Pay equity, diversity and inclusion
4 Ways to Incorporate Pay Equity into Your Organization
Good employers know the importance of offering their workers a strong compensation package. But implementing an ongoing system to ensure all employees are fairly compensated can require holistic changes across an entire organization, leaving some employers unsure of where to start.
Equal pay initiatives are well worth the effort. Companies that demonstrate a commitment to pay equity experience a range of benefits, from increased staff morale and productivity to a competitive advantage when it comes to talent attraction and retention. Beyond the obvious moral imperative, pay equity is the law.
Despite the legislative strides made in recent years to promote pay equity, gender, and racial wage gaps still persist. Based on 2020 data from the U.S. Census Bureau, women in the U.S. on average earn less than their male colleagues: For every dollar a man makes, a woman earns just 82 cents. A new report issued by the National Association of Colleges and Employers (NACE) finds that the wage gap begins right out of college as well.
And the wage gap is even wider for women of color, who earn just 63 cents to every dollar non-Hispanic white men make.
Current loopholes in the federal Equal Pay Act perpetuate these disparities. The good news is that many states and local jurisdictions are increasingly passing legislation to fill gaps and ensure employees earn equal pay for equal work regardless of race, gender, disability, and other protected characteristics. California, Colorado, and Connecticut are just a few states to recently pass laws mandating measures to promote pay equity, including pay data reporting, required public documentation of pay ranges in job listings, and salary history bans.
Pay equity has also become a renewed area of focus at the federal level under the Biden administration. Employers can expect tighter and more universal mandates to come, especially as federal agencies address the impacts of COVID-19 on the workforce.
More than ever, organizations must meet growing expectations from employees, investors, lawmakers, and enforcement agencies to achieve pay equity.
Fortunately, there are concrete steps employers can take now to make pay equity central to their business’ overarching compensation strategy. Below we have outlined some ways your organization can get started.
Step 1: Conduct a pay equity audit
Using software technology to measure equity in your employee pay data is a reasonable first step to incorporating pay equity into your compensation structure. Be sure to conduct the pay equity audit proactively, and look for pay disparities across your workforce at the intersections of gender, race/ethnicity, and age.
This type of audit involves performing a holistic analysis of employee compensation, then using that information to make data-informed decisions to identify and correct issues at the source.
To prepare your workforce data for the pay equity audit, your team should:
Review job descriptions to make sure they accurately detail the duties and responsibilities of each job. This is critical for establishing pay analysis groupings (PAGs). Grouping employees together based on similar job functions is critical for understanding compensation equity within your organization.
Verify salary structure, pay grades, and bonus plans to ensure objective criteria are used that align with job categories.
Consider each individual employee’s experience, education, and level of responsibility. These bonafide factors, also known as legitimate business reasons, can legally explain the difference in compensation between employees who perform similar duties of work. Your organization may weigh these reasons differently, but they should be applied consistently across your workforce.
Take a close look at workforce representation and revisit assumptions about who fills different roles. This will help you resolve any disparities that can exclude some groups from higher-paying leadership roles. It’s important to assess the diversity makeup of your organization so you can better understand how compensation is being allocated. If you don’t have any female employees for instance in the C-suite, you may have a pay equity problem.
After reviewing the aforementioned data, you will likely identify areas of weakness within your organization’s compensation structure. Be sure to document any changes that need to be made in your pay equity strategy. This may necessitate writing or rewriting your organization’s compensation philosophy and policies.
A commitment to continuous improvement is paramount for achieving pay equity. Given the fluid nature of hiring, your system should include ongoing monitoring and regular review of plans and policies as workforce makeup and positions evolve.
Step 2: Make pay equity a part of your work culture
Your company culture should reflect your commitment to an equitable pay structure. From gaining leadership buy-in from the top down to partnering with key staff in your Human Resources department, make pay equity a conversation at all levels of your organization.
When your company is undergoing systematic changes to ensure everyone is paid equitably, it is important to share that information with all employees. Actively hosting a transparent environment is critical for achieving true pay equity. One way to enable workplace transparency is to create a formal plan for communicating your organization’s goals to achieve pay equity, both internally and to the public at large.
Your internal pay equity communications plan should outline:
Instructions for how to disclose sensitive pay information. Employee salaries and wages can be sensitive topics to talk about. Your communications plan should include how to talk about pay equity goals, progress updates, what kinds of equitable pay processes you currently have in place, what steps you’re taking to address disparities, and what employees can expect to see moving forward.
Communication scheduling. Be sure to factor in room for regular and unplanned messages to all internal stakeholders about the progress your organization is making towards achieving pay equity. Compensation is an important topic for most people, so it’s critical that you regularly provide status updates. You want everyone to feel comfortable about the progress you’re making, and actively communicating that will help.
Communication channels. You may be familiar with the expression, “it’s not what you say, but how you say it” and the delivery of sensitive information relating to pay is critical. When creating your communications plan for talking about pay equity, consider the different communication channels, such as email, intranet messaging, social media, bulletin boards, etc., you will leverage for certain messaging. Also, consider the importance of discussing particularly sensitive information, such as salary adjustments, in real-time.
Crisis communication strategies. It’s not something anyone wants, but crises do arise. If your organization finds itself in an unavoidable legal or otherwise public crisis relating to pay equity, you’re going to want to have a plan in place for minimizing lasting damages. Your pay equity communications plan should include actionable steps for resolving crises. The actionable steps should help restore brand confidence and trust to all key stakeholders.
Ownership and maintenance. Appoint a committee within your organization for holding departmental heads accountable for pay equity communications. Shared accountability is critical for many business functions and pay equity is no different. Your pay equity communications plan should clearly identify specific individuals, what they’re responsible for, and how they are actively communicating progress in and outside of your organization.
Step 3: Enlist the help of an expert
If your organization doesn’t have the in-house capability to implement a plan and manage ongoing pay equity monitoring, consider partnering with a pay equity analytics and DEI monitoring solution provider, like Trusaic.
Our pay equity analytics and DEI monitoring solution, PayParity can help ensure you have the tools needed to achieve pay equity within your organization, from auditing software to developing plans for communicating progress with key stakeholders.
Step 4: Learn from the mistakes of others
One way to learn about the consequences of inequitable pay structures is to look at the costly mistakes of other companies. Recently, entertainment company Riot Games settled a gender discrimination lawsuit at $100 million. Gaming giant Activision Blizzard was sued last year by the California Department of Fair Employment and Housing for systematic gender discrimination. Aside from steep monetary damages, these companies also took massive hits to their reputations.
While these companies are working to rectify past mistakes now, their errors show that a reactive approach to pay equity is best avoided.
As the legal landscape around this topic continues to evolve, putting pay equity at the forefront of your organization’s compensation strategy is the best way to protect your bottom line – and play a role in creating a more fair world for all.
To learn more about the steps for effectively communicating your pay equity program to appropriate stakeholders, download our white paper, The Pay Equity Communications Planner.
To help you facilitate discussions around compensation, we created the Pay Equity Communications Planner.