Equity in Compensation: The Art of a No-Negotiation Policy

A No-Negotiation Policy?

Edgility works with clients around the country to make their compensation programs equitable and help eradicate the wage gap in our sector. For the most part, organizations are excited to implement our recommendations. Use market data to build salary ranges? Sure. Conduct an internal equity analysis? Absolutely. Make market adjustments to correct pay rates? Of course!

But when we recommend implementing a no-negotiations policy – many organizations balk.

We know there is a pay gap, and we know that this gap only widens as women and staff of color progress in their careers. Study after study has revealed as much. An example of this would be a recent study of the gender pay gap conducted by Payscale which reveals that women make $0.81 for every dollar a man makes in entry-level positions and $0.69 cents for every dollar at the executive level.

When race is factored in, Payscale found that Black and Hispanic women make $0.75 for every dollar a white male makes. This gap also widens over time as people progress in their careers. Undoubtedly, many factors play into this wage gap.

At Edgility, we believe that negotiations are a factor that is not frequently talked about.

We believe that a no-negotiation policy is one of the five strategies you should use to build and maintain equity in compensation. No-negotiation policies dictate that employers identify an objective market rate for all salaries, make a fair and compelling offer, and then stick with it.

How does having a no negotiation policy affect the wage gap?

First of all, we know that people from marginalized and disenfranchised communities are least likely to negotiate in the first place. And if they do, we know those salary negotiations tend to reward people from dominant demographic groups and disproportionately disadvantage women and people of color. Negotiating, therefore, only exacerbates the wage gap over time. Think about it. When you negotiate, you do the following: You low ball in order to leave room for negotiating. Who is most likely to accept that low offer? Individuals from marginalized communities who are already paid below their white, male peers. Our stance on negotiating is therefore quite simple: don’t do it.

How do we implement a no-negotiation policy with equity in mind?

It is important to use a market-based pay structure so that you know the offer that you are going forward with is competitive. If you aren’t competitive, you may lose new hires despite your equitable pay policies. This means benchmarking your roles to determine their fair market rate, deciding how competitively you want to pay, and then building salary ranges around that rate. Having done this research will give you the confidence that you are offering a competitive wage, and allow you to not succumb to pressure to negotiate. It will also ensure that you do not lose candidates by being under market.

But what if the incoming employee expects to negotiate?

Unfortunately, negotiations are a somewhat ubiquitous practice and many people expect to negotiate. Thus you will need to explain your organization’s stance. When you make the offer explain that you don’t lowball and that you always go forward with your best offer and don’t negotiate. Most new staff will admire this stance, and it will signal fairness and build trust. In addition, most people actually don’t like to negotiate and will be relieved when you take it off the table.

Will I lose new hires?

No. If anything you will weed out staff who may not be committed to your organizational values of equity, transparency, and fairness. By signaling early in the hiring process a strong commitment to fairness, you will attract like-minded individuals and build trust from the start.

One last note….
Many of you may base salary offers on someone’s most recent salary. This too is widening the pay gap. If you think about it logically, basing offers off of past compensation only preserves the person’s position in the market. If someone is being paid unfairly, why would you want to continue that? By starting staff with the same job and work experience at the same market-based salary, your employees will be on a level playing field right out of the gate. This leads to a workplace where staff feel respected and appreciated and in turn, it builds the credibility of your organization.

For more information on building a market-based compensation structure, no-negotiation policies, and other strategies for maintaining equity in compensation, please view our webinar on this topic or contact Jennifer Svendsen at jsvendsen@edgilityconsulting.com

Related: Equity in Compensation Demystified