California has the right idea when it comes to pay equity. The state has moved toward equalizing pay among employees who perform similar work, regardless of their gender, ethnicity and race. It has also moved toward openness with salary data. One result is that employers do not wield an unfair amount of power over job applicants. While it may be a change for some employers, it’s ultimately in their best interest, because they hire workers who truly are suited to the job and who know what they are getting into.
Here’s a look at some notable changes and how your business can learn from these policies.
Understanding the Rationale
The first step in learning from the policies is to understand their rationale. For one thing, women have long been paid significantly less than their male counterparts. This holds true at all levels. One notable example occurred just a few years ago when the first female CEO of an auto company earned halfOpens a new window of what the previous male CEO did. The picture since then has gotten a lot sunnier for her, but what do you think would be happening if she still got paid half of what the previous CEO did? Morale overall might have tumbled, the company could have developed a reputation as stodgy and backward-thinking, and it may not have attracted the forward-thinking applicants necessary for success.
On a personal level, the pay gap also burdens women in many ways, for example by giving them fewer resources with which to save for retirement. It is good policy for your company, its employees and its bottom line to pay employees the same wages for doing similar work.
Knowing What Similar Work Means
Similar work does not mean the same work in this instance. For example, under “same,†a maid and a janitor might be paid differently. However, they do principally the same work, and it’s unfair to pay janitors, who tend to be male, more than maids, who tend to be female.
In California, the work needs to be “mostly similar in skill, effort, responsibility and performed under similar working conditions.†This distinction is important to keep in mind for the following step.
Performing Proactive Pay Audits
Now is a good time to perform a proactive pay audit to see how fairly your organization pays its employees for doing similar work. Here is a guideOpens a new window to help you calculate unadjusted pay gaps, adjusted pay gaps and other, more-sophisticated approaches to pay histories. However, such audits are not recommended if your company has fewer than 200 employees. If your business is on the small side, it’s usually sufficient to look at each position one by one.
Of course, before you embark on a pay audit, it’s essential to have leadership on boardOpens a new window and agreeable to correcting any pay gaps the audit might uncover.
Moving Toward Openness With Salaries and More
Many job ads don’t mention salaries, and that often leads to wasted time for both the company and the applicant. For example, if the salary for a certain job is $35,000, applicants who need to earn at least $36,000 would self-select themselves out of the process. When there’s no salary listed, more people apply, and the company reviews a lot more resumes and asks people to come in for interviews who will later say they’re not interested in the job because of the salary.
New California policies have changed this framework, and any business would do well to follow California’s lead. There’s no good reason for a business to be secretive and tight-lipped about what it pays employees. While California doesn’t require employers to post a salary scale in job ads, it does require employers to provide one upon reasonable requestOpens a new window from an applicant.
What is “reasonableâ€? The reality is that it makes sense that an applicant would want to know the potential salary up front before committing more time to the process. If your company doesn’t post salary ranges in job ads, it should at least give scales to applicants who ask about them without inquiring why applicants want to know and questioning their motives.
California employers are also no longer allowed to ask about an applicant’s salary historyOpens a new window nor allowed to use that history as one factor in making decisions about a new salary. There is an exception, though. If an applicant voluntarily discloses the information, the company can use it as one factor among many to help set the new salary.
With this ban in California, a company can’t use a female applicant’s history of being paid less than her male counterparts to justify keeping her at less pay.
Making Pay Equity Part of the Company-Wide Culture
California passed a series of laws to ensure that employers in the state have to continually consider pay equity. While your business may not be subject to such laws, you can make pay equity part of your company-wide cultureOpens a new window in several ways such as:
- Conducting annual pay audits
- Reviewing hiring and promotion policies for any biases, including subconscious biases
- Establishing pay scales for jobs instead of deciding what to pay each employee position-by-position when interviewing
- Ban questions about salary history
- Seek best practices from other companies and share yours
It can be daunting and even scary to think about overhauling how your business pays its employees. It can also be unnerving to think about giving job applicants more information than they’ve ordinarily had access to. However, the more information both sides have about the other side, the more likely it is that companies make the right hires. The overall, long-term result is a boon to your company’s bottom line.