Pay equity and transparency

Pay equity in compensation means the contribution an employee makes to an organization matches their compensation. What constitutes fair pay can be a complex issue to solve precisely. There are multiple factors to consider, and each contributes to the final compensation. For example, years of experience, competencies, ability level and soft skills all affect the final compensation. The goal is to fairly measure all these factors and achieve equal pay for comparable work.

Making pay internally fair is only one part of the process. It must also be externally competitive.

Which nationwide laws are currently in practice?

There are two key pieces of legislature around pay transparency. The first is the Equal Pay Act of 1963. This addresses discrimination because of sex. The second is Title VII of the Civil Rights Act. This law safeguards people from discrimination more broadly. Protected groups include race, religion, sex, national origin, and skin color.

These two laws together frame the foundation for current discussions around pay equity and the gender pay gap.

What makes pay equity good for business?

It improves employee morale: Pay equity is a strong motivator for the workforce. When employees know their pay is fair, they are more productive.

It attracts the best people: A reputation for fair pay boosts a company’s public image and brand power. This means the best talent will gravitate towards your organization.

Company culture: A strong, visible practice of fair pay will strengthen the company internally. A strong organizational culture means that employees will go further to see it succeed.

Compliance: States across the USA are moving towards increased pay equity with no signs of stopping. Implementing laws such as pay equity before it becomes a necessity is a good practice to adopt. It is another differentiator against the competition. It also ensures that your organization will not need to rush to meet any last-minute deadlines.

How to find and cut existing pay equity gaps

Here are the keys to getting pay equity right:

Analyze existing pay: Understanding the current pay landscape across your organization is crucial. Conduct a thorough audit of compensation for all roles at all levels. Search through the data and flag discrepancies. Organize your data to find patterns where pay gaps occur.

Promote transparency: Transparency means better communication. It could be a conversation between a hiring manager and an employee about their compensation. Or it could be ensuring clear access to compensation information across the company. Be open with your organization about the shift to transparency in pay; this is a positive that will boost morale.

Review: Test to see how your policies are working. Ask employes for feedback. Compare with competitors. Stay on top of trends relating to indirect benefits. This will ensure that all groups in your company receive the compensation they expect. It also helps keep it fair for all.

There should be a consistent, ongoing approach to reviewing compensation. By doing this on a regular basis, you ensure that your organization is not getting left behind. You also keep bias from slipping in. Every two years should be a minimum for full compensation reviews. Businesses often opt for one year.

Actively promote inclusivity: Try to break up negative silos that may occur in the workforce. Mentorship programs, festivals linking to specific demographics, and informal interest groups all improve cultural cross pollination. This will lead to more equity in the company.

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The pay audit process

The process for conducting a pay equity audit is as follows:

Define job requirements. This enables you to clearly define the requirements for each job. For example, skills and years of experience. With this, you can create a hierarchy. After that, you can create compensation to match the job.

Evaluating recruiting processes. Do your job descriptions have unseen bias? Are certain demographics consistently not turning up for interview? These are signs that something inequitable is in your hiring process.

Review salary negotiation procedures. Keep communication transparent. Ensure that promotion is based on skills, competencies, and experience.

Why are women earning less than men?

There are a variety of answers to this question, and each plays a part.

1. Discrimination

   Discrimination against women in the workplace is a worldwide issue. There has often been less value attributed to the work done by women compared to men. This feeling of lower value of work translates to lower value of compensation. The knock-on effect of this is that women struggle to access the best opportunities, further perpetuating the idea that they cannot contribute equally. A way to counteract these issues is by raising awareness of them. This is crucial for recruiters.

2. Segregation by job

   Women heavily dominate certain low paying job industries. For example, childcare and nursing. Conversely, men dominate certain higher paying industries (for example, engineering and technology). This means that at the broadest level, men are getting higher pay than women. Encouraging women to apply for the jobs in the higher paying industries can solve this issue.

3. Raising children

   Women traditionally do more of the work raising children than men. Calculations for pay equity do not include the financial value of this work. This has a powerful effect on the gender pay gap. The work takes a tremendous amount of effort and time, diverting energy from their career. Dividing child rearing more equally between couples can help mitigate this issue.

A combination of these three issues is often present. They can begin to occur during the hiring process. For example, the recruiter may make assumptions about how raising a family will affect the career of a woman. These ideas and similar ones will often follow a woman throughout her career. It will make promotion and access to opportunities more difficult.

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Addressing the gender pay gap

First, improve education around self-negotiation of salary. This will help strengthen the control women have of their compensation. Promotion of pay transparency is also effective for narrowing the pay gap. Supporting laws on the topic can achieve this. Company policies can too, with one key policy being parental leave. Currently, the norm is almost always for women to have more parental leave than men. By making parental leave equal, organizations support the possibility of men sharing the workload.