Aug 28, 2025

Show Me the Money: Creating a Salary Policy

For any company to treat their employees with respect and fairness, it needs to have a transparent pay equity policy in place that is shared with all employees. Read through to understand why creating pay equity is beneficial to your organization.

Companies that make pay equity a priority do find that it boosts employee morale and assists in employee retention, but it is also the law. One of the most well-known of these federal laws is the Lilly Ledbetter Fair Pay Act of 2009, which extended the 180-day period for filing a lawsuit for each discriminatory paycheck. In addition to federal laws, there are also state and local laws in place that provide protection beyond the federal laws.

In order for a company to determine whether they are in compliance with pay equity regulations, they will need to conduct an internal assessment. This allows the company to identify where pay gaps exist and to take corrective steps where needed. Organizations will want to track both current and historical employee compensation to identify an existing disparity. To do this, your business will want to look specifically at median pay, starting salaries and pay growth for similar jobs over a period of time. If it is found that some groups are earning less than others, this is an immediate red flag that requires further investigation.

Start by looking back

The first question to answer is this: How did pay inequity come to exist in the first place? Start by looking carefully at job descriptions and the responsibilities described. Ask if the description truly reflects the skill level, effort and responsibility of the work. If not, then the pay levels need to be adjusted. Taking a closer look at recruitment and hiring practices may offer some insight.

Once the pay inequity is revealed, it is time to take immediate corrective actions to eliminate it. You may need to adjust pay rates and create and implement new compensation policies throughout the company.

Once the internal audit is completed, it is key that the company monitor the new pay equity policy to make sure it is tracking as expected. Other things to examine are the performance review and salary negotiations. While some employees may be worse than others at advocating for themselves, that should not mean that they are not fairly compensated for their work. All employees need to be evaluated objectively. If any pay discrepancies are discovered, they must be addressed immediately and eliminated.

Clearly, instituting pay equity in an established corporate compensation structure requires a commitment on the part of the organization to comply with federal and local laws. Pay equity is a key factor in building employee morale, loyalty and retention. The bottom line is that pay equity is not only the law but also the right thing for all stakeholders.

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