Pay equity, diversity and inclusion
How Intel Achieved Global Equal Pay Demonstrates the Value of Pay Equity Audits
Intel recently announced that the tech giant has done something many of its peers have not: closed the gender and wage gap with its employees.
“Intel defines pay equity as closing the gap in the average pay between employees of different genders or races and ethnicities, where data is available, in the same or similar roles after accounting for legitimate business factors that can explain differences, such as performance, time at grade level and tenure,” said Julie Ann Overcash, vice president of Human Resources and director of Compensation and Benefits at Intel Corporation, in a January announcement.
Intel’s approach to identifying whether it had a gender pay gap across its global work force of 107,000 employees in more than 50 countries focused on total compensation, including reviews of base pay, and stock awards, rather than on just base pay. Intel also took into consideration factors such as performance, tenure, and other similar factors.
In an interview with Fortune, Intel noted that it found pay gaps usually started when employees were first hired. The company noted that gaps in stock compensation usually resulted from promotions.
Many states, including California, Massachusetts, Michigan, New Jersey, Pennsylvania, and Vermont, are attempting to address the pay inequalities that can start upon hiring by passing legislation banning employers from inquiring into the salary history of job applicants.
Perhaps the biggest takeaway from Intel’s pay equity success story is that the effort to achieve pay equity is an ongoing process. Intel initially announced it achieved pay equity. In its 2016 diversity and inclusion report, Intel said it had achieved its “year-end goal of achieving 100% pay parity for both women and underrepresented minorities and achieved promotion parity for females and underrepresented minorities as well.”
In its latest pay equity study, CNET reported that Intel’s “legal and human resources teams worked with an outside vendor to use ‘proven statistical modeling techniques’ to pinpoint countries with a gender pay gap. Employees who weren’t being compensated equally received adjustments to close the gap.”
It’s instructive to review four key elements of Intel’s approach to this pay equity study.
Your pay equity audit should be privileged.
The findings from the audit can and should be privileged. The term “privilege” relates to attorney-client communications and attorney work product. The audit itself should be conducted under attorney oversight so that it is privileged and documents from the audit can be protected from discovery in a court of law. The purpose of the privilege is not to hide or cover-up any wrongdoing; rather, it is intended to allow the attorney overseeing the matter to facilitate candid discussions with the client or his or her company about the findings.
Establish a project team.
After privilege has been established, organize a project team designated by your counsel. This project team usually includes personnel who understand your organizational functions, data sources, hierarchies, and compensation structure and philosophy across departments.
Make use of a qualified outside expert.
Start by consulting with your general counsel, or outside counsel and accountants. In Intel’s case, internal legal and HR executives recognized they needed outside assistance to undertake the study. They chose using a vendor that had expertise that lay outside of Intel. It probably also helped that having an outside party conduct the study would provide a different level of objectivity than if the study had been done using only internal resources. An outside expert can help determine the scope of the pay equity audit, including the compensation measures to be analyzed, workforce segments, the number of employees, locations, and lines of business.
Recognize the importance of data quality management.
Intel looked to outside experts that had experience statistical modeling. You should also consider third-parties that also have experience in data cleansing and validation. Data is the fuel of the business engine of the 21st century. It has become the core economic input of business. If fuel contains impurities, the engine will not run smoothly. If the data used in conducting your pay equity audit and analysis are flawed, so will be your results. A meaningful review of pay practices depends on the integrity of your organization’s employment data.
In Intel’s case, its pay equity audit identified problems and provided actionable solutions. It gave Intel an opportunity to ensure fairness in pay and prevented employee issues from developing into larger problems. In fact, it probably increased employee morale. Finally, it allowed Intel to minimize risk by identifying and remediating deficiencies, providing the employer with greater standing to defend against and win claims of discrimination. It also generated positive news coverage.
Compare Intel’s approach to pay equity to other companies like Uber and Oracle that are on the opposite end of the spectrum, under regulatory investigation, facing millions of dollars in damages and legal fees, in addition to bad PR.
Which approach would your organization prefer to take? Let Intel’s story of pay equity success encourage your organization to take action today to address potential pay equity issues.
To learn more about achieving pay equity, click here.