February 9, 2023 • 13 mins
When differences in pay between senior and entry-level positions shrink, it jeopardizes efforts to attract and retain talented employees. To avoid this unfortunate situation, employers should take proactive steps to review salary practices and conduct periodic compensation surveys. Furthermore, they should consider creative ways to provide rewards that don't rely on pay increases – such as giving more vacation time, recognizing achievements with public acknowledgment, or offering flexible hours. Join host Shari Simpson and Lizzy Bores as they discuss how to address and further prevent pay compression in your organization.
Guest Bio: Lizzy Bores, Senior HR Business Partner, Paylocity
Lizzy has 14 years of extensive HR experience in numerous roles and industries, which included a focus on compensation, talent acquisition, and learning and development. She joined Paylocity in 2018 and currently provides strategic support to our Technical Services organization through a partnership with its leadership teams. She also creates and refines various initiatives to align with the future needs of the Operations org and to drive a positive employee experience.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
(upbeat music)
(00:05):
- Hey, and welcome to PCTY Talks.
I'm your host, Shari Simpson.
During our time together,
we'll stay close to thenews and info you need
to succeed as an HR pro.
And together, we'll explore topics
around HR thought leadership, compliance,
and real life HR situationswe face every day.
(upbeat music)
(00:28):
Joining me on the podcasttoday is Lizzy Bores.
She is a Senior HR BusinessPartner here at Paylocity.
Has a wealth of HR experience,
she's been in this space about 14 years
and has numerous rolesin various industries
focusing on compensation,talent acquisition,
and learning and development.
So Lizzy, thank you so muchfor jumping on with me.
(00:49):
- Thank you for having me.
- So we have a really exciting topic today
to talk about pay compression.
I feel like we're all kindof dancing around this topic
right now with what'shappening in the economy
and the effects of the pandemic.
So let's start with the very basics.
What is pay compression?
- So pay compression,
(01:10):
well, actually, lemme take a step back.
So you would typically find
when you're assessing your workforce
some differentiation in pay.
So, and that would be byskill, education, tenure,
various different factors.
Performance, of course.
So with pay compression,it's where you find
that there really isn'tthat differentiation in pay.
(01:33):
And where you typicallyfind it is in new hires
and your tenured employees.
And that differentiation islost for various reasons.
So that's the baselinewhat pay compression is.
- How does it happen?
So if you have all these good intentions,
you've got your pay grades,
you've got everything kind of outlined,
(01:55):
how do you get in that situation
where you have pay compression?
- Right.
Where you've got allthe tools in the toolbox
but how did we get here?
So I think what the landscapeis today is a prime example
of how employers can findthemselves in this position.
Again, you've got all thesebest practices, guidelines,
(02:16):
approaches around pay strategy,
but think about what we've gone through
these last couple years
and what we've seen in the market.
In the market, salarieshave, in some cases doubled
by thousands of dollars.
Well, what is it?
The great recession,people moving very quickly
(02:38):
across the market andincreasing their salaries.
So you may find that you'vebeen sourcing for a role
for years at this particular rate,
and now you're finding today
that you can't find thattalent at that rate anymore.
So then now you are increasing,
you're starting pay to attract talent
(03:01):
where you didn't haveto do that in the past.
So it's inflating yourstarting salaries coming in
where that wasn't a thing years ago.
- Yeah, it's amazing howmuch we're just experiencing
the impact of the greats, right?
The great resignation,the great retention,
the great reshuffle, the great regret.
(03:21):
- It's caused quite the shuffle.
It's caused things to surface
where they did not surface,
it wasn't even an area offocus maybe a few years ago.
And it's definitelyraising different topics
just like this one inattracting, retaining,
(03:42):
and sourcing talent forvarious different roles.
Years ago we would, we wouldfind it much more common
in more early career roles
where you would see a lot of movement.
Now it's across theboard, it's early career,
it's mid-level, it's more senior level.
(04:07):
We know how eager andexcited the recruiters are
in the market and they will beknocking on individuals doors
to dangle that financialcarrot in front of them
to make a move.
- You mentioned a couple things;
recruitment, retention, I thinkabout employee experience,
(04:28):
those are all things thatare gonna be affected
by pay compression.
And you might be like, "Okay, well why?"
Some of the things that we forget
is employees talk abouttheir pay with other-
- They sure do.- Employees.
So that's just one reason,
but why else should wecare about pay compression?
- Well, I think that'sa great question to ask
(04:49):
because it's what kind ofculture are you trying to drive?
It's human nature when you get good news,
or on the other end, it's humannature to wanna share that
with each other and peoplehave friends at work,
whether that was established at work
or whether the case may be,
but it's human natureto wanna share things.
And I think it would not be a surprise
(05:14):
if you gotta pay increase at work,
and oh my gosh, such a positive thing
and you wanna share that with your peers
because you're so excited,
and you do the whole like sh, sh like,
don't tell anybody we talked you.
I wouldn't be surprised ifthat dance still goes on today.
But the reality of it is people do talk.
We wanna drive the right behaviors
(05:35):
when it comes tocompensation and performance.
So driving that positive experience,
it's for employees and rewardingwhere it is appropriate
is so important.
The other piece of that too,
it's not just about employee experience
and of course, employeestalking with each other,
it's also, you mayuncover in your analysis
(05:59):
some unintentional pay practices.
Again, you've got allthese tools in your toolbox
to ensure the fair consistency
in driving the right behaviors,
but you may find that indifferent groupings of employees
that maybe a group of employees is...
You find that they are paid lower
(06:19):
or this particular group is paid higher.
And that might be okayif you can explain it
and speak to it,
but if you can't that mightactually result in a deeper dive
in a data analysis to say,
"All right, it's here.
We can't fully speak to it.
It wasn't intentional.
What's our plan to bridge that gap?"
- As you've been thinking about this
(06:42):
and coaching managers inyour various roles you've had
in different organizations,
how do you go about kindof uncovering these pockets
of pay impressions?
So I think the example is really good
because you might only have it
in one little small group,
but if you're not looking at your data
in these cross sections, sohow have you tackled that?
(07:02):
How have you kind of looked at your data
to uncover those things?
- Well, it can be quite overwhelming.
So whether you work for a smaller company
where there's maybe a handful of roles
or maybe you have hundredsof roles, where do you start?
Where do you even start totry and uncover this stuff?
Especially if you're anHR practitioner of one
and you don't have centers of excellencies
(07:24):
to kind of lean on on their expertise.
My recommendation, where agood starting point would be
is take a look at thoseroles that now you're like,
"Ugh, oh gosh, I can'tfind a customer service
representative for this rate.
And over the last six months I've realized
we are now bringing in newtalent at those higher rates."
(07:46):
That's a great starting point to uncover
if those starting rates forthose higher volume roles
that you're seeing hascaused some pay compression
when you're reviewing your data.
The other area whereyou could start as well
is if you are experiencingsome higher turnover
in a particular role.
(08:07):
And the common theme has beencompensation in your analysis.
So you are losing your tenured employees,
your good performers, andtheir primary reason is comp.
There might be more to unpack there.
So I would definitely, for me,
I would take a look at thatdata a little closer to see
(08:27):
if there's some paycompression happening there.
- Once you've kind offigured out the pockets
that you're having thisin, how do you address it?
Make me feel like there'sobvious ways to address it,
but I also feel likesometimes you might uncover
that you have a huge problem
that you didn't realize you had,
or maybe you realized youhad it and now you're like,
(08:49):
"Okay, what are the tactics I can take?"
So maybe you could walk through
just a couple different optionsthat you can think about.
- Yeah, there's a coupleof different approaches
that you can take when kindof developing your strategy
around pay.
So one, do you have a strategy today?
If not, what behaviorsare we trying to drive?
Do we wanna be a pay forperformance organization?
(09:09):
Are there certain contractual things
that need to be consideredgiven your workspace?
It's really what behaviorsare you trying to drive?
There's things that you can put in place
when identifying those toensure some best practices
(09:29):
when bringing in new talent
and assessing current paywith your current talent.
Some of those thingsinclude, you could have,
I've seen this more commonwith early career roles.
You could have compensable factor models
where you kind of puttogether a point system
for various differentskills or attribution
that talent brings to the table.
(09:50):
And you can do that withyour current talent too.
You can apply it, you could say,
"Sherry has X, Y, Z, thesehave translated a success
for the role, so therefore,
I would anticipate her tobe higher in the range."
So that's an opportunity there.
The other pieces you could implement
different models like competencies.
(10:11):
What are the most importantcompetencies for your company
for those roles?
What translates to success?
What behaviors?
And you could benchmark against that.
- I think those are all really good ideas.
I think if you are down the road where
you maybe have some ofthese things in place
and you know you justneed to fix the comp,
(10:33):
like one sweep, right?
So you could do a market adjustment,
you could do a one-time bonus.
There are things you can dothat you can help communicate
to your organization,
"Hey, we're doing this toaddress the pay compression
that we're seeing."
You might need a stop gap
and then you might need a long-term plan
kind of based on what youuncovered in that discovery phase.
(10:56):
So as I think about what's next though,
how do we come up with a long-term plan?
So I mean, forbid we endup in another pandemic,
- Sure, yeah.- 'Cause I feel like
this is an endemic now.
I think we can all agree on that.
But let's say we run into something
where we're seeing this again,
how can we get ahead of itinstead of being reactive to it?
(11:18):
- I think that you couldrun regular audits.
And I get a lot of questions too
around how many audits should I do?
Should I do this monthly?
Should I do this every quarter?
There's no right or wrong answer to this.
I think it's situationaldepending on company size
and the makeup and the volume.
You may see that a high growth company
(11:39):
that have many high volume roles,
where new talent isconstantly coming in the door,
you may have to run youranalysis every quarter.
You may find that you needto do it every six months.
So I think it's kind of testing the waters
of what makes sense foryour organization size
and the activity that you're seeing.
But I think it's thoseregular audits of data review
(12:00):
to see if there's anything going on there.
You may work for an employerwhere maybe your growth
is not high right now.
And of course, that's totally fine.
But then you're notseeing a lot of new talent
coming in the door andyou're maybe not seeing
a lot of attrition,
so therefore your datais going to be stagnant
(12:22):
for a little bit longer.
So maybe it makes more senseto do an annual review.
- I love all of these suggestions.
So if you're listening
and you wanna dive into thistopic a little bit more,
Lizzy and I actually justdid a webinar on this
where we go into greatdetail of all these things.
So I will make sure to includethat in the show notes.
But Lizzy, thanks fortaking just a couple minutes
(12:43):
for us to tackle a really a deep topic
that I think everybodyis addressing right now.
So I appreciate your time.
- Yeah, absolutely.
Thank you.
(upbeat music)
- This podcast is broughtto you by Paylocity,
a leading HCM provider that frees you
from the task of today,
so you can focus more onthe promise of tomorrow.
(13:04):
If you'd like to submit atopic or appear as a guest
on a future episode, email usat pctytalks@paylocity.com.
(upbeat music)
(upbeat music)
(00:05):
- Hey, and welcome to PCTY Talks.
I'm your host, Shari Simpson.
During our time together,
we'll stay close to thenews and info you need
to succeed as an HR pro.
And together, we'll explore topics
around HR thought leadership, compliance,
and real life HR situationswe face every day.
(upbeat music)
(00:28):
Joining me on the podcasttoday is Lizzy Bores.
She is a Senior HR BusinessPartner here at Paylocity.
Has a wealth of HR experience,
she's been in this space about 14 years
and has numerous rolesin various industries
focusing on compensation,talent acquisition,
and learning and development.
So Lizzy, thank you so muchfor jumping on with me.
(00:49):
- Thank you for having me.
- So we have a really exciting topic today
to talk about pay compression.
I feel like we're all kindof dancing around this topic
right now with what'shappening in the economy
and the effects of the pandemic.
So let's start with the very basics.
What is pay compression?
- So pay compression,
(01:10):
well, actually, lemme take a step back.
So you would typically find
when you're assessing your workforce
some differentiation in pay.
So, and that would be byskill, education, tenure,
various different factors.
Performance, of course.
So with pay compression,it's where you find
that there really isn'tthat differentiation in pay.
(01:33):
And where you typicallyfind it is in new hires
and your tenured employees.
And that differentiation islost for various reasons.
So that's the baselinewhat pay compression is.
- How does it happen?
So if you have all these good intentions,
you've got your pay grades,
you've got everything kind of outlined,
(01:55):
how do you get in that situation
where you have pay compression?
- Right.
Where you've got allthe tools in the toolbox
but how did we get here?
So I think what the landscapeis today is a prime example
of how employers can findthemselves in this position.
Again, you've got all thesebest practices, guidelines,
(02:16):
approaches around pay strategy,
but think about what we've gone through
these last couple years
and what we've seen in the market.
In the market, salarieshave, in some cases doubled
by thousands of dollars.
Well, what is it?
The great recession,people moving very quickly
(02:38):
across the market andincreasing their salaries.
So you may find that you'vebeen sourcing for a role
for years at this particular rate,
and now you're finding today
that you can't find thattalent at that rate anymore.
So then now you are increasing,
you're starting pay to attract talent
(03:01):
where you didn't haveto do that in the past.
So it's inflating yourstarting salaries coming in
where that wasn't a thing years ago.
- Yeah, it's amazing howmuch we're just experiencing
the impact of the greats, right?
The great resignation,the great retention,
the great reshuffle, the great regret.
(03:21):
- It's caused quite the shuffle.
It's caused things to surface
where they did not surface,
it wasn't even an area offocus maybe a few years ago.
And it's definitelyraising different topics
just like this one inattracting, retaining,
(03:42):
and sourcing talent forvarious different roles.
Years ago we would, we wouldfind it much more common
in more early career roles
where you would see a lot of movement.
Now it's across theboard, it's early career,
it's mid-level, it's more senior level.
(04:07):
We know how eager andexcited the recruiters are
in the market and they will beknocking on individuals doors
to dangle that financialcarrot in front of them
to make a move.
- You mentioned a couple things;
recruitment, retention, I thinkabout employee experience,
(04:28):
those are all things thatare gonna be affected
by pay compression.
And you might be like, "Okay, well why?"
Some of the things that we forget
is employees talk abouttheir pay with other-
- They sure do.- Employees.
So that's just one reason,
but why else should wecare about pay compression?
- Well, I think that'sa great question to ask
(04:49):
because it's what kind ofculture are you trying to drive?
It's human nature when you get good news,
or on the other end, it's humannature to wanna share that
with each other and peoplehave friends at work,
whether that was established at work
or whether the case may be,
but it's human natureto wanna share things.
And I think it would not be a surprise
(05:14):
if you gotta pay increase at work,
and oh my gosh, such a positive thing
and you wanna share that with your peers
because you're so excited,
and you do the whole like sh, sh like,
don't tell anybody we talked you.
I wouldn't be surprised ifthat dance still goes on today.
But the reality of it is people do talk.
We wanna drive the right behaviors
(05:35):
when it comes tocompensation and performance.
So driving that positive experience,
it's for employees and rewardingwhere it is appropriate
is so important.
The other piece of that too,
it's not just about employee experience
and of course, employeestalking with each other,
it's also, you mayuncover in your analysis
(05:59):
some unintentional pay practices.
Again, you've got allthese tools in your toolbox
to ensure the fair consistency
in driving the right behaviors,
but you may find that indifferent groupings of employees
that maybe a group of employees is...
You find that they are paid lower
(06:19):
or this particular group is paid higher.
And that might be okayif you can explain it
and speak to it,
but if you can't that mightactually result in a deeper dive
in a data analysis to say,
"All right, it's here.
We can't fully speak to it.
It wasn't intentional.
What's our plan to bridge that gap?"
- As you've been thinking about this
(06:42):
and coaching managers inyour various roles you've had
in different organizations,
how do you go about kindof uncovering these pockets
of pay impressions?
So I think the example is really good
because you might only have it
in one little small group,
but if you're not looking at your data
in these cross sections, sohow have you tackled that?
(07:02):
How have you kind of looked at your data
to uncover those things?
- Well, it can be quite overwhelming.
So whether you work for a smaller company
where there's maybe a handful of roles
or maybe you have hundredsof roles, where do you start?
Where do you even start totry and uncover this stuff?
Especially if you're anHR practitioner of one
and you don't have centers of excellencies
(07:24):
to kind of lean on on their expertise.
My recommendation, where agood starting point would be
is take a look at thoseroles that now you're like,
"Ugh, oh gosh, I can'tfind a customer service
representative for this rate.
And over the last six months I've realized
we are now bringing in newtalent at those higher rates."
(07:46):
That's a great starting point to uncover
if those starting rates forthose higher volume roles
that you're seeing hascaused some pay compression
when you're reviewing your data.
The other area whereyou could start as well
is if you are experiencingsome higher turnover
in a particular role.
(08:07):
And the common theme has beencompensation in your analysis.
So you are losing your tenured employees,
your good performers, andtheir primary reason is comp.
There might be more to unpack there.
So I would definitely, for me,
I would take a look at thatdata a little closer to see
(08:27):
if there's some paycompression happening there.
- Once you've kind offigured out the pockets
that you're having thisin, how do you address it?
Make me feel like there'sobvious ways to address it,
but I also feel likesometimes you might uncover
that you have a huge problem
that you didn't realize you had,
or maybe you realized youhad it and now you're like,
(08:49):
"Okay, what are the tactics I can take?"
So maybe you could walk through
just a couple different optionsthat you can think about.
- Yeah, there's a coupleof different approaches
that you can take when kindof developing your strategy
around pay.
So one, do you have a strategy today?
If not, what behaviorsare we trying to drive?
Do we wanna be a pay forperformance organization?
(09:09):
Are there certain contractual things
that need to be consideredgiven your workspace?
It's really what behaviorsare you trying to drive?
There's things that you can put in place
when identifying those toensure some best practices
(09:29):
when bringing in new talent
and assessing current paywith your current talent.
Some of those thingsinclude, you could have,
I've seen this more commonwith early career roles.
You could have compensable factor models
where you kind of puttogether a point system
for various differentskills or attribution
that talent brings to the table.
(09:50):
And you can do that withyour current talent too.
You can apply it, you could say,
"Sherry has X, Y, Z, thesehave translated a success
for the role, so therefore,
I would anticipate her tobe higher in the range."
So that's an opportunity there.
The other pieces you could implement
different models like competencies.
(10:11):
What are the most importantcompetencies for your company
for those roles?
What translates to success?
What behaviors?
And you could benchmark against that.
- I think those are all really good ideas.
I think if you are down the road where
you maybe have some ofthese things in place
and you know you justneed to fix the comp,
(10:33):
like one sweep, right?
So you could do a market adjustment,
you could do a one-time bonus.
There are things you can dothat you can help communicate
to your organization,
"Hey, we're doing this toaddress the pay compression
that we're seeing."
You might need a stop gap
and then you might need a long-term plan
kind of based on what youuncovered in that discovery phase.
(10:56):
So as I think about what's next though,
how do we come up with a long-term plan?
So I mean, forbid we endup in another pandemic,
- Sure, yeah.- 'Cause I feel like
this is an endemic now.
I think we can all agree on that.
But let's say we run into something
where we're seeing this again,
how can we get ahead of itinstead of being reactive to it?
(11:18):
- I think that you couldrun regular audits.
And I get a lot of questions too
around how many audits should I do?
Should I do this monthly?
Should I do this every quarter?
There's no right or wrong answer to this.
I think it's situationaldepending on company size
and the makeup and the volume.
You may see that a high growth company
(11:39):
that have many high volume roles,
where new talent isconstantly coming in the door,
you may have to run youranalysis every quarter.
You may find that you needto do it every six months.
So I think it's kind of testing the waters
of what makes sense foryour organization size
and the activity that you're seeing.
But I think it's thoseregular audits of data review
(12:00):
to see if there's anything going on there.
You may work for an employerwhere maybe your growth
is not high right now.
And of course, that's totally fine.
But then you're notseeing a lot of new talent
coming in the door andyou're maybe not seeing
a lot of attrition,
so therefore your datais going to be stagnant
(12:22):
for a little bit longer.
So maybe it makes more senseto do an annual review.
- I love all of these suggestions.
So if you're listening
and you wanna dive into thistopic a little bit more,
Lizzy and I actually justdid a webinar on this
where we go into greatdetail of all these things.
So I will make sure to includethat in the show notes.
But Lizzy, thanks fortaking just a couple minutes
(12:43):
for us to tackle a really a deep topic
that I think everybodyis addressing right now.
So I appreciate your time.
- Yeah, absolutely.
Thank you.
(upbeat music)
- This podcast is broughtto you by Paylocity,
a leading HCM provider that frees you
from the task of today,
so you can focus more onthe promise of tomorrow.
(13:04):
If you'd like to submit atopic or appear as a guest
on a future episode, email usat pctytalks@paylocity.com.
(upbeat music)
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