Implementing Pay Equity

Previous Section	Next Section
Developing Equity Centered Hiring Models	Healing Justice in the Workplace

The pay equity journey starts during the hiring process and continues throughout the entire tenure of the organization. The ability to retain staff depends on safe, equitable, and engaging working environments where people feel fairly compensated. Compensation is where an organization’s values around JEDI are tested. And compensation has a profound impact on people’s lives. The Fund the People podcast interview with Mala Nagarajan from Vega Mala Consulting is an excellent starting place for background on compensation equity.

Across the economy, workers are not being compensated equitably. According to a 2022 report published by the Government Accountability Office, for every dollar earned by White men, Latine women earned an estimated 58 cents (a pay gap of 42 cents on the dollar), and Black women earned an estimated 63 cents (a pay gap of 37 cents on the dollar), while White women earned an estimated 79 cents (a pay gap of 21 cents on the dollar).

Some factors to consider include salary floors, pay families, or pay bands (as well as clear criteria for how employees are sorted into them). Many organizations also institute a ratio cap between their highest and lowest paid employees. For example, a 3:1 ratio cap means that if the highest paid employee is receiving $150,000, the lowest paid employee should receive no less than $50,000.

Another critical consideration for organizations implementing pay equity is to have clear policies around when and how they conduct COLA (cost of living adjustments) increases. COLA raises are critical and should be part of any organization’s annual compensation planning. If organizations are not pacing salary increases with increasing cost of living are functionally asking their staff to take a pay cut year over year.

Finally, organizations should review their benefits package and consider adding flexibility where possible. One great example of this is to reconsider employer retirement matches. Employees who are unable to take advantage of the match due to other commitments or circumstances drawing on their income (childcare, elder care, student loans, car payments, high cost of living, medical expenses, etc.) are leaving resources that the organization has committed to on the table. Making retirement matches available as contributions to flexible spending account, or as a cash payout allows employees to meet their own needs more effectively.

There are several tools to support organizations in exploring pay equity. The Compensation Scale Equity Process and Calculator from Vega Mala Consulting provides a detailed process for assessing current policies and creating new ones. Additionally, the Racial Equity Outcome Toolkit by LaTreda Leonard Sherill of Heinz Endowments provides a more holistic series of steps, with pay equity embedded in each.

Much of the work involved in implementing pay equity requires organizations to completely reassess traditional practices in compensation and benefits. It is essential that organizations that are serious about reducing pay gaps holistically and transparently review their standard practices around compensation. To accomplish this, organizations should identify external partners with deep experience in this area.

Linked Resources

Stahl, Rusty, and Mala Nagarajan. “Compensation Philosophy for Your Nonprofit – with Mala Nagarajan, Vega Mala Consulting.” Fund the People, Nov. 2022, fundthepeople.org/compensation-philosophy/.
U.S. Government Accountability Office. “Women in the Workforce: The Gender Pay Gap Is Greater for Certain Racial and Ethnic Groups and Varies by Education Level.” Women in the Workforce: The Gender Pay Gap Is Greater for Certain Racial and Ethnic Groups and Varies by Education Level | U.S. GAO, www.gao.gov/products/gao-23-106041#:~:text=Overall%2C%20women%20earned%20about%20%24.,every%20dollar%20White%20men%20earned.
Subramaniam, Vega, and Mala Nagarajan. “Top Tips to Stop Widening the Wealth Gap.” Vega Mala Consulting, 16 July 2022, www.vegamala.com/top-tips-to-stop-widening-the-wealth-gap/#:~:text=ONE%3A%20Do%20Cost%2Dof%2DLiving%20Adjustments%20(COLAs)%20differently%3A.
“Reimagining Compensation: It’s Time to Stop Building on Inequities of the Past (Part 2).” CompassPoint, 11 Oct. 2022, www.compasspoint.org/blog/reimagining-compensation-it%E2%80%99s-time-stop-building-inequities-past-part-2#:~:text=Challenging%20Inequities%20in%20Our%20Approach%20to%20Benefits.
Subramaniam, Vega, and Mala Nagarajan. Compensation Equity Process and Calculator Background, docs.google.com/document/d/1SHlxI7YgTXdWnYMs5BywXbp4-v5NsmwvbQ8tLnKI3dw/edit.
Leonard Sherill, LaTreda. “Racial Equity Outcome Toolkit: A Six-Step Process for Your Organization.” Heinz Foundation, www.heinz.org/UserFiles/Library/Racial_Equity_Outcome_Toolkit.pdf.