Pay equity cost this company $15 million. It was worth it.

Credit Karma’s chief people officer on how to achieve pay equity.

Illustration of payroll

Pay equity is a problem in nearly every industry, including tech.

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This week marked 2020’s Equal Pay Day in the United States. What that means is that women in this country have to work until March 15 to make what men earned in the previous year. Historically, that date is even later in the year for Black and Latina women, who face an even greater gender pay gap.

Pay equity is a problem in nearly every industry, including tech. But there are things that HR leaders can do to get closer to parity. Chief among them is systematizing pay practices to root out areas where bias can occur, from hiring to promotions.

Protocol spoke with Credit Karma’s Chief People Officer Colleen McCreary about the company’s pay equity program, role-based compensation and the $15 million it spent three years ago to overhaul its compensation system, resulting in raises for 98% of Credit Karma employees.

We also chatted about inflation and what that means for worker wages in light of a new Credit Karma study released this week. The main finding? Perhaps unsurprisingly, two-thirds of American workers feel that their pay is not adequate to cover the rising cost of inflation.

This interview has been edited for brevity and clarity.

March 15 was National Equal Pay Day. When would Equal Pay Day be for Credit Karma’s female employees?

Since we have a very strict pay equity program, everybody in the same role makes exactly the same amount of money. Historically, certain functions tend to be primarily female, and they tend to pay lower. What we've done is we looked at the market for the skills and role that people have to have. So a director of Public Relations is going to be making something fairly similar to a director of Engineering because the management capacities are the same.

So you're saying that even unadjusted for role and experience, there is no gender pay gap at Credit Karma?

Correct. And every time we talk to another company, they're like, “You do what?”

So when you're talking about paying the heads of Public Relations and Engineering similarly, are you correcting for the effect of occupational sorting and women gravitating toward certain lower-paying jobs?

Right. There's usually this backlog in history of jobs that were traditionally female-based being paid lower. What you find in tech, actually, is that most companies are sophisticated enough at this point to recognize and appreciate what those positions are worth. I don't think you would say that broadly. I think if you had factory workers, for example, there's probably still a broad differential between those roles and how they're leveled and paid.

In marketing, HR, and sales to some extent — depending on if it's technical sales or non-technical sales — the competition for talent compensation is a supply and demand issue. And so the competition in tech for these roles is so high that it becomes an equalizer.

We talk a lot about the gender pay gap, but what about race? Have you looked at if there’s a racial pay gap within Credit Karma?

We actually take a pretty data-driven approach to everything. When we look at role-based pay, for example, we have around 1,500 employees, and we have people sorted into 300 different roles at this company. So we're not seeing a pay gap there either. I think the reason for that is we have a nice distribution of people across functions. It’s also about making sure that people are getting leveled appropriately, that they're hired into the right jobs and then that they're getting promoted at the same rates.

What are the main pillars of this pay equity program?

Many pay equity issues come from the fact that managers are generally making decisions around hiring, promotions and potentially bonuses. That’s not to say that managers are intentionally doing anything wrong. It's unconscious biases that you bring with you. And they start when employees are hired. Pay ranges are one of the things that contribute to that, where people are slotting somebody in, oftentimes, without any really good judgment, in my opinion, or definition of saying, “Why is this person being paid at the high end of the range versus why this person is being paid at the low end of the range?”

It also starts with the leveling, so we built out really clear job levels for each role. We also got rid of performance reviews and ratings. What we do is each role pays whatever it pays, and we do a market review for every single job twice a year. Every February, every August, we do a market review, and we tell the whole company. And if your pay has moved, your pay moves. If it hasn't moved, we have not ever needed to take anybody down. We just don't do that. We think that you should be making whatever is competitive in the market.

The other thing that we did is, for most jobs — except for the most senior jobs that have at-risk pay tied to the company's performance — we actually rolled the bonuses into base salary for people. So there's no more discretionary bonus that's given to folks. We also moved promotions to be quarterly. So we actually do a full promotion calibration four times a year, which means that if somebody is ready to be promoted, they're not waiting a year. And that means we also don't do any of these last-minute saves. We don't say, “Hey, someone's threatening to quit, so I'm just going to promote you.” Doing that goes against every form of pay equity philosophy that we have.

Why get rid of performance reviews and ratings?

That's something I had actually done at multiple companies. And the reason I had done that is that I personally never saw that they did anything but disincentive people. They were not necessarily reflective of an entire body of work, rather only the last couple of months of somebody's career. What I found is that the people who were top performers were usually annoyed by whatever was happening, and the people who were at the bottom never really got an honest answer from their manager as to why.

We’ve moved to weekly, real-time feedback systems. They're usually more honest, because it's like a micro feedback moment versus this huge dumping on someone.

And the other thing that you mentioned was market reviews twice a year. How does that work?

We're very clear with our employees that we use [compensation benchmarking database] Radford as our compensation tool for them. It's all posted internally twice a year. We think education for employees is important. I think the easiest thing for companies to do is just to get transparent about where these numbers come from. It helps us stay competitive, especially in fast-moving markets like the Bay Area, New York, Seattle.

The other thing that we did around market pay is that we decided that we were going to make sure that every role at Credit Karma made at least the living wage for a family of four in each of our geographies. That really only affects people at the lowest-paying roles, but it was important to us.

Tell me about how much this program cost. It must have been an investment.

It cost us $15 million. We were about 700 people then, so it was a huge investment. As for getting our board over the line as well as the entire management team, the hardest thing wasn't even so much the $15 million, it was the mindset around meritocracy, or the idea that, “Well, I should be able to distinguish between my two employees based on pay.”

Everyone loved that 98% of our employees got a raise in their base salary. For some of those people, it might have been like $100. For other people, it was substantially more, especially for those people who were in some of the legacy functions that weren't necessarily always valued, like marketing, communications, HR, finance, as well as many member support functions. Some of those roles saw lifestyle changes for those folks.

Credit Karma has two offices in California. And there was a bill recently introduced that would require employees in California to disclose salary ranges in their job postings, which is already required in many other states. Advocates view it as a step toward pay equity. What do you think?

I think people are throwing ideas at the wall and hoping that they solve for these pay equity problems. And the reality is, that's not going to change. I mean, you can post a range and where somebody lands in the range isn't necessarily going to change how people pay. This is why I really liked role-based pay: You're in this job, and everybody else who's in this job in Los Angeles is going to make the exact same amount of money, end of story.

We don't [post the exact salary in our job postings] and there are a couple of reasons. One is, in many cases, there are multiple levels for each job. And when people are applying, they don't know what sort of role that they should be coming into: “Do I come in as a senior software engineer or a principal software engineer or a software engineer?” I think it's just from a competitive standpoint. I don't have people coming to Credit Karma because they're going to make the most money if they come here. I’m just honest about that. Even in the Bay Area, I'll just say I think you're going to make more money maybe at Facebook, Google or Amazon. I'm not afraid to say it. I think that those people have a reason that they pay very aggressively. That's not why you should come to work at Credit Karma. And for the most part, for the people who come work here, that's not the only thing that they care about. But I'm also not going to lay it on a table for Facebook to be like, “Oh, well, they pay this.”

For companies like Credit Karma, that know that they can't compete with the Metas of the world on pay, what's the selling point?

People join because they're excited about our mission. We are a free product that helps people make financial progress. At the end of the day, the people who want to come here stay here because they are proud of the work that we do and the people that we serve.

I always say that there are three things that matter to employees, and you get a trade-off of those three, especially in technology. No. 1 is ownership, No. 2 is compensation and No. 3 is, “Are you proud of where you work?” I think at best, if you can get two out of three, you're usually feeling pretty good.

Credit Karma just conducted a survey which found that American workers are really concerned about how their pay is lining up with inflation, which is, as you know, around record highs. Have you raised pay across the board at Credit Karma to account for inflation?

So inflation and compensation are actually not connected. I think that’s the fallacy. It's hard for people because they're obviously paying out more dollars than they'd like to on their basic needs, but pay is all about supply and demand: that is, the supply and demand of workers. And that's why you're seeing such big increases for hourly workers who sadly have had to drop out due to COVID child care concerns, certainly safety concerns, all these kinds of things. That is why you're seeing hourly pay go up so much versus these more professional, white-collar jobs. The other side of it is that, when inflation is low, you haven't seen people take pay away. So I don't think you want to be in this zone where it just optimizes for one side of the equation.

Do you have any advice for other chief people officers on how best to root out bias in their pay practices?

I think No. 1 is just being honest and transparent with your employees about how they are paid. I think the light of day will often bring out some of the challenges or things about the systems that might not necessarily be working. A lot of HR people are just living in the fact that they understand and know the data, when the reality is the rest of their workers don't understand. It really helps when you have to explain any kind of concept to the broader audience. You start by explaining to employees how they're paid.

$15 million is a lot for a lot of companies. So if it's not something that they can take on, they can take on small steps by at least looking at: Do we do some of these things that lead to pay inequity? Do we make deals with employees to try [to] get them to stay? Do we do a full calibration when we're looking at promotions? There are actually some pretty easy things that are not that expensive that you could do that at least start to bring an opportunity to make some changes to the forefront.

So do you show employees what the pay would be for the level above them?

We don't do any of that. And I feel very strongly that pay transparency isn't about showing people what other people make. Now, if people want to do that, I strongly encourage it. I always tell people, “Hey, by law, you can talk about what you're paid.” But whether or not people want other people to know what they're paid is very private. And it's very different from employee to employee. And I'd rather them make that decision than me doing that. I always say: You can't unsee pay data. I'm not going to put somebody in that awkward position, personally.


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