The Josh Bersin Pay Equity Maturity Model

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The Josh Bersin Pay Equity Maturity Model

The Josh Bersin Definitive Guide to Pay Equity is a global industry report commissioned by Salary.com. Part three of the guide explores the Pay Equity Maturity Model. This is a four-level model. Different companies find themselves at different points in their pay equity journey. Astonishingly, 50% of companies find themselves at the bottom and only 5% at the top.

In this article, we discuss the key characteristics of each maturity level, what percentage of the market falls into each level, and the benefits or drawbacks a company in each level can expect.

pay equity maturity model

Level 1: Compliance-Driven Process (50%)

Companies that are amateurs in pay equity work fall under the first level of the maturity model. They’re concerned with pay equity only to avoid legal and reputational risks. Often led by the legal department, they approach pay equity as a compliance-driven process. Pay gaps are determined with the most basic statistical approach. Seeing as it’s only concerned with base pay, the job evaluation is rudimentary.

As it is so vague and lacks communication, employees and managers don’t understand the pay equity review process. The issues then repeat themselves in the natural cycles of hiring and promotions. The root cause goes undetermined. Unfortunately, 50% of companies are performing at this level. As a result, they can’t create any significant business, people success, and innovation outcomes.

Level 2: Sporadic Pay Equity Audit (37%)

37% of companies are at level two, conducting sporadic pay equity audits. Some of them use benchmarks with basic outside support for statistical analysis. These companies choose to perform pay equity audits to identify pay gaps considering basic demographic categories, such as gender and ethnicity.

As less-obvious criteria are ignored, the root causes are still not understood and progress is short-lived. Audits, therefore, repeat the same story. With the lack of budget to mitigate the issues, these companies proceed with insufficient actions. Unfortunately, these actions won’t diversify talent nor improve employee engagement.

Level 3: Skills & Capability-Based Pay (8%)

Companies at the third level of the maturity model are making strides. However, just 8% of the job market falls into the skills and capability-based pay level.

At this level, business and HR leaders understand that pay equity is an ongoing process. It’s often C-suite sponsored. They are aware that it is necessary to have a deep understanding of skills, capabilities, and experience to compare jobs. Making analyses requires using dedicated pay equity software. Therefore, a significant budget is set aside for mitigating pay equity issues.

The team involved in the process is broader, including legal, DEI, HR, and business partners. Among them, pay transparency is understood as a legal requirement, but it’s also an expectation. Everyone understands the benefits of pay equity and the mutual goal of attracting and retaining talent for successful customer and business outcomes. Sometimes, there may be too heavy a focus on pay-for-performance which can negatively affect teamwork and collaboration.

Level 4: Balanced Pay Strategies (5%)

5% of companies sit at the top of the maturity model. Level four is where companies with balanced pay strategies are in their pay equity journey. This approach is future-oriented. Using specialized pay equity software, they make holistic skill-based evaluations and practice transparent communication.

Employees in such companies feel rewarded compared to both internal and external markets. This inspires teamwork and collaboration rather than creating a competitive environment. Business leaders are accountable for creating an environment that encourages the success of employees. Additionally, employees are in the loop and understand the company’s pay equity process. As they trust their employer, pay equity is a natural expectation.

Everyone is involved and works together in achieving pay equity, including the CEO, C-suites, finance, IT, operations, DEI, sales and marketing, legal, and communication departments. By making the talent processes fair and equitable, they foster a culture of productivity and performance. from hiring to promoting and creating growth opportunities, the company is always looking for the root causes of bias or inequities and mitigating them with the necessary efforts and budget.

What’s Your Next Step?

If you’re on a pay equity journey, aiming to improve your company practices, it helps to start by identifying what level of maturity you’re at. Then, you can identify the necessary actions and make advancements.

You cannot skip levels. The goal is to make thoughtful movements through each one. Remember, the success of a company depends on its people. As noted in the report, “While pay is not necessarily a motivator in itself, it can be a big demotivator if it is perceived to be unfair, inadequate, or inequitably distributed.”

If approached successfully, pay equity will allow a company to attract, engage, and retain talent. There are financial benefits, customer experiences improve, and your company can remain innovative for the future. Without pay equity, all other aspects of a business will suffer.

Check Out ‘The Definitive Guide to Pay Equity’

The Definitive Guide to Pay Equity will equip you with all the knowledge you need to have a deep understanding of pay equity. Through what is outlined, you will be able to create a plan for achieving pay equity, identify what’s most important, assess your organization’s current pay equity situation, and define the actionable steps toward achieving excellence in pay equity.