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Pay Equity

How do we determine equitable pay?

First, we have to acknowledge that some co-workers are worth more than others. This raises the immediate question: Why?

Here are some factors: Skills, Knowledge, Work Habits, Ability to interact with customers/vendors with respect and amiability.

Radical idea: Base pay for everyone is the SAME and relatively low! The BULK of the pay package is recognition of the longevity, skills, knowledge, work habits, attitude, speed, attention to detail, freedom from errors, vendor and customer relations, etc. that the person contributes to the business.

Metrics would need to be developed for anything that is included in the pay package. A simple point system, based on relative worth to the company for all identified areas, including specific skills and knowledge (the other factors might be more difficult to include – but this aside is NOT meant to dismiss them – they must be included, they’re just harder to quantify!) would be developed. Points earned by all co-workers would be added, resulting in a company wide point total. The yearly budget (or perhaps the governing documents of the business) would establish a total fund for incentive pay and each individuals incentive pay would be their point total as a fraction of the company wide point total, multiplied by the incentive fund.

A simplified (vastly) example is shown in the post titled A vastly simplified example.If what I’ve said so far doesn’t cause you to immediately see the structure I’m creating, then please STOP NOW and read the example!!!

Let me say right now that I recognize that this will NOT work for new hires!!! The company won’t be able to hire anyone if the prospective co-worker can’t be given an initial salary figure. In lieu of using the point system for new hires, each new hire would be given a higher base salary based on the best guess of where they should fall in the point system after a probationary period. The length of time for the probationary period would likely vary from as little as 1 month for a messenger, who would have few company specific skills associated with her job description to as long as 1 year for a new hire into a position of high responsibility (assuming nobody already with the company wasn’t used.)

I envision a base point structure, with multipliers on each base value for: Required in current position (multiplier = 1), NOT required, but can do if necessary (multiplier = .5), INSTRUCTOR in the skill (multiplier = 2)

Assuming the business is large enough (10+ people) then there would be a committee who periodically reviews the base points table AND who functions as an “appellate court” for co-workers who believe their points aren’t assigned correctly. Committee would consist of 1 representative from each general area of the business. In the case of the example (assuming the example had 10 or more people) the general areas would likely be: Production (those who actually transcribe the dictation), Administration and Sales. As the company grows, I could see adding representatives of Management, short-time workers (longevity in bottom 25%) , long term workers (longevity in top 25%), Mentors (people with at least 1/3 of their base points earning the double value for teaching). Additions to the committee would be designed to represent the evolving company. If the business is too small for a committee, then it would simply be a committee of the whole.

All information would be public within the company. Yes, the most recent hire would know how much everybody else is making, but more importantly, everybody would know WHY each co-worker is paid what they are paid. There will likely be people of roughly equivalent skill/responsibility sets who will differ in their pay. First reason will be for longevity (as defined by the points system) and also for productivity (which will be part of the system, but I omitted from the sample.)

OK. I’m going to stop now. What do you think?

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Categories: Workplace
  1. Anonymous
    26 Feb 2006 at 23:29

    Have you read any books on Mao? Ok, maybe a bad example but, basicly communism has it’s “points”. What I am saying is that this sounds a lot like some of the policies that changed China. At first it helped, made the classes more equal. Then corruption set in. Friends and family got special privlages etc. As long as you could keep the commities fair and just, it might work. At my job everyone tries to find out what the others are making.If they knew and understood how the other people made that amount it would take out lots of negativity. thanks for reading my reply.

  2. fulfilling-work moderator
    27 Feb 2006 at 00:55

    No, I haven’t read any Mao, nor any Chinese history, nor for that matter ANY history as it relates to economics and how businesses are run. I’ll put some of that on my to do list, but it’s WAY down the list.

    With that being said, my first reaction was that if this is somewhat akin to what Mao wrote, or China did, I suspect that it was imposed from the top down, not from the bottom up. What I’m seeking to do is use a framework like this from the bottom up and with enthusiastic people who run, not walk up to join. As long as the books are open, the decision making processes transparent (at least within the company) and communication is free and open I’m not worried about special priveledges, nepotism, cronyism, etc.

    I haven’t covered it yet in any detail, but I’m looking for converts and co-workers, not employees. I’m looking for people who want to shape their work experience into a fulfilling part of their lives and are willing to take risks in order to try and acheive that end.

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