Pay equity has long been an elusive goal in the U.S. as in many other parts of the world, even though it’s been required since the Equal Pay Act was passed in 1963. Casual observers may argue that a big reason pay inequity has been so persistent is that employers aren’t motivated to do anything about it.
While it is true that a significant minority of HR professionals feel management doesn’t grasp the importance of pay equity, many businesses actually do have a strong interest in closing pay gaps and pay disparities in the workplace. This is even more so the case now that several states and cities across the U.S. are requiring employers to prove they have equitable pay practices.
The critical importance of pay equity
Pay disparities and inconsistencies have negative implications for companies that want to be as economical as possible with their budgets. Overpaying for a role reflects unnecessary expenditures. On the other hand, underpaying can also be problematic in that it could hinder companies’ abilities to attract and retain talent, especially in tight labor markets. Companies that underpay staff risk losing those staff to other employers or simply having engagement problems with staff who feel they’re being compensated unfairly.
Another reason companies strive for pay equity relates to diversity, equity, and inclusion (DEI) efforts. DEI efforts haven’t always been given much credence in Corporate America. But both political and economic pressures have made these issues top of mind for most companies. DEI initially got a boost during the Obama administration, became less prevalent under Trump, and has re-emerged with a renewed focus under Biden.
Social pressures have also had an impact, starting with the murder of George Floyd and the massive related unrest that followed. In addition, most organizations now understand that diverse and inclusive companies that treat their employees equitably outperform less diverse, inclusive, and equitable competitors. In fact, as Gartner notes: “Societal pressures around environmental, social and governance (ESG) and DEI are increasingly impacting enterprise and board priorities.”
Organizations that get a reputation for paying some people less than others for the same work – whether intentional or not – are going to have a harder time finding diverse workers (and, arguably, workers in general) if workers believe they may be paid less than others for doing the same work.
While companies do have good reasons to pursue pay equity and while many genuinely do try to achieve pay equity within their organizations, it can be a daunting challenge. One of the biggest obstacles to pay equity is simply the ability to compare apples to apples. For example, what is fair compensation for a “director of customer experience” compared to a “head of network infrastructure”?
This is where having a well-developed job architecture can make life a lot easier.
What is job architecture?
Job architecture describes the framework or infrastructure within which the jobs offered by an organization exist. This includes job levels (manager, senior manager, associate director, director, associate vice president, etc.), job “grades” (A, B, C …), requirements for promotion, career paths, and more.
Job architecture may be very complex in large organizations with many different departments and corporate functions and very simple or even nonexistent in small companies. For example, a sole proprietorship may have one employee – the owner founder, or it may have just the owner/founder and a single assistant. A large corporation, by contrast, may have eight or ten different seniority levels, plus detailed job descriptions and prerequisites for each job in the organization chart.
Why job architecture is key to pay equity
So, while job architecture sounds like a great way to organize staff within a company, what does it have to do with pay equity? Quite a lot actually. Job architecture considers the relative importance and impact of job roles on the organization. While all roles are arguably important, some have a greater impact and, consequently, demand higher levels of pay.
The director of network infrastructure and security, for instance, may demand a salary of $20,000 a year more than the director of customer experience, based on the impact to the company, the scope of authority of the role, how challenging it may be to find talent to fill the role and other considerations.
Job architecture organizes positions by their value to the organization, their seniority level, the skills required to perform the job, the required education to hold the position, etc. In other words, with a thoughtfully developed job architecture, organizations can effectively establish pay analysis groups, and be confident in how different employees are being grouped.
As a result, they can accurately assess and evaluate compensation across their workforce. This makes it easier to compare compensation across jobs and, subsequently, to identify potential pay disparities.
For example, if the director of network infrastructure were instead vice president of network infrastructure, it would probably make sense if that position paid $20,000 more than director of customer experience. The scope of authority of a vice president’s position is broader as is the overall impact on company operations. Job titles consistent with the value of the work, and its impact on the organization, are a great example of how job architecture assists with pay equity.
Pay equity audits
When a company has accurate data on job titles, descriptions, seniority, required skills and education, organizational value, and compensation for the positions within the organization, it becomes much easier to conduct a pay equity audit.
A pay equity audit is a review of company compensation to identify disparities that may require closer review and remediation. For example, when paired with employee demographic data, a pay audit may reveal that Black managers are earning 10% less, on average, than white managers within a company.
As an important side note, while having solid job data based on a sound job architecture makes the analysis of pay equity easier, it’s still important to not lose sight of the various ways the employees themselves are diverse when identifying potential inequities.
Pay equity refers to granting the same compensation for the same work. Job architectures make it easier to compare different jobs within an organization for the purposes of conducting pay equity audits to determine whether and to what extent pay equity gaps exist within the organization.
Organizations that can mitigate or even eliminate their pay equity gaps will not only be more financially efficient, they’ll also be better positioned to excel in their DEI and employee engagement efforts.
What’s more is that leaders in pay equity use specialized software, like PayParity. Recent data from our report with the Josh Bersin Company finds that employers that use specialized software are 3.2 times more likely to engage and retain employees. They’re also 7 times more likely to attract the right talent, which helps them save money in the long run.
For more information on the benefits of pay equity, and the role of job architecture, download our research report, Creating A Culture of Diversity, Equity, and Inclusion, conducted by the Harvard Business Review.
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