SALARY EQUITY . The perception among employees that salary or pay is equitable or fair. There are three types of equity: external, internal, and individual. From an employee's viewpoint, external equity is achieved when salary is perceived as equal to the market rate for similar positions in like organizations or governments. Internal equity is achieved when the worth of the position held by an employee is fair compared to the worth of other positions within the organization/government. Individual equity is achieved when levels of performance are rewarded fairly compared to the levels of performance of other employees. Although it is possible to conceptually separate these three types, in practice maintaining equity for one is likely to impact equity concerns for the other two.
If salary is viewed as inequitable, there are several possible causes. If external equity is not present, it may be that the government has adopted a policy that supports wages deliberately set below the market rate; or, alternatively, no market rate policy may exist. In addition, if salaries outside the government have not been surveyed recently, information concerning the market rate may be out of date. Even if up-to-date information has been collected, if pay structures and relevant pay policies for the surveyed organizations are different from those of the surveying government, it may be difficult to interpret the collected data so that the appropriate market rate may be clearly identified.
Even if organizations do identify an accurate market rate, a raise policy that would offer market adjustment raises to existing employees is rarely found. Salary surveys may result in pay range adjustments that favor higher salaries for new hires.
Traditionally, internal equity may become a concern if there is evidence of grade creep. This phenomenon is found when positions are reclassified to a higher pay range without sufficient changes in the nature of the duties and knowledge, skills, and abilities (KSAs) to warrant such an action. When it happens for one position, gradually other employees who hold similar positions elsewhere in the government pressure their supervisors to approve similar upgrades.
Raise policy can contribute to internal inequity. It is often easier politically to approve cost of living allowances (COLAs) rather than provide raises that move the salary of an incumbent further up a pay range. Realizing that pay raises provided to existing employees often do not keep up with increases in market rate, governments tend to also provide the same percentage increases to pay range minimums and maximums as is given to COLAs. The relative position of incumbents' salaries on the pay range does not change.
The greatest potential threat to internal equity is a job evaluation system that is either biased or misused. In measuring a job factor such as job knowledge, if more weight is given to knowledge obtained from work experience rather than formal education, for example, then there may be a built-in bias to the worth allotted to a position. This issue is often raised by those claiming a gender bias in pay equity, since for many supervisory or management positions, males often have more experience and less formal education than women.
Similarly, the weight or importance of each factor is often determined by analyzing the existing wage structure for the government or organization. To the extent that there are biases or inaccuracies in the existing structure, then, the application of a given job evaluation system based upon these is likely to result in inequities.
Furthermore, even using a "bias-free" job evaluation system may still lead to inequity if it is misused. When using a point rating job evaluation system, governments may use inconsistent point spreads in allocating points to each pay range. Additionally, if the points awarded to various factors for each position are not reviewed within each job series (e.g., all secretarial positions) or department as well as for each pay range, the assigned pay range for positions at higher levels in an organization may be incorrect.
Individual equity concerns arise for two primary reasons. First, the manner in which performance is measured may be of low validity. The typical graphic rating performance evaluation system used in government, one which is applied uniformly to all positions, suffers from an overemphasis on personality traits. Also, such systems do not provide sufficient distinction between performance levels for many positions. Typically, employees are rated on a five-point scale from unsatisfactory to excellent, with over 90 percent receiving a satisfactory, above satisfactory, or excellent rating.
Second, there is often an inadequate relationship between levels of performance and the amount of reward received. In many cases, if the raises provided are only in terms of COLAs, there may be no relationship between pay raises and performance levels. Alternatively, if an employee receiving an excellent performance rating is given a raise that is only 0.5 percent higher than an employee who obtains a satisfactory performance rating, for example, individual inequity is likely to be perceived. Furthermore, if the total non-COLA raise package is small, then the total dollar difference allocated to each performance level may further aggravate individual equity problems.