What is Internal Equity, and Why Do You Need it?

The missing element in most FQHC compensation programs is the most important one — the system that ensures that equity exists in the compensation opportunities offered to people in the various jobs in the organization.  Its great to be competitive, but employees are in contact with other employees far more than they are with the labor market.  The reality is that people usually only find out their market value when they are upset with their current job and looking around.  Job evaluation is a tool to reduce the likelihood employees will ever need to look.

One of the reasons employees look around is a feeling that they are not being paid fairly compared to others within the organization — the obvious comparison is with employees in the same job, but for many, it’s a comparison to those who they feel are providing comparable value.  Whether it is a comparison of jobs held by two entry level professionals with completely different degrees, or three managers, or even the difference between a medical assistant and a dental assistant, everyone has a feeling about where their job is in the internal hierarchy of value, and if the compensation program doesn’t reflect that, there is a feeling that the system isn’t “fair.”

Another fairness issue related to equity is when differences in the nature of the job within the organization compared to the typical job out in the market.  Sometimes organizations will recognize that they need to pay more than “what the survey says,” but how much?  The occasional expert will tell you “15%” because, well, years ago someone said “add 15%.” Even worse, what about the job that doesn’t even exist in the labor market?

The answer is an internal equity process, frequently called “job evaluation.”  An effective job evaluation process measures key characteristics of jobs, using objective standards.  For example, every job requires some level of knowledge and skill.  Craft a series of definitions of various levels of knowledge, and determine what level each job requires.  Determine the amount of leadership exercised by each job, the nature of the working conditions, and other factors that have value to your organization.

There is no one simple job evaluation plan that will work for everyone.  The characteristics measured, the level definitions, and even the weight assigned to each factor should be based on the nature and philosophy of the organization.  Merces’ most common FQHC job evaluation plans measure:

  • Knowledge skill and ability required to perform job duties
  • The amount of problem solving used on the job
  • The type, complexity and nature of the leadership exercised by employees
  • Communications and contacts
  • Impact of work performance on the organization
  • Work environment and conditions

Each of these characteristics is important to the valuation of a job, and are very typical for plans of this type.  With points assigned to each level definition, it is possible to create a total score for each job, and have jobs with a similar value assigned to the same pay grade. Measuring job value without reference to the market also provides another benefit — a system that ensures equity free of bias due to gender, race or other types of discrimination.

While developing a job evaluation plan may seem daunting, with the assistance of a qualified professional it can be a relatively painless process.  Administration of most job evaluation plans can be done internally, and managed effectively by a human resources professional.

About Edmund B. Ura

Edmund B. Ura, MAIR, JD, works with governing boards, executives and human resources staff to develop methodologies for ensuring fair and equitable compensation programs that support achievement of organizations' missions. Contact Ed at ebura@mercesconsulting.com.
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