Pay equity is a top compensation trend—and for good reason. Pay disparities can add up to significant lost wages over a worker’s lifetime, impacting their ability to provide for their families, meet financial goals, or escape poverty. Inequity can lead to decreased employee engagement and retention, impacting your company’s top and bottom lines. And it’s just plain wrong for someone to be paid differently for no reason other than their demographic attributes.
Sales teams provide an interesting study on the state of pay equity, as it’s common for more than one person to occupy a given role and performance data is highly objective. Theoretically, a team’s salary distribution could align with their performance ranking.
The most commonly used measures of sales team success are progress to revenue goals, achieving sales quotas, new leads, and deals closed. These are all highly objective key performance indicators (KPIs) that could be tied to compensation and help ensure pay equity on sales teams.
But data analyses from Xactly have found that’s not the case. In an August 2021 World at Work conference session, Erik Charles, VP and Company Evangelist at Xactly, shared some disappointing data on the state of pay equity in sales departments.
Xactly’s first pay equity report in 2014 found that women in sales roles earned 17 percent less than men in sales roles, despite performing three percentage points higher. This included differences in both salaries and commissions, with the analysis finding that men earned a 4.8 percent commission rate, while women earned only 4.1 percent.
They updated the study in 2019, and found that women in direct sales roles earned 22 percent less than their male counterparts. The pay gap widened further in sales leadership roles, where women earned 25 percent less than men.
More recently, Xactly found there was a significant swing during the pandemic. The wage gap still exists, but it’s much smaller. The reasons why are unclear, but it’s exciting to see some progress nonetheless.
Another key trend taking place is high turnover in sales roles. While high attrition is common in this field, 58 percent of organizations report sales turnover has increased in the past year. In fact, voluntary sales departures were highest among technology and software companies at 67 percent. While competition for strong salespeople has always been high, the increase in remote work has opened up many more opportunities for salespeople everywhere.
Hiring is booming again and increased competition for sales talent is causing compensation packages to shift in response. Pay for lower-level sales staff fell at the beginning of the pandemic, but it’s made a comeback (and then some). This will likely lead to additional turnover, as salespeople begin seeing and hearing about higher compensation packages.
Across all functions, 65 percent of workers are looking for a new job in order to get better wages and salaries, benefits, career advancement, and flexibility. If you want to get ahead of sustained high turnover, these are good areas to focus on. The 2019 Xactly study found that the average representation of female sales managers is 26 percent across industries. Promoting more women in leadership roles can provide them with higher wages and career advancement—without needing to leave your organization in order to get it.
While high turnover should be avoided as much as possible, it does present a unique opportunity to reset compensation and work toward pay equity. If those who are overcompensated for their performance levels leave, you can backfill their spot with a new team member paid at the appropriate target. In the process, you may also free up budget for pay equity adjustments for those who are underpaid for their performance.
Pay inequities often begin at the point of hire and are perpetuated throughout the employee lifecycle. Build competitive compensation targets and keep pay equity in mind during recruiting and hiring, territory and quota assignment, performance and review, and promotions and rewards.
Bump up existing team members who fall below your current compensation targets, and red-circle team members whose compensation is above your targets. Build diverse talent pipelines for all job levels, and include internal candidates. Offer promotions when they’re due, and track time to promotion by gender to reduce the opportunity gap. Tie base and variable pay to performance data to ensure more equitable pay distribution. And use your compensation management system to run a continual pay equity analysis and keep pay equity on track.
The road to pay equity is complex, but worth the journey. We’ve been making progress and it’s crucial to keep building momentum so we can ensure fair pay and equal opportunity. High turnover isn’t ideal, but it can provide an opportunity to reach pay equity in your sales team—and across the rest of your organization. Consider this a silver lining and don’t miss this opportunity if it presents itself.