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Three Ways Women Can Negotiate And Close The Bonus Gap

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When we think about closing the gender pay gap, are we paying close enough attention to our total compensation? This is the question raised by a new report titled Rethinking Gender Pay Inequity in a More Transparent World, published recently by the ADP Research Institute. The report analyzes data from a six-year cohort, tracking 11,000 employees between 2010 and 2016. The analysis looked at fluctuations in base and incentive pay during that period of time. One key finding was that incentive pay - like annual bonuses - play a significant role in determining who does or does not close the pay gap between genders. In at least in one industry, that incentive pay actually helps women nearly close the gender pay gap entirely.

The study suggests that "lower negotiated incentive pay at time of hire may become a limiting factor that prevents career advancement years down the road." Researchers examined six industries, including finance and real estate, professional and business services, information, manufacturing, trade, transportation and utility, and education and health.

ADP Research Institute

Not all industries have the same incentive pay, and that variance proves to be helpful for women in technology. Analysis from the report showed that women working in the information sector were able to secure 107% of the bonus to base ratio when compared to men coworkers, which lessened their overall gap in total earnings. The information sector is characterized as employees who work for companies specializing in software, digital services or the media. Ahu Yildirmaz, who is co-director of the ADP Research Institute, thinks that women achieving better bonuses in this sector might be linked to the huge demand for talent in digitally-based jobs. "We're not saying that women do better in the information sector, but the research does show that women do better when it comes to incentive pay versus their male counterparts, when compared to other sectors." The demand for talent in information and technology sectors, possibly coupled with the heightened increase in salary awareness and increased transparency might be driving this change. Women working in education and healthcare also were able to secure 97% in their bonus to base pay ratio when compared to men, though they still only make 84% of the salary of their male counterparts. Yildirmaz believes this is due to a more fixed compensation structure in education and healthcare, where salaries and incentive pay tends to be more established and rigidly set.

In stark contrast, women in the Finance and Real Estate industry are earning 21% less in their bonus to base ratio compared to men. In fact, finance and real estate as an industry had the largest pay gap for women, with and without incentive pay. Yildirmaz thinks this is probably linked to the wide variety of jobs and skills sets that this sector includes. "Women tend to be retail bank tellers, where men are investment or mergers and acquisitions bankers. It is all about the proportion of women and what kind of jobs they're in." Yildirmaz mentioned that it's the concentration of women at these lower paying jobs - jobs that generally do not include incentive pay - that might be perpetuating the pay gap. Yildirmaz said that this is true across industry, but according to her research, the finance sector tends to have the steepest divide.

One encouraging finding is that women in the 40-to-50 year range had virtually no pay gap when compared to men in their cohort. In fact, women in this age group were able to close any gaps that might have been present at the start of the study. Yet, they still had lower incentive pay. This is particularly true in the $40,000 to $60,000 income range, where on average, women would receive a bonus of 8.5% versus the 11.4% average for men. When looking at the cohort in the $100,000 to $150,000 group, women were nearly at parity with men, though still starting with slightly lower pay. Even still, women in this income group were making 98% of what their men counterparts were making in total earnings.
So how does this research inform how women might move forward and beat the odds? Being savvy about how, when and what to negotiate is the first step. I talked to three negotiation and career experts to see what strategies they suggest that can help close the bonus gap for good.

1. Get smart on equity compensation.

Understanding the longer-term benefits of a bonus package are essential to closing the bonus and wealth gap, and some of those benefits are detailed and complicated. But that shouldn't put you off from understanding the specifics. Executive coach Suzanne O’Brien urges women to get smart on their equity compensation as a way to maximize their bonus possibilities. "Annual grants, vesting schedules and potential upside are all important details to know and understand," she suggests. She also stressed the importance of getting rid of any hesitancy women might have about asking for more information on equity compensation. "I want to be abundantly clear about this," O'Brien said, "it is acceptable and shows your savvy and interest in the company's future to ask for some time to sit down with someone and walk through the company valuation and your equity grant." O'Brien mentioned that by doing so, you don't risk being uninformed. It signals that you have a deep interest in the future success of your company or organization. If you're nervous about it, O'Brien suggests reaching out to a knowledgeable friend first. This can help you get a better sense of what questions to ask and rehearse the conversation before it happens.

2. Start bonus conversations early and know your audience.

Negotiation coach Jaime Lee points out that salary and incentive pay are rarely coming from the same part of your organization's budget. This information is important to keep in mind because "there is more flexibility, seasonality, and taxes for bonuses than salaries.” She also suggests paying close attention to the the audience you are trying to influence in a negotiation. “It’s important to understand the key decision makers, their key values, and the key factors that will influence bonus amounts,” she said, “so that you can influence the decision before it’s made for you.” Anticipating the discussion and starting those discussion well in advance of and annual review or decision-making can greatly increase your success in securing a better bonus.

3. Use open-ended questions to gain information for current and future negotiations.

Fotini Iconomopoulos suggests a similar approach or starting early. Iconomopoulos is a negotiation expert and lecturer at Schulich School of Business at York University. She urges being as proactive as possible in determining the parameters and requirements attached to getting a better bonus. She also mentioned the importance of knowing your audience, particularly your manager or the key decision-maker's rubric for success. “Use their expectations and measures to justify your reward,” she suggests. “That doesn't leave them any wiggle room to vaguely claim you didn't earn it.” Iconomopoulos also suggests using open-ended questions to get more information from your decision-maker, like follow-up questions that help you get a clearer understanding of the organization’s objectives. This approach can be effective if you sense resistance.  "What circumstances are required?” Iconomopoulos suggest, “What is the team average? How often do others get paid out? What hurdles are they meeting? How does that differ from my performance?" Iconomopoulos also urges that by helping your decision maker get more specific, you will have information that can increase your negotiation outcomes and set you up for greater success in future negotiations as well.

 

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