Bersin Pay Equity Maturity Model: Level 3 – Skills & Capability-Based Pay

The Josh Bersin Definitive Guide to Pay Equity includes a pay equity maturity model. The report, commissioned by Salary.com, found that the majority of companies are only performing at level one or two of the model. Just 8% found themselves at level three, the skills and capability-based pay equity approach.

In our previous article The Pay Equity Maturity Model: Level 2 – Sporadic Pay Equity Audit, we discussed the characteristics of level two and how to transition into the third level of the maturity model. This article will discuss what defines the third level and how companies can mature to the fourth.

What is Level 3 - Skills & Capability-Based Pay?

Level three of the maturity model addresses pay equity in a holistic manner. These companies set aside significant budgets and see apparent benefits of pay equity. Usually, organizations at this level have a strong C-suite sponsor, with leaders understanding the importance of deciding pay based on skills, capabilities, and experience. Let’s look at some more characteristics of level three:

Use dedicated pay equity software.
In-depth statistical analysis to identify pay equity issues.
Team includes compensation, legal, DEI, HR business partners, and businesspeople.
Pay transparency is an expectation.
Proactive bias mitigation.
Focus on both internal and external equity.
HR acts as an employee advocate andleadership support.

Why It’s Important to Move Past Level 3

Achieving level three of the maturity level demonstrates that your company approaches pay equity seriously and with dedicated effort. The fault at this level is that sometimes these companies focus too much on pay-for-performance approaches. There can be an over-focus on individual contributions. This can inhibit successful teamwork and collaboration across the company.

One of the major advantages of pay equity is that it creates a culture of inclusivity in such a way that employees are motivated to perform well. At level three, a positive is that HR is consulting with business partners on the right approach to rewards. However, too much focus on this and there may be less opportunity to facilitate a productive environment. Friendly competition is great, but teamwork gets the job done.

How to Transition to Level 4 in the Maturity Model

Advancing to level four is the ultimate goal. Companies need to focus more on balance, transparency, and improved communication. Pay equity must be included in broader business priorities. Advancing to level four means transparently communicating pay equity internally and externally. Managers need to be trained to adequately communicate with their team. When a company learns to value fair rewards, it can foster trust among the team.

While level three works hard to identify and mitigate pay equity issues, level four takes it that step further. These companies have an ongoing process addressing the root causes of biases and inequities upfront. This includes when hiring new employees, considering promotions, career development opportunities, and performance reviews. Therefore, maturing to level four requires embedding pay equity into all business decisions.

At level four, business leaders collectively take accountability for creating an equitable environment. HR’s role also expands. At level four, they are responsible for bringing all pay equity team members together and defining the company’s goals. Everyone must understand how the organization decides pay.

Final Considerations

Level three of the maturity model is a commendable effort in the pay equity journey. These companies are applying sufficient effort and budget and involving all the right people. There is, however, still room for growth.

It’s obvious from the Definitive Guide to Pay Equity report that the meager 5% of companies at level four of the maturity model are reaping the benefits. Josh Bersin explains, “Just 63% of Level 3 companies attract the talent they need for the future, compared to 98% of those at Level 4.” Pay equity done right highly improves business performance levels.