Tag Archive for: Pay Equity

Five tips for employers to set geographic pay differentials: A growing consideration for remote workforces

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Employers with operations in multiple locations have long grappled with concerns about how to handle compensation. Employers often offer geographic pay differentials, by adjusting base pay with locality pay to account for variations in the cost of labor and the cost of living. 

With increasing numbers of employees working remotely, many employers are facing new and complicated questions. In determining the right approach to locality pay, employers should consider the following recommendations.  

Set expectations with a clear policy that applies to all employees.

Employers should adopt a formal policy that sets clear expectations about how locality pay applies to all employees. For example, the policy should make clear how location is determined–by city, state, region, country, etc. Employers should avoid ad hoc decisions based on a specific situation or individual negotiation at time of hire. 

A system that applies a locality differential on top of regular base pay can make it easier for employers to address situations where employees move from higher-cost to lower-cost areas. The federal government’s pay system offers a clear, transparent approach to setting locality pay that utilizes locality adjustments to base pay. The standard pay scale is adjusted upward for 54 specific localities. For example, in 2022, the base pay for an employee at the Grade 8, Step 1 level would be $42,641. But an employee in San Francisco would be paid an additional 42.74% locality adjustment, bringing total salary to $60,866 in San Francisco. By comparison, an employee at the same level would be paid $49,813 in Corpus Christi, with an additional 16.82% locality adjustment to standard base pay. 

 

2022 Federal Locality Pay Corpus Christi, TX San Francisco, CA
Base Salary for Grade 8, Step 1 $42,641 $42,641
Locality Adjustment Percentage 16.82% 42.74%
Locality Adjustment Additional Pay $7,172 $18,225
Total Salary $49,813 $60,866

 

Smaller employers could adopt a more streamlined approach that identifies just a few high-cost locations eligible for a geographic differential, like New York and San Francisco, rather than try to benchmark all salaries for each different location. 

Consider the potential costs and budgetary impacts.

In weighing different options, employers should consider any potential budgetary impacts. Do most employees live in higher cost areas or lower cost areas? What will be the total annual cost of additional compensation to raise pay for employees in areas with a higher cost of living? Consider the possibility that some employees may relocate in the future, which could translate to additional costs.  

Consider potential impacts on employee recruitment, morale, productivity, and retention. 

A new locality pay policy should be viewed as a net positive by employees. The policy should help attract and retain talent. A reasonable policy should reassure employees that they are compensated fairly. 

To the extent possible, employers should avoid adopting policies that reduce pay for incumbent employees who live in lower cost areas. While some employers may seek to cut costs by reducing pay for remote workers who opt to move to a lower cost area; an unexpected cut in pay may have negative consequences for employee morale, productivity, and retention. An alternative to cutting pay is to phase in adjustments over time for employees in higher cost areas and freezing pay for employees in lower cost areas. 

Employers also should consider how locality pay factors into the calculation of raises and bonuses. For example, when employers use a high-cost area as the baseline for all employees, employees who live in the high cost location may perceive that their raises will not go as far. 

Identify opportunities to communicate and reinforce the policy.

Once a new locality pay policy is in place, employers should seek multiple opportunities to communicate the policy verbally and in writing. Encourage open discussions about compensation.

Regularly review employee compensation and address inequities.

To ensure pay equity, employers should regularly review overall compensation to identify potential concerns and correct unexplained gaps and discrepancies. This review should include an assessment of geographic pay differentials. 

 

Working IDEAL provides trusted and innovative advice on inclusive workplaces, diverse talent, and fair pay. Our audits and assessments apply the best thinking on how to promote gender, race and other forms of equity in your pay practices. Our robust quantitative and qualitative reviews go beyond basic compliance to align effective compensation strategy. Let’s connect.  

How the Rooney Rule Can Advance Equal Opportunity

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Author: Cyrus Mehri

As football fans gear up to watch the Rams and the Bengals clash in the Super Bowl this weekend, there’s another showdown happening off the field: the debate on how to best combat racial discrimination in the NFL. 

It’s a debate that has implications that extend beyond the football field and into board rooms across corporate America. Football, like many other industries, faces a glaring problem: despite diversity and inclusion efforts, many companies have failed to adequately increase racial diversity in their senior ranks.

The NFL’s hiring practices have come under intense scrutiny after a racial discrimnation lawsuit by Coach Brian Flores. Specifically, some advocates have called on the NFL to abolish the Rooney Rule, a rule that requires NFL teams to conduct in-person interviews with a diverse slate of candidates when hiring head coaches and general managers. 

Versions of the Rooney Rule have been adopted across many industries, so this discourse has significant implications and represents an ongoing debate: how do companies best establish equitable and inclusive practices that will increase diversity? 

As one of the creators of the Rooney Rule, I’m intimately familiar with this debate. I, along with late Johnnie L. Cochran Jr, advocated for the creation of the Rooney Rule starting in 2002 in response to the dearth of Black coaches in the NFL. And the Rooney Rule has had success.

Before the Rooney Rule, there were only a handful of Black head coaches in the NFL’s 80 year history. In the 19 years since the creation of the Rooney Rule, a person of color has been selected as an NFL head coach 27 times, including twice this month. That’s infinitely better than it was before, but it’s also significantly below where it should be. 

Clearly, the NFL still has a lot of progress to make. But abolishing the Rooney Rule would be a huge backslide. The Rooney Rule has taken the NFL from an abysmal situation to a better one, and it has the potential to truly transform the NFL — and other industries — if utilized in the right way. 

In my work across companies and across industries as a civil rights litigator, consultant and a reformer, I have learned a number of lessons on how the NFL, and other industries, can do the Rooney Rule the right way: 

Accountability Matters: First and foremost, accountability is key. This is the NFL’s current biggest area for improvement. In the early years of the Rooney Rule, the NFL strongly enforced the rule, but recently, it has turned a blind eye to blatant violations. No policy can be successful without enforcement.

Diverse Slates of Finalists, Not Diverse Pools of Applicants: Saying you have a “Rooney Rule” isn’t enough. Several major companies such as Facebook have established weak or symbolic versions of the Rooney Rule, like having a diverse pool of applicants while saying nothing about the finalists. The Rooney Rule requires interviewing a diverse slate of candidates for the final round. Don’t be fooled by what some companies say — if it’s not a finalist interview slate, it’s not likely to move the needle.

Address Bias in the Pipeline: There’s a bias in the pattern of NFL teams excluding coaches of color from the QB position coach and offensive coordinator, which results in those coaches also being excluded from the head coach pipeline. Programs dedicated to developing a diverse talent pipeline, such as the Arizona Cardinals QB Coach fellowship, and strong recruitment programs can help avoid a situation where companies claim there aren’t any outstanding candidates of color. 

Use Multiple Candidates from Underrepresented Groups: A study in the Harvard Business Review showed that when there are two or more candidates of color, a candidate of color is over 190 times more likely to be hired. The Rooney Rule has been updated to include multiple underrepresented candidates in the final interview pool, and with that modification, there are signs of success with women and people of color gaining ground as team presidents and other key positions. Any company using a Rooney Rule type policy should do the same. 

Start with Leadership, Then Expand: Companies should be strategic about which jobs should have a diverse interview slate requirement – starting with the key leadership positions where they are less likely to have diversity now and where the impact of each hire is greatest. At first, the NFL kept it just to Head Coach, then added General Manager. Now it extends throughout the League office and the Club levels to all senior leaders and now coordinators and it is reaping the benefits in many key areas. Changing how a company selects its leaders — and who they select – creates critical buy-in at the top and establishes this as part of organizational values.   

Use Diverse Interview Panels: Many companies use diverse interview panels as part of the decision making process with great success. The NFL has not done so and should.

Use Better Selection Criteria: Diversity is stymied unless decision-makers expand their talent pool by expanding the criteria used for a key position. There are a lot of skill sets and experiences that can lead to success, even if they’re not the ones traditionally used to fill a position. Continuing to select the talents a company already has actually reduces the overall quality of its hires, especially if the criteria have not been reconsidered recently. Use an open mind and open up the process. 

Use Common Sense Guidelines: The first year of the Rooney Rule, Jerry Jones interviewed a white candidate for two days in person and a Black candidate by phone for just half an hour. We called on the League to develop common sense guidelines and they did. There is still room for improvement to ensure that interviews are being held as genuine interviews, not just to tick boxes. 

Whether in the NFL, or in companies large or small, we can achieve a level playing field and an inclusive economy if we stick to the principles of fair competition and implement the Rooney Rule the right way. 

 

Photo credit: REUTERS / Alamy

 

The EEOC report may be on hold, but pay data reporting isn’t going away.

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Last night the EEOC announced that its new pay data report is on hold and will not be implemented as scheduled in March of 2018.

Working IDEAL supports the EEOC pay report as an important tool to move us forward on closing the wage gap.

Here’s what we already told EEOC about how they could use the data to boost enforcement:

  • Increasing the number of employers that monitor their pay data and practices regularly is essential to closing the pay gap — required reporting will motivate employers to work on improving their data and systems so they can do it better.
    Research shows that measurement and increased accountability are one of the best ways to improve EEO performance, and boost diversity, equity and inclusion. In other words, what gets measured gets done.
  • Requiring companies to regularly analyze and report their gender and race wage gaps focuses management on an issue of increasing importance to stakeholders, regulators and the public.  It creates a mechanism for them to assess and improve their performance over time.
  • Reporting also makes it more likely companies will find problems when they exist and take voluntary measures to fix them. This is good for workers and employers — and avoids potential enforcement actions.
  • Using (and reporting) benchmarks by industry, size and other factors makes it easier for the agency and employers to identify problems by comparing their own data to benchmark values, and helps target enforcement and voluntary compliance resources.

There is a lot more detail about all this in our comment, including our ideas about using benchmarks.  You can read it here: Coukos Working Ideal Comment on EEOC Pay Data Collection

It’s very disappointing that this will not be moving forward now. But employers who take this issue seriously have the opportunity to review their own data and resources, establish their own plans and benchmarks, and engage their workers and stakeholders. And given that some states (and even cities) are showing increasing interest in moving ahead on pay equity, state legislators may start proposing pay data reports of their own. Those with concerns about the EEOC proposal should be thinking hard about meaningful and effective alternatives and options. Pay data reporting is on the agenda now, and it isn’t going away.