Last month, in the U.S. House of Representatives, the Subcommittee on Diversity and Inclusion held a virtual hearing entitled, “Closing the Racial and Gender Wealth Gap Through Compensation Equity.” Among the matters discussed were two pieces of legislation aimed at closing gender and racial pay gaps.

According to the House Committee on Financial Services, the Subcommittee hearing was intended to “explore how discrimination based on gender, race, sexual orientation, and disability has led to compensation and pay disparities in America” as well as to “discuss legislative and other solutions to create compensation equity for women and people of color in the workplace.”

One of the two bills referenced in the hearing would “amend the Securities Exchange Act of 1934 to require issuers to report information relating to gender and racial pay equity, and for other purposes.” Additionally, the bill would “require issuers filing to the Securities and Exchange Commission to conduct an audit on gender and racial pay equity with respect to the compensation of the employees every two years and disclose the results every two years on their Form 10-K.”

The bill is believed to be the first-ever to require such disclosure of pay equity results for covered employers’ entire workforces. With that in mind, the Subcommittee noted that “companies can take proactive measures towards closing compensation gaps, including conducting pay equity audits, building inclusive work environments, and publicly disclosing pay gaps.”

Neither the legislation nor the “proactive measures” suggested should come as much of a surprise. Bloomberg recently reported that “with Democrats holding the levers of power in Washington, House Democrats are mounting a renewed effort to pass federal legislation, while a flurry of proposals are being promoted on the state level as lawmakers try to seize what they see as a moment for change.” The Hill took it a step further, writing that “with a new administration and Democratic Congress, new federal pay equity laws are inevitable,” and also noted that, “the good news is there are many ways today to identify and fix pay inequities, with technology making it a faster, more easily replicable process.”

Some organizations have been urging employers to be proactive on pay equity for years: a 2010 post by the Society of Human Resources Management (SHRM) asked, “what can a prudent company do to manage the risk of pay equity litigation?” Their answer: “Conduct a pay equity study. Such a study helps a company understand its pay structure and reduce its potential liability by addressing three questions:

  • Which pay differences are at issue?
  • Whose pay should be compared?
  • What are the factors that explain differences in pay?”

After analyzing the resulting data, an employer can, as law firm Skadden put it, pursue “appropriate remediation of any indefensible pay gaps.” The House Subcommittee on Diversity & Inclusion was more specific: “Companies can take proactive measures towards closing compensation gaps, including conducting pay equity audits, building inclusive work environments, and publicly disclosing pay gaps.” Glassdoor, whose chief economist testified at the hearing, posted that “employers … should make pay data more transparent, analyzing their own internal pay processes to study compensation data to ensure no gaps by race, gender, or other protected categories exist or open up, whether intentionally or not.”

So, where should an organization looking to achieve pay equity begin? The answer is simple: by establishing ongoing, monthly monitoring of DEI metrics, including race, ethnicity, and gender pay gaps with the help of an expert, external technology partner. Doing so will not only help organizations reduce risk in today’s ever-changing environment of DEI-related laws and initiatives, but achieve greater success as well.

To find out more, download our white paper, DEI in ESG Reporting, and consider undergoing a comprehensive Equal Pay Risk Assessment. To learn about how organizations can bolster their diversity and inclusion efforts with the help of an expert partner, check out our pay equity analytics service.

Organizations looking to disclose pay equity, diversity, and inclusion data information should do so within an ESG reporting framework. Download our white paper, DEI in ESG Reporting to learn about the different standards you can leverage for sharing your progress.

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