Payscale: Addressing Pay Equity With Ruth Thomas

Music:   This is RecruitingDaily’s recruiting live podcast, where we look at the strategies behind the world’s best talent acquisition teams. We talk recruiting, sourcing, and talent acquisition each week. We take one overcomplicated topic and break it down so that your three year old can understand it. Make sense. Are you ready to take your game to the next level? You’re at the right spot. You’re now entering the mind of a hustler. Here’s your host, William Tincup.

William Tincup:   Ladies and gentlemen, this is William Tincup and you are listening to the RecruitingDaily podcast. Say we have Ruth on from Payscale. Were you talking about addressing pay equity? Can’t wait to get into this. It’s a passion of bond and I’m just really excited to learn from Ruth. So without any further ado, Ruth, would you introduce yourself? You’ve been on the show before, but let’s introduce yourself and also introduce Payscale.

Ruth Thomas:   Great. Okay. Thanks William. Nice to be here today. Yeah, well, I think January last year was the last time we spoken and at that time, I was in my role as a principal consultant at Curo and Curo was acquired by Payscale in August last year. And I’m very excited to come into the Payscale family as pay equity strategist. So I’m really focusing on the whole fair pay strategy and mission here at Payscale, both in terms of how we interact with customers and focusing on technology and data across our product suite.

William Tincup:   I love it. Let’s start with some of the basics for the audience and myself. Let’s start there. How did we get here? How did we get to pay and equity?

Ruth Thomas:   Well, that’s a lot of history. I would say, what contributes to where we are now is so many historical issues. And I could-

William Tincup:   Write a book.

Ruth Thomas:   Probably talk for two hours about that. Having read a lot of interesting research about, what the position that we find ourselves in today and some of the structural and systemic-

William Tincup:   Right.

Ruth Thomas:   Issues that drive, pay and equity particular on a gender and race basis. I think why have we woken up to pay equity might be an easier question to answer.

William Tincup:   Yeah. Let’s do that.

Ruth Thomas:   So I think, historically organizations focused on pay equity, because this was a kind of like a litigation risk issue,

William Tincup:   Right.

Ruth Thomas:   And so they focused on managing litigation risk. And of course we are continuing to see a new stream of legislation emerge at a state federal and international level, but there have been newer forces at play in this conversation. And we’ve seen obviously social justice movements that highlighted the need to address both racial and gender equity. And I think really employees just now feel more empowered to have conversations or to ask their employers where they stand on fair pay and then add into the mix. Other stakeholders, such as activist investors, even your customers be their direct part of your supply chain, really all asking questions about, where do you stand on fair pay?

William Tincup:   You know what, the reason I started, I’m glad you went to kind of, again, kind of where the top like of addressing it is. I’m not sure people know history or understand history. So like I can see a person arriving at a company new freshly minted, VP of HR and not really understanding kind of what they got themselves into. Maybe it wasn’t a part of their due diligence and all of a sudden now they find themselves in a situation where they don’t literally don’t understand how they got here. Now they have to fix it. And so that’s why I wanted to start with history and you’re right. We could write a book on all the contributing factors. So where does one start? And where do you, when you both advise and kind of help people navigate, I would say tricky waters, but really it shouldn’t be tricky waters. This should be relatively straightforward, but all right, let’s call it tricky and murky waters just to make it interesting. Where do you advise folks to start?

Ruth Thomas:   Well, I think first point is to make the commitment that you want to make change happen and that you want to address the whole topic of pay equity. And so, that’s really making that commitment is the first step on the journey.

William Tincup:   Real quick. Sorry to interrupt. Do you believe that commitment has to be board level, C-suite, et cetera? I mean, it’s one thing to be a comp professional in a large company, in one of the comp professionals in a large company and want that, it’s quite another, if the board is meeting on it monthly, and this is an agenda topic, right?

Ruth Thomas:   Absolutely. And really the last three to four years, it was emerging pre-pandemic as a strategic issue and a C-suite discussion point, because people were starting to join the dots and understand that, a record of fair pay or paying people equally impact employee engagement, as well as ultimately your business performance. And we’ve seen those great McKinsey studies that have shown how diverse organizations perform better. And we’ve seen other research from Deloitte, which show that, when there’s a commitment from the top, then you actually start to see real action happening. So it has to be a C-suite discussion. And that’s one of the big changes we’ve seen is, this was something that happened in the cupboard downstairs in the HR legal function. And it’s now been elevated upstairs to the boardroom, which is great.

William Tincup:   I love that. So, okay. Back to once you have that commitment and again, that commitment, let’s just say it starts from the top floor for whatever reason, a host of a variety of reasons. It’s there. There are committed, then what’s the next step?

Ruth Thomas:   Well really, unfortunately it is doing the analysis, so crunching the numbers to understand where you stand, because otherwise you don’t know what the size of the problem is and how to move forward. So we will say, “Getting commitment from the organization, potentially articulating your goals. Sometimes it’s hard to even articulate your goals, until you know, the size of the problem.” And then, crunching the numbers, doing some pay equity analysis, which basically means comparing groups of employees on and comparing also employees in protected category classes and seeing how they are paid compared to each other for doing the same or substantially similar work. So looking across levels in organization, as well as just looking within job families.

William Tincup:   And are we looking at that point when we’re, this is the audit, the analysis, the crunching of the numbers, are we looking at skills, experience, degrees, certifications, potentiality, like what do… And I’m sure that’s not easy, just what I just asked, but what are we trying to… The number two pencils or Twinkies. What are we trying to create like items of?

Ruth Thomas:   So we look the way that we operate here at Payscale is we look at uncontrolled and controlled pay differences. So uncontrolled those average pay gaps that you see in the BLS data here in the US, where women are paid 82 cents on the dollar. And so they’re those average pay differences. So we start by, we encourage organizations to look at those, because unless you understand those pay gaps, which are normally an indicator of structural issues, like lack of representation and occupational vertical segregation and things like that, you’re never going to fix pay and equity, because you need it to be an ongoing, sustainable exercise.

But we do then also look at the controlled pay gap, which is where we will make comparisons of people in the same or similar roles. And we will factor in things like seniority and grade, prior experience, location, performance potentially, or any other factors that the company thinks should drive, pay variants in their organization. And we will then do statistical analysis typically used. We’ll do that. It’s all automated within our pay equity solution here at Payscale to understand whether those pay differences are real or not.

William Tincup:   Right. So you mentioned location, obviously the last two years has kind of thrown up thought of monkey wrench into just things that we thought were kind of normal with location based pay and things like that. How have you seen, and again, without naming companies or anything like that, but how have you seen kind of how comp professionals have addressed location or cost of living in certain areas and it made adjustments or not in terms of trying to create still the equity of a job, if it’s a VP of sales and one’s located in Dallas, the other’s located in Manhattan, the cost of living of those two places is completely different stated and covered, but the job itself is the exact same.

Ruth Thomas:   I think we’ve got some way to go until we have a consistent approach to this. We do a lot of great research here at Payscale. Our remote work study came out in, I think it was November last year that sort of showed that there was no one particular way forward that everybody was going yet. It was really a voyage of discovery and each company was trying to work out, what worked best for their talent, supply and strategy. So from a pay equity perspective, if your pay strategy is to pay a for location, then that is fair. And that is a justifiable reason for saying why you pay people differently. But it is an interesting ethical discussion to say, “Well, does it matter where I am? If we’re all doing the same work,” and therefore, should you be factoring? Don’t I have a value to you that come for doing this work? And it doesn’t matter whether I’m in, San Francisco or whether I’m in somewhere else, basically.

William Tincup:   Yeah. To me, it’s fascinating, just because I’m not sure. And again, kind of getting back to the 82 cents on the dollar, just as an example, it’s like, okay, if we were to cut that and we were to find that and again, this is a poor example, but just let’s say that women were living in more rural areas than urban areas. And that’s the difference. I know it’s not by the way, but let’s just say that’s the difference, then actually there is pay equity in the sense of if we factor in cost of living or location.

Ruth Thomas:   Yeah.

William Tincup:   If we strip that away, then we don’t. If we pay people for the job, the skills, if we just pay people for the job and we take cost of living out of it.

Ruth Thomas:   Yeah. And I think that will be, if we see all companies move to a average wage rate-

William Tincup:   Right.

Ruth Thomas:   Approach to defining their pay strategy. We are going to pay people at the average wage rate-

William Tincup:   Yes.

Ruth Thomas:   For the job,

William Tincup:   For these skills. Yeah.

Ruth Thomas:   Yes.

William Tincup:   Yeah.

Ruth Thomas:   And we don’t care where they’re located.

William Tincup:   Doesn’t matter.

Ruth Thomas:   It doesn’t matter. Yeah. But whilst people still maintain location, specific pay strategies, then we will always include that as a factor to consider. I mean, it’s interesting. I mean, you mentioned the 82 cents of the dollar, is a gender gap. Location does have a significant part to play in addressing the racial pay gap, because-

William Tincup:   That’s right.

Ruth Thomas:   Employers are obviously in some locations are restricted, because of the supply of talent that isn’t available for them to be able to address some of those pay gap or structural issues or around representation, because of where they’re located. So that does prove a challenge there.

William Tincup:   It’s interesting, I’ve talked to a bunch of com professionals that are having difficult conversations with their executives and with employees related to taking salary back and making it more appropriate. So if you lived in the Bay and you moved to Wyoming during COVID and it’s location based, or it’s cost of living based, they’re having tough discussions about, okay, how do we have this conversation with an employee about taking their pay down and migrating their pay down. I want to get your take on that and how that impacts pay equity and also anything you’ve seen in compression.

Ruth Thomas:   Yeah. I mean, I think compression’s going to be another… We’ve had like the double whammy back to back, we had the pandemic, which unfortunately, we know how to disproportionately negative effect on minority groups. And we’re going to see that in the pay gap data that starts to get reported this year, then we’ve got the talent crisis that we’re seeing at the moment and the tendency of employers to hike salaries in order you to deal with that. And that’s going to only lead to even more-

William Tincup:   That’s right.

Ruth Thomas:   Inequity issues. So it’s going to be an interesting place maybe in another 12 to 18 months, when we look at where we fell with the combination of both of those phenomenon happening. There’s going to be a lot of work to do I think, to address a lot of the inequity issues that would probably have cracked in as a result.

William Tincup:   It’s interesting, because a lot of people think about pay equity just on the talent acquisition side, just on the hiring side. But if we’re going to fix it, one of the things when I talk to executives about it, when they’re, it’s what keeps you up at night, this is one of the issues. I’m like pay equity is all the way throughout the organization. You have to think about equities all the way, promotions, internal mobility, training and development, succession planning, in terms of layoffs. One of the things that I think we realized in 2020 is there was a massive amount of layoffs and women were disproportionately impacted. And it’s crazy to me that, to think that companies didn’t look through the lens of like diversity-

Ruth Thomas:   Yeah.

William Tincup:   Of when they made furloughs or layoffs.

Ruth Thomas:   Yep. And we were appealing to employers to do that at the time we were saying, “And make sure you track.” One of the things we always say is tracking metrics across the talent life cycle, in order to try and tackle those vulnerable moments is what I like to call them the vulnerable moments in the talent life cycle, where you may lose talent and of certain protected category groups, just because of the way things happen in your organization. So we always say you should track the number of applicants for your job adverts, the number of people that get through the various stages. But you should also look at the number of people that get [inaudible 00:   15:   46] for example, on senior management training courses, the number of people in certain promotion grades, just wherever a decision about people is being made.

You should monitor that from a representation perspective. And it will probably give you some… It will definitely tell you some interesting stories about potentially where things aren’t playing out fairly in your organization. And unless you fix those, then during a pay equity analysis, every year, you’re not going to solve your problem, because it’s a bit of a whackamole situation. You do your [PE 00:   16:   19] analysis, you go off, you hire a load of people, promote people, do everything else to your people come back again. And that inequity’s just crapped back in. So for it to be what we call sustainable pay equity has to be part of the day to day and has to be of, and every people related transaction that you do.

William Tincup:   I couldn’t agree more. It’s got to be the center. One of the center is not a spoke, not an afterthought, if you’ve got to actually weave it into everything you do, every decision is, but training every aspect of the article of HR and recruiting talent acquisition as well. I saw this on LinkedIn the other day, and it was in a recruiting group and it was basically, the job had a, it was a budget of $140,000. And a candidate came in at $90,000. And historically in staffing and recruiting, we’ve looked at that as a $50,000 win to the company. And so I asked the question, I’m like, “Didn’t we just create a $50,000 pay equity that we’ll have to deal with later?” And what came back a lot of comments, a lot of opinions, shocking, not shocking, but a lot of opinions were about negotiation skills. And I’m like to me, you’re the expert, to me, that’s a cop out.

Ruth Thomas:   Yeah.

William Tincup:   If there’s a budget that then the comp professionals have said, this is what the job should pay.

Ruth Thomas:   Yeah. If you have a pay range, a fair pay range-

William Tincup:   Yeah.

Ruth Thomas:   Maybe your organization isn’t mature enough to have fancy pay ranges and everything. Maybe you’re a small organization, but you can still look at the market benchmarking data, or you can still look at who the current incumbents are in that role to determine what’s the fair pay range in your organization for that role. And then recruit into that. And as you say, if you may think that you are getting value for your organization by potentially undercutting the candidate, but in fact, you’re really just setting your business up for potential risk and even greater costs down the line. So thinking about hiring into those fair pay ranges is really important.

William Tincup:   Yeah. And it’s a mindset for TA. I can tell you, it’s a mindset shift. They literally have to move.

Ruth Thomas:   Absolutely huge shift. I mean, I’ve done recruitment myself, and you think, great, I’d saved the company this amount of money, but-

William Tincup:   You just Created a liability.

Ruth Thomas:   Yeah. And I think that’s the awareness now is that there’s been so much talk around, pay equity, driven by new laws, driven by the social justice movements, driven by understanding of the impact of the pandemic that people are just so much more aware and really just expect fair pay to be something that is part of the employee value proposition. And so we all need to shift in order to be able to deliver that. And if you have fair pay, you shouldn’t need negotiation.

William Tincup:   That’s right. And again, what does negotiation have to do with the job ones going to perform, unless it’s general council.

Ruth Thomas:   Yeah.

William Tincup:   And they need to be really good at negotiating. I think it’s a cop out, but I also think it’s a cop out to think that pay equity is so overwhelming that this is another discussion thread that I have with people. It’s so overwhelming. I’d rather go fix another problem. I’d rather go fix another aspect of something that’s broken in our thing. And I think some of this, want to get your take, is they don’t know when they’ve reached the goal.

Ruth Thomas:   Mm-hmm (affirmative).

William Tincup:   In succession planning, when you do a succession plan, especially you do it annually, you go through a process and there’s a succession plan and you obviously you update it quarterly. And then, annually, you go back to tear it down and build it back up. So there’s kind of a process and there’s an outcome and it’s not easy. Don’t get me wrong. But like, everyone can see that there’s a winnable game. I’m not sure the C-suite or even HR professionals can see, not just the end game, but can see how do we know that we’re actually there. How do we know that we’ve arrived at the destination?

Ruth Thomas:   Well, I mean, in theory, if you did your pay equity analysis, you’d have no people to remediate and you would have zero pay gaps, but there are very few organizations that even who those have been working on it, who are there. And what we always say is please acknowledge that this a journey coming back to where we started our conversation, making that commitment to that journey. A lot of people, for example, will start working with them in the first year and onboarding them onto our software and they’ll go… They realize there’s a whole load of data that they don’t have in order to do the analysis. And we was like, okay, let’s just do what we can, because if you then go out to sort of highlight your results from your first year analysis, collecting data, particularly sensitive data, like protected category data that people may not be willing to disclose.

The more they believe in you, that you want to fix this, the more they see you committing to fixing it, the more they will give that information to you. And then you can get more data and continue to fix the problem. And so, we always say, “Just recognize it’s a journey and be honest about that.” The issues that drive pay equity, as we said, right at the beginning are hundreds of years old.

William Tincup:   Right.

Ruth Thomas:   We are not going to fix that in one year. You’re not going to fix that in two years. This is probably going to take at least another generation to fix, unfortunately, but I hope it’s only 10 to 20 years and not another a hundred or 200 years.

William Tincup:   It’s, it’s funny, I’m in a process of losing a bunch of weight. And when people ask me about the journey of it, I’m like, I didn’t get fat overnight. I’m not going to get healthy overnight. It’s okay to lose half a pound a week. Like that’s okay. But when I address this with HR pros, I basically say it’s a relentless pursuit of equity.

Ruth Thomas:   It is, absolutely.

William Tincup:   I mean, it is kind of overwhelming to think of it as something that’s relentless, but it’s relentless and you just got to like, think of like, okay, we’re never going to reach the destination. We’re going to reach a new destination. We’ll create another one after that.

Ruth Thomas:   Yeah.

William Tincup:   And that’s okay. What’s your take on pay or salary in job descriptions as it relates to equity?

Ruth Thomas:   Well, obviously seeing that come out in some of the new pay transparency laws where employers have to provide the applicant salary range for the position, at some point in the hiring position. I know a lot of organizations potentially feel uncomfortable about that right now, as in, kind of where we are right now, because they maybe haven’t reached the point in the pay transparency journey internally. And that’s another important kind of foundation that you need to put in place. It’s much easier to communicate about pay equity when you are more transparent about pay generally within the organization. So I think it is difficult for some organizations, because there’s a lot of work that needs to go into getting to the position of pay equity. And it isn’t just doing the analysis.

You need to do your kind of job leveling, which for some organizations can take them 12 months to do job leveling. So before you can compare people, you really need to have people grouped in the right, what we call, pay analysis groups in order to make those comparisons, then you can do your analysis, but then you also need to get to the point where you’re confident disclosing, what are your pay ranges internally within your organization? And sometime there’s a whole load of again, history. History keeps coming up here. There’s a whole load of-

William Tincup:   Well, I have two degrees of history. So of course it’s going to go keep coming up. Sorry.

Ruth Thomas:   So there’s often for particularly larger organizations, there’s a whole load of history of pay decisions that have had an impact that need to be tidied up. So I think unfortunately, I’ve heard of cases where employers have said, “Well, we’re not going to hire in that state now, because they’ve got these pay transparency orders-

William Tincup:   That’s just insane. We’re going to take an entire talent group and go, “Yeah. We’re just not going to,” like New York, I think has one of those laws.

Ruth Thomas:   Next one? Yeah. May the 15th, that one comes into play this year in-

William Tincup:   Yeah. We’re just, we’re not going to hire New York. Oh, okay. So all the talent, that college talent, early stage career, all of that talent. Yeah. That’s just dumb.

Ruth Thomas:   But we know this is a focus we’re just about to launch our compensation, best practices report here at Payscale, which is-

William Tincup:   Oh cool.

Ruth Thomas:   Which is research that we release every year coming out in February. And it was really excited to see in that, that this year 66% of organizations said that they’re going to tackle pay equity analysis this year or they’re planning to, and that was a 20% increase on last year. And-

William Tincup:   That great.

Ruth Thomas:   So the intent is there, let’s hope it comes to fruition.

William Tincup:   Right? Well, they used to say the path to hell is paved with good intentions, but we’ll see. I mean, for me it’s outcomes. I want to see as you do, look at the data after the fact and go, okay, are we actually… The intention is great. I mean, that’s fantastic. So last thing, and I’ll let you go in either direction you want. Horror story or hero story? And again, no names, no brands, nothing like that, but just either something where you’ve seen, something and you’re really inspired like these folks had a problem, they tackled it and here’s where they are now. Walked into a situation. This is a complete horror story. Oh my God, can’t believe that this company even is operating. And again, you can take it either way. It doesn’t make a difference, but I’d love to hear just kind of a hero story or a horror story.

Ruth Thomas:   Well, I’m normally a glass half full person. So I’m going to go with a hero story, and because there are unfortunately quite a lot of horror stories. Yes. So let’s focus on a hero story. I mean, working with some leading organizations who are actually joining the dots and there aren’t many of them, but joining the dots between understanding how you connect talent strategy with business performance and this now new emerging, environmental, social governance positioning as well, about how addressing pay equity can be part of your sustainable pillar underneath that ESG agenda and showing how that really drives business performance. And we’ve been lucky enough recently to work with a couple of large organizations who, that was their goal. They wanted to join the dots. And they’re now able to tell that story and it’s a really inspiring story and they will no doubt be the winners in the talent race.

William Tincup:   Right. Again, they’ve seen it strategic, they’ve put the hard and it is hard work. They put the hard work in, they’ll see it. It’ll reap benefits for years and especially if they stay on top of it and don’t think of it as a one and done.

Ruth Thomas:   Yeah.

William Tincup:   I love that. And I love talking to you Ruth. So thank you so much for your carving out some time for us and coming on the RecruitingDaily podcast.

Ruth Thomas:   Great. Thanks for having me William.

William Tincup:   Absolutely. And thanks for everyone listening to the RecruitingDaily podcast, until next time.

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