Equal Pay and Non-Discrimination Laws

Compensation has never been more complex to get right. Professionals in the space must create compensation that is:

• Externally competitive

• Satisfying the workforce

• Compliant with the latest regulations and laws

• Increasingly transparent (depending on geography)

There is also a societal shift in expectations around equal pay. Organizations must not only take responsibility for non-discriminatory compensation. They must also be able to prove it.

Why Does Internal Equity Matter?

Moving towards true equality of pay is crucial to organizational longevity. Here are the reasons why:

Improved employee satisfaction. When employees are certain that their pay is fair, their morale improves greatly. This has extremely beneficial knock-on effects across an organization. For example, better workforce cohesion, increased productivity, and better organizational reputation.

It is the law. It is illegal to discriminate by race, skin color, and sex. To do so is to invite legal action, high expenses, and organizational damage.

Improved competitiveness. One of the most significant benefits to pay equity is that it keeps the workforce externally competitive. In other words: employees have salaries in line with market rates. This means no unnecessary expenses that come with overpaying. It also means no internal inequity, which often goes in tandem with underpaying employees.

Fairness. Fairness of pay is a goal for most organizations. Actively pursuing a policy of pay equity takes you closer to your goal.

Attracting the best talent. An organization that has built up a reputation for paying its employees fairly is going to attract the best talent. This means a higher quality workforce, and motivated, enthusiastic employees. Retaining the best employees becomes significantly easier.

Moving Towards Internal Equity

In short, pay equity means employees in a company get paid similar salaries for comparable work. Achieving this across an organization can be a difficult, slow process. However, these steps will guide your organization in the right direction.

1. Review existing policies. Compensation and transparency are developing faster than ever before. Taking stock of where your organization already is will clarify where it needs to get to.

2. Gather all the necessary employee data. For example, salary, benefits, level of experience, and career paths.

3. Analyze. This is crucial. It is often one of the most painful parts of the process. However, clearly outlining the inequalities in your company is critical to long-term equity. You will be able to draw direct comparisons across roles in your company. These comparisons will lead to discrepancies and imbalances in pay.

4. From the data and analyses, create rankings for jobs. They will inform you of the exact amount to pay for each job to remain fair and competitive. This will also streamline the process of deciding compensation for new employees.

   There may be fair reasons behind differences in pay. For example, years of experience, or earlier performance. However, avoid differences in pay based on gender, race, or other personal aspects not related to work. These are the internal inequities.

5. After finding these inequities, make the necessary changes to salary and transparency. Adjusting the salary will solve the short-term inequity. Adjusting policy and adopting increased transparency will improve long-term equity.

6. The last part of the process is to have regular evaluations. These evaluations will help find deeper trends. If the pay is changing, why? Is it changing compared to other members of the workforce, or the same amount? These check-ins will enable continual improvement of pay equity for the organization.

What the legislation says

Over the past few years, the USA has seen a steady movement towards increased transparency and by extension, more pay equity. This is not a trend we expect to see stop, or even slow soon.

Some of these laws are nationwide, like the Equal Pay Act of 1963. While important, this is a broader law that exists to give basic protections to all individuals. In this case, it protects employees against discrimination by demographic.

One of the other significant pieces of legislature is the Lilly Ledbetter Fair Pay Act of 2009. This exists to support employees that have received unfair pay.

However, there are more localized laws around equal pay that vary depending on the state and in cases, the city. These laws cover equity and transparency in more specific detail for the region. Here are examples of the types of laws enacted:

• Obligations on organizations to post pay ranges for job candidates.

• Bans on companies asking for salary history.

• Bans on organizations for punishing employees for talking about salaries.

Each specific law exists to further the overall goal of pay equity. It is critical to keep your organization well ahead of the latest laws. This will avoid difficult, last-minute implementation.

To do this, conduct an internal pay audit.

Additionally, consider how to word your organization's job descriptions. Examine them for bias and be cautious of language that could exclude or alienate potential employees.

Lastly, be vocal about policies around fair pay in your company. Share updates on your organization’s intentions and policies. This not only fosters internal goodwill but is a positive influence on other organizations and improves organizational image.

The tools for achieving fair pay

Here are the most effective tools and methods for pay equity:

• Benchmarking: This tried-and-tested method keeps organizations aligned with market rates. This helps avoid any specific organizational biases.

• Data collection tools: Data is the foundation of pay equity. A tool that can get you the data you need in the format that suits your processes is critical.

• Data evaluation tools: Once gathered, these tools can audit the data and find the inequities.

• Job analysis procedures: Evaluate each role in the fairest way possible. This part of the process is relative and will vary across organizations.

• Visualization tools: These are effective for reporting to the management and employees. They help show and communicate the reasoning behind specific pay decisions.

• Education: It is important to get the key members of your organization on board. For example, managers need to understand the importance of pay equity. They also need to know how to support it. HR teams need to know how best to use their specialized tools.