Here’s How To Understand If You’re Getting Paid Fairly

Are you paid fairly? You probably don’t know, and that’s the case for the majority of candidates. Some states, like California and New York, have laws to mandate salary transparency, but many times, companies don’t share salary data and calculations with candidates.

The reality is the details that go into calculating employee compensation involve several nuanced inputs, such as individual experience, company profiles (e.g. revenue or funding), and market dynamics. Candidates often find themselves scrambling to validate their salaries by calling friends who work in similar fields or by browsing various unverified online resources like Glassdoor, Reddit, Levels or Blind – which are typically inaccurate, outdated, or miss nuances.

Today is Equal Pay Day, which is no accident. This date symbolizes how far into the year women must work to earn what men earned in the previous year. The wage gap is highlighted with women earning 84 cents for full-time, year-round work according to a report from the U.S. Census Bureau. While the exact day differs every year, it serves as a reminder that while equal pay is a conversation that concerns everyone, it continues to remain a real issue for women and many minority groups. The lack of accurate salary data disproportionality hurts women and underrepresented minorities from negotiating their pay fairly.

AJ Thomas, Global Head of Talent Experience at X, the Moonshot Factory and a strong advocate of pay equity, recently told me that “Transparency in pay isn’t merely about unveiling figures; it’s about nurturing trust, equality, and responsibility within an organization, illuminating the path for fairness and collaboration to thrive.”

How Companies Create Offers

It’s important to understand how companies create offers to better negotiate your pay. Many candidates do not grasp the process businesses follow when assembling an offer for a new hire. Candidates can also fixate on one component of total compensation, such as base salary, and may not consider all aspects of total compensation including benefits and time off entitlements. Generally, total compensation includes some form of short term incentives in the form of base salary and variable pay like bonuses. Some companies, especially in tech, may also include long-term incentives like equity in the company.

An offer is is generated by taking into account the following key elements:

1. Following a company-established compensation philosophy

A compensation philosophy is a business strategy that guides all decisions related to candidate and employee total compensation. It serves as the foundation for pay equity, guiding teams in crafting offers and determining the company’s stance on a role’s market value. Most compensation philosophies are defined by a percentile. For example, if the top of the market pays approximately $100,000 as the base salary for a specific role, and the company’s compensation philosophy aims for the 65th percentile, the business will likely offer around $65,000 as the base salary for that role. Starting a candidate at a specific percentile also allows for growth within their role and rewards for performance over time. These percentiles can also be applied to bonus and equity calculations.

2. Paying for employer-only compensation datasets

Businesses pay for access to employer-only compensation data sets, allowing companies to exchange information about every employee’s salary for industry benchmarking data. Such exchanges enable a deeper understanding of the compensation other companies offer for each role.

Comparing these employer-purchased data sets with the data available to candidates from their network is akin to comparing David with Goliath. While both provide salary information, only one offers a level of accuracy that is comparatively more reliable.

What Can Candidates Do Today to Get Paid Fairly?

So what can you do? The reality is there is no solution for candidates to get accurate information, but here is what you can start with:

1. Ask the company to help you understand their compensation philosophy

Employers often share their compensation philosophies with candidates, although most candidates do not request this information. You can also request assistance in modeling your equity over time. Remember that you should consider all aspects of your total compensation, not just base salary.

2. Do your own research

You should do your own research to best understand the compensation details in your offer. However, it’s important to remember that your research will be based on limited data points that excludes nuances that contribute to your total compensation, such as the internal compensation philosophy.

3. Understand trade-offs: Compensation is not everything

It is important to consider your career goals as you evaluate your offer. The highest compensation may not provide you happiness or fulfillment. For example, I accepted a reduced salary when I switched my career from strategy and operations to the field of Human Resources mid-career. This trade-off eventually paid off several times over after 5-6 years, and also led me to a role I am extremely passionate about.

Looking ahead

The reality is there is no place today for candidates to get accurate salary data that is trusted and verified. Companies only collect and sell market data back from businesses, leaving the employees stranded. As the pendulum will eventually shift back to becoming an employee-driven market, there is an opportunity to help candidates access this data.

I believe that one of the ways to improve pay equity is by providing candidates with a holistic set of data points that is personalized to their role, company and market dynamics. I see a future where AI can help ingest large data sets with the specific job you’re applying for, analyzing market data, and generating a potential compensation and benefits package tailored to you. While there are several complexities involved in making this a reality, I envision a world where salary information can continue to be democratized, thereby helping to bridge the equal pay gap.

I recently discovered FairComp, which intrigued me as they are aiming to build a verified compensation database for consumers vs. organizations. Their initiative claims to help you understand if they’re being paid fairly by using data supplied by employees and verified through technology. I am curious to see how this plays out and the possibilities for other similar tools to follow. I also hope this will encourage existing compensation survey organizations to consider making their data available to consumers in the future.