Compensation Equity: An Opportunity To Ensure Fairness

Within the HR team at Spotify, we often discuss fairness and the importance of contributing to a company culture that is open, inclusive, and provides everyone with opportunities to reach their full potential. These have been priority issues and central to our work at Spotify over the past 10 years.

It does not come without dedication though. Every daily decision and compensation policy that the Total Compensation & Benefits team makes is an opportunity to ensure fairness, and as such, it’s crucial to spend time discussing and debating these matters, and keeping them at the forefront of the mind.

The Focus

For those of us who work daily to ensure fairness, it’s more important than ever to maintain our focus. Every day.

It doesn’t matter what the newest technical solution or platform in the market is. At the end of the day there is no silver bullet. This is a part of our job (HR) – it always has been and always will be. There is no shortcut unless you’re working on these issues solely to satisfy external stakeholders rather than improving your organisation. In our daily work, it naturally includes developing the absolute best technical tools we can, to streamline our efforts and to remain compliant in all markets without compromising our global compensation fairness delivery. 

The Buy-In 

It’s undeniable that every organisation that wants to compensate in an equitable way needs some sort of policy to avoid biases, or simply to make sure everyone is aligned. And that alignment is essential – you can’t implement a policy such as this, without having buy-in from the right people who will ensure that the policy is understood and followed throughout the organisation. And you must have buy-in across the board, even if there are local differences. 

The Local Considerations

Local differences are highlighted in situations like we’re seeing currently: where in both the USA and the EU, we are witnessing the implementation of new, stricter regulations. Just like with other changes that may seem complex at first glance, the consulting industry sees business opportunities here. Lawyers uncover anecdotes of companies facing lawsuits, new systems are being marketed, and the number of Pay Transparency consultants is expected to grow in the coming years. Many want to contribute. 

The important thing is to acknowledge the pace at which different countries and industries are improving regarding wage disparities. And if you already have a global compensation equity north star to adhere to, you can accommodate slightly different local components in order to be compliant. It is possible with a global equitable compensation policy that everyone buys into, to make room for these differences and still  follow your global policy.

Compensation Equity At Spotify

As my colleague Elizabeth often rightly points out, this is not a matter of extra importance because it’s trending (or not). It’s also not a question where changes in legislation will force you to work differently if you’re already actively committed to doing what’s right. Legislation is, of course, extremely important because we know that unjust discrimination is prevalent in the business world and society. 

However, many companies, including ours, have long operated with a zero-tolerance policy confronting discrimination, which we will continue to uphold. At Spotify, we feel that we have our hearts and minds in the right place: we do not accept disparities in compensation that cannot be explained by the nature of the work or one’s performance. This fundamental principle is not up for debate; it’s simply how we operate.

The way we report methods and outcomes must naturally comply with the laws and regulations of each country or region, but our global philosophy will remain the same: Our Diversity, Equity, Inclusion, and Belonging mission is to unlock the potential of human creativity — by accelerating a diverse, equitable, inclusive, and supportive culture where everyone belongs.

In our ongoing commitment to fairness and equality, we conduct an annual pay equity review to ensure that our employees are compensated equitably for their work. At the heart of these reviews is the goal of identifying and rectifying any unjustified pay differences among our workforce. Our ultimate aim is to foster an environment where equitable pay practices are consistently applied.

If you are yet to start this journey, here are some actions I’d recommend you to get started with:

  1. A Yearly Check-In On Pay Equity: An annual pay equity review is a crucial part of our commitment to fairness. It involves a comprehensive assessment of employee compensation, focusing on those who perform similar roles or “like-for-like” work. This process will allow you to pinpoint any disparities in pay and take appropriate action to correct them.
  1. Rigorous Analysis for Equitable Compensation: During the pay equity review, we advise employing a meticulous approach, including a company-wide analysis, thoroughly examining compensation data to identify any outliers or discrepancies. If discrepancies are identified, then you can delve deeper to understand the underlying causes. Moreover, if you are an international organisation, we’d suggest placing great importance on self-reported data. This will allow you to collect valuable information about gender across all your locations and race/ethnicity, particularly in the US and UK (if you have employees based there). By utilising this data, you can make more informed decisions about compensation adjustments.
  1. Making Adjustments Where Necessary: When discrepancies in pay are identified and cannot be justified by factors like experience, performance, or other valid reasons – take action. Make sure that your commitment to pay equity means that you are prepared to make pay adjustments to ensure that all employees are fairly compensated for their contributions.
  1. Looking Beyond the Annual Review: While the annual review is a significant milestone in the pursuit of pay equity, your commitment should not stop there. You can also integrate pay equity considerations into various other aspects of the compensation framework, such as hiring decisions. And don’t forget that an employee’s position relative to their peers can evolve over time due to factors like new team members joining, others departing, and changes in team dynamics. Recognising these shifts, means you can periodically recalibrate your compensation practices to maintain fairness.

These steps give a pretty holistic overview of all the areas where you can implement some sort of pay equity approach. And it’s holistic because that’s how it needs to be. At Spotify, our dedication to pay equity is not limited to a yearly review; it’s a core principle that guides our compensation practices throughout the year. By consistently assessing and fine-tuning our approach, we aim to create a workplace where every employee is compensated fairly, regardless of their gender or ethnicity. 

Yes, I may have painted a picture of many challenges, because that’s the reality. It doesn’t mean everything is difficult, boring or a pain in the backside. With the realisation of the impact that such work can have, it can be the opposite: motivating, exciting and a catalyst for many other meaningful decisions to be made within your organisation. As HR professionals we must recognise that it’s absolutely not a utopian ideal to do what’s right within a company – it doesn’t just happen – we in HR need to make a conscious effort to do the right thing every single day. And let’s try to have some impact and fun while we’re doing it!

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