Pay equity means an individual’s race, gender, or ability does not influence the pay awarded to employees of an organization.
In 2018, Deloitte introduced the concept of the social enterpriseOpens a new window â€“ an organization that is expected to fulfill social expectations such as closing the wage gap, providing equitable opportunities for individuals to earn a respectable living, and invest in causes outside the organization to have a direct impact on society.
In the ambit of the social enterprise falls instituting pay equity. Not only is it mandated by law in several states, but it is also the ultimate form of respect to the value an employee brings to the organization â€“ regardless of their gender, race, or ability.
In 2019, a studyOpens a new window by members of the Washington Post Newspaper Guild on pay at the Washington Post stated that among journalists, â€œCollectively, employees of color are paid less than white men, even when controlling for age and job description. White women are paid about the median for their age. Women of color in the newsroom receive $30,000 less than white men â€” a gap of 35 percent when comparing median salaries.â€
Interestingly, while there was no pay gap between men and women in the commercial sector, there was a wide gap between white employees and employees of color. â€œThe median salary for white employees in commercial is $88,000, compared with $83,445 for people of color â€” a difference of $4,555, or 5 percent,â€ states the study.
Pay gap reporting is one way to identify the challenges in the organization. The next is to take actionable steps to close it.
Here’s a compilation of the best practices organizations can adopt to enable pay equity.
5 Best Practices That Can Enable Pay Equity
Apart from being called out openly about pay gaps that exist in your organization â€“ which can profoundly affect your employer brand â€“ you may be challenged legally.
1. Define what pay equity means in your organization
Pay equity is not just providing equal pay for work of fair value. It is providing the opportunity for people of all genders, races, religions, abilities, and other protected classes to grow equally in the organization. This means giving everyone learning opportunities, flexible working arrangements, benefits, rewards, and promotions alike.
Another important aspect of pay equity is transparency in pay and in the performance review process. While transparency may expose gaps in compensation, it also demonstrates a commitment to openness with employees and to work toward achieving pay equity.
Some companies, such as the BBCOpens a new window , release their pay data regularly. Others provide a salary calculator to help candidates identify their potential pay in the organization. For Example, SparksuiteOpens a new window lets candidates calculate their salary based on the role and lists the additional benefits available with the job.
Making equity and transparency a part of company values and following it up with action help achieve pay equity to a certain extent.
2. Impose a complete ban on questions about past salary
On June 24, 2020, Newsweek reportedOpens a new window on a study that found how asking for salary history perpetuates systemic racism. â€œWhereas people changing jobs typically saw hourly wage increases of just under four percent, average hourly wages for people changing jobs in states with enacted salary history bans increased by 7.9 percentâ€”a four percent improvement,â€ reported Newsweek.
The move to ban salary history queries significantly improved the pay of women and Black workers. But just removing the question from the interview process is not enough.
Inherent biases play a role in determining a candidate’s pay. Assuming women or people of color make lesser money than men or white employees should not be the foundation of a salary offer. This means that managers, C-suite executives, and recruiters â€“ must undergo training to ensure they don’t inadvertently elicit this information â€“ unless candidates themselves are forthcoming. Even then, that information should have no impact on the salary they will be offered.
3. Regularly reevaluate the compensation planning process
A reevaluation requires that people from all departments and diversity make up the evaluation group. This includes line managers, hiring managers, the HRIS team, the IT team, the payroll team, the benefits team, the finance team, and the total rewards team.
This diverse team evaluates the current challenges in the workplace. Hiring managers can provide insight into the hiring process and the bottlenecks that challenge the achievement of pay equity at the hiring stage. For instance, the team then can work together to create job descriptions that encourage applications from skilled candidates instead of â€œhighly educatedâ€ candidates, for example.
It is likely, for example, that women hold more part-time positions in the organization because they require flexibility. This can result in two findings. First, work in general, where possible, requires greater flexibility by instituting scheduling policies and leave to encourage their participation in full-time work. Second, women â€“ as a result of the nature of their employment â€“ do not have the same opportunities for advancement as do full-time employees. These factors will define the next compensation planning cycle.
Finally, do you reward top performers for their performance equitably? Making non-payroll rewards a part of the compensation process can also result in pay equity.
4. Rely on data instead of assumptions
Hardcore pay data is the only tool that will shed light on the actual state of pay equity in your organization. A range of pay equity analysis software is available for this.
While pay discrepancies may arise when compared with roles at different levels of seniority, these software help HR managers and compensation teams assess pay discrepancies throughout the organization for similar work. For instance, is it in the recruitment process? Is it in the performance review process? Is it in the skill development process? It can also identify which groups of people are more receiving lower pay. For example, is it single mothers or employees of color or people with more work experience but not a master’s degree?
Pay equity software also benchmarks salary data against industry standards to allow you to identify fair pay for a specific job or a set of skills. Tools with predictive competencies offer recommendations on the steps you can take to close the pay gap. Finally, this software also prepares organizations for compliance audits.
By identifying the gaps, you can learn the reasons why they exist in the first place and develop a strategy to close them. Could it be certain business factors that perpetuate pay inequity? Is it just gender/race that contributes to it?
The real driver of change, of course, will be how the data is used.
5. Evaluate your screening software to ensure no questions about pay come up
Both background screening and candidate screening software must be trained not to ask or seek past-salary-related questions. For instance, in some organizations, recruitment chatbots are in play, and they may ask such questions. Similarly, they need to be trained to remove bias occurring from learning a name and the gender/race associated with it. These inherent biases â€“ often existing in historical data sets â€“ need specific training to be removed so that not only does everyone get an equal opportunity but also equal pay.
Instead, a rigorous screening process that evaluates skill sets will be essential to provide an equitable experience, equitable opportunity, and equal pay.
Current Events Demand Forward-Thinking Pay Equity Solutions
The rise of the Black Lives Matter movement has put several organizations into the spotlight about their wage discrimination practices â€“ among other biases employees of color face in the organization. This is a wakeup call for companies not just to provide lip service and â€œstand by the Black community,â€ but to institute real change by conducting pay gap audits and ensuring that the pay gap is closed as far as possible.
However, data collection can prove to be a challenge. A 2019 PwC studyOpens a new window found that employers don’t have the data they need to evaluate the ethnicity pay gap. Ethnicity pay gap reporting has been encouraged, like companies report their gender pay gaps, to ensure substantial pay equity. However, barriers include people’s reporting of their ethnicity and the fact that they can trust their employers and their anonymity with this data.
No employee can be forced to provide this information, but if organizations succeed in asking them to do so, it may help in identifying pay gaps and closing them.
Ensuring compliance with state and federal regulations will be essential in achieving pay equity in the organization, and these best practices can help to do just that.