Despite positive intentions, achieving pay equity across your business isn't something that'll just happen organically. In this episode, we learn how two companies, Buffer and GrantTree, have brought in innovative approaches to ensuring people are paid fairly, based on their skills, experience and knowledge. We also dig into how you can adapt your compensation structure to achieve pay equity.
AMIRAH JIWA: From Courier, I'm Amirah Jiwa.
DUNCAN GRIFFITHS NAKANISHI: And I'm Duncan Griffiths Nakanishi.
AMIRAH: And welcome to Courier's Workshop podcast. Every two weeks, Workshop breaks down one essential business topic and explains how it could be useful for you. Our goal is to get you just the right amount of info to help you apply what we're talking about to what you're working on. I'll be speaking to experts with practical tips and founders with relevant experience.
DUNCAN: And I'll be explaining essential terms and summarising the key takeaways at the end of the show.
AMIRAH: Today, we're talking about pay equity, which is all about making sure that people are being paid fairly across your business. Having structured compensation frameworks and being transparent about salaries can help make sure that people contributing the same value to the business are being compensated equally. That, in turn, makes for a more inclusive culture that helps attract and retain top talent. We spoke to people at two progressive future-proof workplaces with policies like these in place.
CARYN HUBBARD: We have a very specific kind of way that we approach work through the lens of freedom and flexibility, trusting people to know where they do their best work. And so with that comes a core value of transparency.
PAULINA TENNER: Create future workplaces, I think, that are much more caring about people where people can really grow and evolve as human beings, as opposed to just professionals.
AMIRAH: Caryn Hubbard is head of finance at Buffer, a tech company that helps businesses manage their social media. One of Buffer's core values is transparency. The company has been transparent about salaries and the formula they use to calculate them from the start. And more recently, Buffer has focused on optimising its policies to reduce any overall pay gaps.
CARYN: We're celebrating our 10-year anniversary in this season. And so the early co-founders, Joel and Leo, raised a seed round with investors and shared those terms with the world. And that was kind of like a hot topic because it helped other startups see how to approach that kind of thing.
And then soon after, the team decided that they would share salaries with the world. They put in place this idea of a salary formula that was intended to kind of minimise any negotiation, just make all of the information open to all teammates.
AMIRAH: Caryn, what does pay equity mean for Buffer, and why is it important?
CARYN: What it means is that we're not hiding information from teammates, we're not afraid to talk about salaries, it's not something to hide from. We're promoting, we're paying based on contribution and value regardless of your gender, regardless of all of these protected classes. It's a more humane approach. We're aware of privilege. And we're aware that not everyone starts on equitable ground.
AMIRAH: So transparency has been part of Buffer since day one. But when did the company start to think about how the way it compensates staff affects pay equity?
CARYN: Kind of the growth path of the company lended itself to more awareness of unconscious bias.
DUNCAN: Hey! Definition time. ‘Unconscious bias’ refers to an underlying attitude or stereotype attributed to another person based on race, gender, sexuality, ability, ethnicity, or age.
CARYN: The idea was that this formula is super objective, and there's just no way that bias could find its way in there. However, I think human nature is that bias exists. And so what we found is – it was 2017 when we launched the next iteration of the salary formula, and we were able to look at things from a different lens and say: ‘Oh, it's interesting that potentially we are promoting people or levelling people from this lens of bias. We potentially have a lot of senior engineers that are male, and where are the female engineers?'
And so it's these smaller steps towards being aware of the unconscious bias, educating ourselves and internalising those conversations, shining a light on them. I think, traditionally, it's white males that are in positions of authority and power. And in some industries – specifically in tech – that's more apparent. And so we want to make sure that we're making space for other voices and other groups, and that salary promotion, levelling opportunity is a reflection of more of a humane approach, not just putting people in their classes based on bias.
AMIRAH: How can companies come up with a structured compensation framework or formula, you know, that helps enable pay equity?
CARYN: First, you want to have clarity on like, the roles on your team. Like what are their kind of job descriptions – not saying you have to write it out, but just like clarity around like, where they fit within the labour market. From there, I would say find a data source that you feel is reliable, and we use Radford, which is a survey-based data platform for companies.
So there's tonnes of different tools out there, but this gives you kind of a foundation to benchmark market rates based on certain locations and that gives you a basis point.
And then I think you can consider doing a reset for your team – having conversations with them that is around their career aspirations. So this would be a performance review process in place where you're committed to checking in with them based on today, and then just revisiting those conversations on a six-month or annual cadence.
You can look at Buffer's formula – there's a lot of other companies that are going with that approach, but you can put together a spreadsheet and have a formula and have the fundamental things that are important for your organisation. So maybe a salary benchmark, maybe a levelling, performance review, career growth aspect of your formula. And then cost of living may or may not be applicable.
Yeah, and then I think it's shipping that to the team and talking about those things and remembering the why and sharing that consistently.
AMIRAH: Finally, what are some of the other things companies really need if they want to put in place salary transparency, and achieve pay equity?
CARYN: I definitely think the cultural element – the buy-in from teammates and understanding the why is probably the most work. Like, setting philosophy around it that works for that company, and then helping people understand and get on board for why it's important.
Diversity and inclusivity training and awareness is a key part of this as well – because I think it sounds like maybe a lot to put into place, those things that I mentioned. But once you do that, I think there's still this ongoing need to make sure that all biases are being considered and that you're presenting the same opportunities to people regardless of race. And I'd say disability or skin colour or gender. And so that's something that I think is a constant really important thing to be aware of, and to keep learning on.
AMIRAH: Paulina Tenner is one of the founders of GrantTree, a London-based financial services company that helps startups get access to government funding. GrantTree's had transparent pay, since it was founded 10 years ago, and introduced self-set pay four years ago.
PAULINA TENNER: So, we've had solid transparency ever since we started. So now we are a 50+ people company, but when we started 10 years ago, accounts, company accounts and all the financials were transparent to every new person who was joining.
When we first started, we had an office manager join and then a sales person join and they had access to our accounts. And then it would have felt unfair not to let other people have access to it as well. Essentially, all the people, the entire team has access to all the financial information, which is normally kept secret in many companies, particularly in financial services, which we are in.
AMIRAH: I know you do self-set pay now. But before you introduced that, did you have a structured process for determining compensation?
PAULINA: We had a so-called pay committee. So we have members of different departments, both junior and senior coming together to create a pay matrix and place everyone in the company in what they deem to be an appropriate place on that pay matrix.
AMIRAH: And then what does your self-set pay process look like now?
PAULINA: First of all, they need to be performing a self-assessment process for six months, regularly, every month. So, they need to be reporting the results and reporting on the goals they set themselves and receiving feedback on it. So they need to be doing that for six months to qualify for this self-set pay.
PAULINA: And once they've done that, they can then appoint two or three advisors who will assist them in every step of setting the new pay. And what happens is that they do their market research, call probably recruiters, they find out currently what the kind of position that they have, what that kind of skill set is worth on the market. And then they prepare a proposal on which they get feedback from the people that they have appointed to give them feedback. And our CFO or our financial director also are involved in the process to make sure that it's sustainable for the company.
AMIRAH: These are some really exciting and progressive policies around compensation. What motivated you to put them in place?
PAULINA: We believe that if we expect people to perform at their best, to be adults in the workplace, then we need to treat them as adults. And we need to be able to give them the freedom and the power to decide not only how they deploy their resources, how they manage their energy throughout the day when they work, where they work from, but also how much they're paid.
AMIRAH: And what are some of the key advantages and disadvantages of these policies?
PAULINA: So the advantages are that people are more empowered, and they feel more empowered, and they feel treated like adults in the company and therefore can bring more energy, more talent, more of their genius into it.
Disadvantages – it does put people on the spot. It's a difficult and sometimes confronting process to have to set their own salary knowing that everybody will be able to tell what it is and everybody will be able to see it. But we still believe that the advantages massively outweigh the disadvantages in this process.
AMIRAH: So how did you know that salary transparency and self-set pay lead to pay equity within a company?
PAULINA: I think that one of the main advantages is that all the gaps self correct, and that it's impossible to have a gender pay gap or socio-economic pay gap because everything is out in the open and that just makes all those water cooler conversations about pay completely unnecessary. There's no room for a lack of fairness, because the system autocorrects, so when it would be ridiculous if a man was earning more than a woman in the same position, because you can see it if that was to be the case that woman would be actively encouraged to change her pay.
AMIRAH: Finally, do you have any advice for other businesses looking to experiment with transparent pay or other progressive pay policies?
PAULINA: First of all, I would suggest to work on your culture. So other than making the pay self-set or even transparent, make sure that the culture can hold it, so that when it's actually introduced, it's not a big shock but it's a natural consequence of your culture and your values.
AMIRAH: Caryn and Paulina helped outline how structured compensation frameworks and salary transparency can help reduce pay gaps on your team. But an important part of pay equity is making sure that underrepresented groups are represented at all levels of your business. So it's not just the white men at the top that are earning the most money.
To help make that happen, we got some advice on how to put in place hiring processes that are fairer and more inclusive from Katie Donovan. Katie is founder of Equal Pay Negotiations, a consultancy that helps businesses close their pay gaps.
KATIE DONOVAN: I basically want everyone to have the exact same opportunities and ability to get promotions and paid as the white guys. No matter where they live.
Put in the bluntest of terms, that's what I want. So, right now, no matter what your grouping is, if you don't fit into an able-bodied, heterosexual white gentleman, you're getting paid less, you're getting promoted less, you're getting hired less.
AMIRAH: Why do these pay gaps tend to exist?
KATIE: Because the overall goal of any employer is to not pay a penny more than needed when they hire someone. And instead of having employers make their number one goal as don't pay a penny more than needed, they have to make the actual goal to pay equitably if they're going to ever achieve it. If that's not a goal, it's never going to happen.
AMIRAH: And what can companies do to reduce pay gaps, especially when they're making hires?
KATIE: Having a salary included in a job description, or a posting, or wherever you publicly share this on your website, wherever it might be, does a couple of things. It helps get the right group of people there. It helps people who have statistically always been underpaid understand the true value of the job. And notice I'm not talking about the value of the person. It's the value of the job they're doing today.
So if I'm able to meet the criteria, you really only need to meet about 60% 70% of the job criteria to apply to a job. If I'm able to meet that, and then I beat 200 candidates to get the job offer, there's no reason I should have to make up what I should be paid based on my previous underpayment.
As you're asking the question: what are you looking to earn – which is what they will ask usually in the application if they don't share that number – for everyone else to put the same number or close to the same number as what the white guy puts, based on statistically their typical underpayment, a black woman's going to have to double her current pay to get to the same number. And no one's going to do that. You know, so that's the easiest one. It's also the one that gives every employer a heart attack.
AMIRAH: You know, we've already learned that having a structured way to determine compensation and salary transparency are important. So it makes sense that you should extend those practices to the job process and not just save them for when somebody is already in the business. Any other tips of businesses looking to make hiring more equitable?
KATIE: Do an audit of how you describe the jobs. There's a tonne of different resources out there about job descriptions being biased, or be feminine or masculine, where they're culturally not connecting with certain groups. If it's all very Anglo Saxon references, people who aren't aren't going to understand even what the job is and won't apply.
There's also where you advertise it, or what your network is in hiring. Here in the States, there's research that the black community listens to the radio more than other groups. So if you're trying to focus on certain groups that your company doesn't have as many employees in that different demographic, you have to go to where they are, you can't just do more of the same recruitment.
AMIRAH: Thanks so much to Caryn, Paulina and Katie for their useful and actionable insights. Here's Duncan to summarise key takeaways from today's show.
DUNCAN: Number one – pay equity won't just happen organically. Businesses need to be intentional, bringing in a structure or framework that helps set salaries and other compensation, like salary formulas or salary bands.
Number two – achieving pay equity and/or salary transparency benefits employee motivation and morale, and can help attract top talent.
And number three – when it comes to hiring, one of the simplest ways you can support pay equity is by including the salary, or salary range, in the job description – rather than putting the ball in the candidates.
Cool – that's it for today. If you're looking for more tips on achieving pay equity head to mailchimp.com/courier for our step-by-step guide on the topic.
AMIRAH: Workshop is back in two weeks. See you next time.