This issue of equal pay continues to gain traction in the media and in society. It is interesting to hear the various opinions being offered on how to address the expanding pay equity regulations taking place around the world.
As described in a report by Harvard Business Review Analytic Services, done in association with Trusaic: “The crush and overlap of Legislative initiatives threaten to saddle organizations with more challenges instead of making things clearer when addressing gender pay gaps. In the U.S., federal reporting requirements have been expanded and more congressional initiatives are in the works, while a groundswell of states and localities are changing their laws to fill in the gaps in federal enforcement of regulations.”
These policy changes take time to adjust within organizations. Because each organization handles changes in policy very differently, some are more successful at addressing these changes than others. Trusaic spoke with a group of business experts in diversity and inclusion, human resources, and legal strategists on how they are making changes in pay equity policy to address the increased attention on this issue.
The executives we spoke with mostly agreed that being more proactive in addressing pay equity policy, whether by means of an audit or otherwise, is better than being reactive. More importantly, many saw equal pay as not only a legal issue but a way to improve corporate performance. The HBR-AS report noted that 54% of U.S. respondents said the competition for talent was their primary reason for conducting pay equity analyses.
“A poor culture and unmotivated workforce drive down productivity and ability to drive change” noted Brian Chossek, CEO at Impact 7 Generations. “Good organizations see compensation and equity as an issue central to employee engagement — it comes out in surveys — and address it proactively to ensure a motivated, driven workforce. Yes, if you’ve ignored the issue there are potential legal issues at play. But, even once you get past the short-term topic, the long-term motivation is sustainable performance.”
Companies are also approaching their review of pay equity issues in different ways. A study by the consulting firm Korn Ferry, done with WorldatWork, found that larger organizations favor multivariate regression analysis as part of a pay equity audit, but smaller organizations prefer descriptive statistics, which are limited in what they reveal about justifiable pay differences.
If you are asking yourself whether or not your company should participate in a pay equity audit, you are not alone.
A pay equity audit can be multi-disciplinary, combining extensive domain knowledge and expertise in pay equity statutes regarding legally protected classes across multiple jurisdictions, economics, statistics and statistical modeling, workforce data management, and knowledge of your regulatory landscape. The executives we spoke with noted that this could be a stressful experience because it could bring to light pay inequalities within their organizations. However, in the long run, they noted that it is important to not ignore an issue that could become mandatory to address in the future.
Autumn Bayles, VP Global Supply Chain at Aramark, said, “Organizations can choose to not perform such an exercise, but boards/investors/employees/laws are pushing for transparency…the key is to be proactive. Set up the right data framework, cultural tone, and HR processes to be able to analyze, monitor, and stay on top of a positive pay equity dialogue.”
Pay equity audits are becoming a business necessity as equal pay regulations continue to grow across the U.S. and in countries around the world. A pay equity audit can identify pay differences between employees that cannot be explained due to job-related factors. This type of audit not only identifies problems but also provides actionable solutions. It gives employers an opportunity to ensure fairness in pay and prevent employee issues. It allows the employer to minimize risk by identifying and remediating deficiencies, providing the employer with greater standing to defend against and win claims of discrimination.
Overall, a comprehensive proactive pay equity audit is the best place to start to understand what your company is doing right, and where it can improve, before regulatory investigations, employee lawsuits, and investor actions that require you to provide this information.
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.