are you going to think your pay is fair based on that market value? Absolutely not,” Armstrong said. “It’s not enough to explain the ‘what.’ We have to reimagine the ‘why’ and the ‘how.’ ”

Although achieving pay equity is a challenge, there are a number of steps organizations can take to create a compensation strategy that aligns with organizational goals while advancing pay equity. Here’s a blueprint to get started.

Data Intake

The first step is to collect data and information regarding the organization’s pay strategy. “When it comes to defining our compensation philosophy, we need to understand: How does our comp philosophy actually align with our mission and values?” Armstrong said.  

For instance, if an organization is a social service nonprofit, and its purpose and mission is economic empowerment, but it “pays workers less than a living wage, your comp strategy is at odds with your mission,” she explained.

Employers should also be clear about what they want to achieve with their compensation strategy, whether it’s attracting top talent, improving retention, fueling innovation, or something else.

Establishing how pay decisions will be made is also vital so that employers can communicate them with employees and build trust, Armstrong said.

Role Analysis

Next, employers should take stock of individual roles. The first part of this is establishing fair and market-ready job descriptions, Armstrong said. 

“A lot of times, job descriptions tend to be outdated. Sometimes we don’t take them very seriously unless we’re hiring for a role,” she noted. “But an accurate job description is actually critical for compensation because it serves as the foundation: What does this job do? What is required of this role? We cannot have fair or strategic or compliant pay decisions without really accurate job descriptions.

“Having outdated or vague job descriptions can lead to misaligned pay,” Armstrong continued, adding that HR should review these with employees and managers. 

By clearly defining the requirements of each role, “you can create a taxonomy of skills — what are the skills and responsibilities required for every job within your organization? Then you have this database of skills.”

Employers should also focus on what matters — that is, going beyond degrees and years of experience. “Consider what is required for a role, and then, of course, enable fair comparisons,” she said.

Importantly, employers should do some soul searching and analyze which roles are pivotal for the organization: How does a role support clients or customers? Does it generate revenue? Does it provide mentorship or leadership? “One of my favorite questions in this internal assessment is: How many days can you operate without someone in this role?” Armstrong said.

Scenario Modeling  

After analyzing roles, employers can then group some of those roles together. It often makes sense to group in terms of internal value — the value they bring to the company — and skills-based value: the abilities and skills they bring to the table.

“You might be surprised that sometimes we see that individual contributors end up in the same quintile as a VP,” Armstrong said. “But it’s because that role is so crucially important. You want to start to test different compensation scenarios based on your goals, your budget, and your philosophy.

“We’re not necessarily saying that someone in guest services should make what a VP is making, but if the gap is quite large, do we want to look to make that gap smaller? And if so, by how much?”

Similarly, Armstrong explained, “if two roles share 80% of the same required skills, responsibilities and competencies, but there is a large pay gap, that might raise a red flag.”  

Action Planning

Finally, finalize the compensation plan by putting it into action. Set a budget, make sure the goals are aligned, and set a timeline to achieve them.  

“We want to develop a timeline for implementing changes, including who’s involved, what’s changing, and why,” Armstrong said. And make sure to align on what the biggest priorities are — that may dictate the timeline.  

Employers should also use updated data to guide ongoing decisions on compensation, and they should consistently communicate to employees about what is happening regarding the new strategy. “Make sure that you’re providing clear and consistent messaging to employees about why you’re making these changes,” she said.