Mind the Gap - Do Companies Pay Women and Minorities Less on Purpose?
This post is a continuation of a series that began following a local SWE event here in Minneapolis. As I mentioned in my last post, there were a lot of questions about how pay works inside companies that came up during a session on negotiation. I can’t speak for every company. I provide just one perspective. This series aims to remove the mystery of what happens behind the scenes at companies when deciding how much to offer you for a job, bonus or raise based on my own personal experience. I’m no expert, but I’ve witnessed and led compensation conversations in all these scenarios.
In the negotiation session, one of the people in attendance asked:
“Do companies have different pay ranges for women and men?
The thought had never occurred to me personally. I realized this question may be one people of any specific group might wonder. What goes into deciding their pay? Disproportionate income and equal pay for equal work are topics I personally care about. Whether you learn of disparity in pay from the news, personal research, the coworker who runs around broadcasting what they earn, or that friend in payroll who shares more than they should, knowing you are earning less than your peers can be frustrating. We all want to get what we deserve and be paid fairly. If a coworker is earning more than us and we believe we perform better and do more work, being paid less is maddening!
The more you know the better you will be able to relate to the employer’s perspective while also considering how to relate to the employers who are figuring out what to pay you. If you’ve done research and learned you are not getting what you are worth, you’ve heard the self-tooting horn coworker brag about their earning, or just heard it through the grapevine that you are earning less, I’m sorry. We all need to look out for our best interests hopefully sharing my experience will give you a better understanding of what happens behind the scenes.
What is a pay grade? Known by many names pay scales, pay grades, job bands, or salary levels are ways a company uses to determine how much an employee should be paid as a wage or a salary for their geography and profession. Many companies pay a lot of money to big consulting houses to survey the external market and learn what people in similar jobs are making throughout the country. Each job is given a bottom and a top number usually representing the 25th to 75th percentile of what survey respondents earn and then it’s modified based on geography and industry specialties if or when necessary.
How do companies determine where I fall in the pay range? It’s all over the place! Some companies have a “we pay at the top of all the ranges" stance. Others say, “we bring people in at the low end and grow them into the jobs.” The most sophisticated employers take a value-based approach. They look at how many years of experience someone has in a similar job and place them on the scale based on education level and years of related experience coupled with the share of work this person is responsible for compared to his or her peers. For example, if this person will be responsible for cost-savings initiatives of $1 million and their peer will be working on initiatives with $500,000 of savings they would pay the one with the higher impact responsibility more money.
What I’ve seen most commonly is companies ask what you are currently making and figure if they offer you somewhere in the ballpark ranging from lateral pay to 20% increases they can get you on board. Asking about current earning is becoming illegal for some cities, states, and employers. Make sure you know if the law protects you from disclosing this information. Google “salary history ban” before a job search to ensure you know your rights. your rights. Here’s an article from last week with the latest on the topic of discussing salary history.
Will a company disclose their pay range? They usually will not. The most common exception to this is union roles that follow a seniority-based scale. They are very transparent about pay. Most companies will look to understand if you are in or out of their defined range and budget in terms of your expectations. Usually, they’ll point to their goal salary vs. telling you the whole range or name their low number to get a sense of whether you’d consider an offer near there. Pay ranges can be large sometimes spanning a 40,000 swing from one end to the other. The budget they can dedicate to that range is truly what determines what they will offer. If an employer discloses the whole range and can’t afford the top, it could lead to a disappointing job offer. If you have great experience and education directly related to the job; it’s perfectly acceptable for you to desire and seek the top of a pay range.
What can I do with this information? Knowing a bit more about how pay ranges work, that they are NOT designed to create inequity, and understanding why employers may not tell you the whole range is a great first step. Carry that knowledge into the interview and to ask some thoughtful questions as you consider career milestones and changes. Here are some questions you can bring up throughout the interview or raise negotiation process:
“I have # years of highly related experience to this job and would expect my pay to be in line with the (low, mid, high) point of the range for my profession. Does this position have enough budget to support pay at that level of the pay range?”
“In comparison to others in this same job would you say my role is responsible for the same (# of projects, budget, geographic scope, cost-reduction, revenue generation) etc. Has that been considered in how this job was budgeted vs. the others?”
“I understand that you likely have a budget you are working towards as you look to hire for this position. I’ve done some research myself. I estimate it would be between x and y, Is that in line with the pay for this position? What other items make up the total pay for this position?”
To answer the original question “Do companies have different pay ranges for women and men?” I’m happy to say, I’ve never personally seen a company with a formalized pay scale that grouped people by age, race, gender, marital status or any factors other than education, experience, current earnings, the data provided about the role in the market, and the value of the role to the organization. The companies I helped hire regularly evaluated their wages to look for any disparity. If they self-uncovered a gap they worked to address it. How the gap got there in the first place, in my opinion, has more to do with: an unnecessary emphasis on current earnings in the hiring process, people not advocating for their worth, or unintended bias finding its way into the offer process.
If you know of a company that has pay scales designed to offer lower wages to any group of people on purpose, this practice deserves to be reported and exposed.
Important note: Salary market data looks backward, it’s a lagging indicator. In times of full employment, or regulatory changes within a profession, or for people with rare skills companies may be willing to blow the budget to get the expertise they need on their teams. If are employed and have skills that are making headlines for being high in demand don’t be afraid to aim higher. I’ve seen companies go outside of their budget for rare skill-sets and in-demand talent many times even during recessions. The most notable was in the early 2000's after the passage of Sarbanes-Oxley. Any accounting or professional with SOX experience was defining their own pay scale. The same thing happened in 1999 when computer programmers who knew how to convert systems to 4-digit date codes saved the world! Right now, we are nearly at full employment across the country, wage stagnation hopefully has seen its end. It’s a great time to consider asking for more than you thought you could earn.
Have questions, comments, feedback or want to share a different perspective? Drop a comment below, I’d love to hear from you.
Next up - How do I handle internal negotiations during a promotion offer, raise discussion or at bonus time?