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What Is Internal Equity?

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Choosing how much you will pay an employee is tricky. We explain how small business owners can create a pay system that maintains employee loyalty and happiness.

Original blog post: https://www.patriotsoftware.com/payroll/training/blog/what-is-internal-equity/

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Published in: Recruiting & HR
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What Is Internal Equity?

  1. 1. Internal Equity? What Is
  2. 2. Choosing how much to pay your employees can be tricky. You want to be fair to your employees, and you want them to feel valued.
  3. 3. By using internal equity, you can create a pay system that maintains employee loyalty and happiness.
  4. 4. DEFINITION: Internal equity is the comparison of employee positions in your business to ensure fair pay.
  5. 5. Employees should also perceive that they're paid fairly compared to their coworkers. Otherwise, they might feel unvalued and leave.
  6. 6. When you adopt a straightforward and honest payment system, your employees will believe that they are being paid fairly. This boosts company morale and employee loyalty.
  7. 7. So, how can you achieve internal equity?
  8. 8. 1. Consider the tasks of your employees. If two employees perform similar tasks, they should earn similar wages.
  9. 9. 2. Don't base employee wages solely on job titles. Two workers that have different titles but perform similar tasks should have similar wages.
  10. 10. 3. Consider educational backgrounds and relevant experience. Similar tasks are the main consideration when you set employee wages, but an employee's education and work experience should be accounted for.
  11. 11. 4. Document all the factors that led you to your decision. This will maintain transparency and fairness in your business. If an employee ever questions their wages, you'll be ready to answer.
  12. 12. There are 2 major laws regulating internal equity: The Equal Pay Act The California Fair Pay Act 1. 2.
  13. 13. Equal Pay Act This act states that men and women who have equal jobs must be equally compensated, and that you can't use a person's sex to justify higher wages.
  14. 14. California Fair Pay Act This Act is more strict than the Equal Pay Act. California employers must pay equal wages to employees performing similar work. The Act also allows employees to openly discuss their wages.
  15. 15. Thanks for reading!
  16. 16. Free payroll training, right in your inbox. Learn how to run payroll like a pro with training, tips and news from our blog, updated weekly. SUBSCRIBE NOW

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