Pay Disparity vs. Pay Gap: A Comprehensive Comparison

With the global focus on fair pay, you have come across the term "pay gap." However, you may not be familiar with the closely related term "pay disparity."  While they may seem similar at first, if we take a closer look, we can see they are different.

In this post, we will explore the distinctions between pay gaps and pay disparities, so you can discuss fair pay more clearly.

What Is a Pay Gap?

To simplify, a pay gap occurs when one demographic earns more than another. Within this scenario, there exists a reference group —the one with the highest earnings —and another group with comparatively lower earnings. The pay gap represents the unexplained difference in earnings between an individual in the reference group and another in the alternate group.

Typically, discussions about pay gaps center on the disparity in earnings between men and women, commonly referred to as the gender wage gap. Recently, a common statement has been, "For every dollar a man makes, a woman makes only about 82 cents."

However, it is crucial to grasp that the pay gap does not necessarily indicate an issue with pay equity. This is because these gaps fail to account for legitimate reasons why employers differentiate in compensation. Therefore, when utilizing wage gaps to assess pay equity, it serves more as a guide directing where to investigate rather than providing a complete narrative.

What Is Pay Disparity?

Pay disparity occurs when there is an unjustified difference in paying employees holding similar positions within the same organization.  It is a more detailed version of the pay gap because they consider valid business reasons for paying employees differently.

Factors like how long someone has worked, their education, and their experience are some of the good, legal reasons why employers may pay people differently. When accounting for these reasons, what is left—the difference in pay between two people or groups—is what we call the pay disparity.

In simpler terms, pay disparity is a part of the pay gap that can potentially cause legal problems for an employer. It represents the pay difference between groups of employees that cannot be explained by good business reasons.

Pay Gap vs. Pay Disparity

To make the difference between the pay gap and pay disparity clearer, let us look at an example.

Imagine a company called X Corporation deciding to check if they are paying their employees fairly. They find out there is a pay gap of $1.5 million between men and women in their tech department. At first, they felt bad for treating people unfairly.

But then, a pay equity expert explained that the $1.5 million pay gap did not necessarily mean that X Corporation was paying men and women differently just because of their gender. The expert asked questions about how X Corporation decided how much to pay people. X Corporation strictly considered factors like education and experience when setting salaries.

After considering the impact of education and experience on pay, they found a pay disparity of $200,000. It was still a problem, but it was smaller than the initial number.

The key here is that understanding the difference between a pay gap and a pay disparity is important when working on making pay fair. They may seem similar, but they are not.   These differences are important examples, especially when trying to fix pay equity issues.

The Importance of Pay Gap and Pay Disparity

When conducting a pay equity audit, it is essential to focus on the pay gap and pay disparity. This audit must assess each employee's earnings, giving special consideration to factors such as gender, race, ethnicity, age, and disability. This is the best way to understand the situation with pay in your organization.

Addressing Pay Disparity and Pay Gap

• Transparent Pay Scales and Regular Audits. Make sure everyone knows how pay is determined and check regularly to ensure fairness.
• Bias Elimination Training. Train your hiring and decision-makers to be fair and unbiased when it comes to paying.
• Promote Occupational Diversity. Encourage people from all backgrounds to work in different job fields.
• Equal Education and Training Opportunities. Make sure everyone has an equal chance to learn and develop their skills.
• Flexible Work Policies. Offer work options that are adaptable, especially for those who need to care for family members.

Conclusion

Conducting a pay equity audit is a vital step in making sure that everyone in your organization gets fair pay. But it is not just about the numbers; it is also about how you share what you find and how you are making things better with the people involved.