As the world continues to progress and policies change, companies are forced to recognize and address trends. Disparities with regard to equal pay reflect a current topic that is gaining a great deal of traction in the media as well as in politics. Pay equity policies have been particularly at the forefront of debate as of late. These policy changes take time to put in place, and it’s not only important to understand the reasons for change: understanding current company culture, legal implications, and the best strategies to implement policy change is necessary as well.
Since each organization handles changes in policy differently – some being more successful at these transitions than others – we reached out to a group of business experts in Diversity, Equity, and Inclusion (DEI), human resources, and legal strategy to see how they’re making changes in pay equity policy. Moreover, we wanted to understand the perceptions of pay equity within these individuals’ respective organizations, as well as how they’re obtaining and measuring their data around pay equity. Here’s what we found.
Perceptions of Pay Equity
While responses varied, most leaders agreed that being more proactive when it comes to pay equity policy, whether by means of a pay equity audit or otherwise, is better than reacting when they are pushed to do so down the road. More importantly, equal pay isn’t only a legal issue. As Brian Chossek, CEO at Impact 7 Generations, points out, “Motivations for pay equity are performance; a poor culture and unmotivated workforce drive down productivity and ability to drive change. Good organizations see compensation and equity as an issue central to employee engagement — it comes out in surveys — and address it proactively to insure a motivated, driven workforce.” He also notes: “Yes, if you’ve ignored the issue there are potentially legal issues at play. But, even once you get past the short term topic, the long term motivation is sustainable performance.”
Some experts recognize the complexity of the compensation topic, wondering if it is even possible to satisfy all stakeholders. In addition, it can be difficult to define individual roles within organizations in order to make comparisons in the first place. Other experts have conducted multiple disparity analyses over the years, yielding results that may not have been expected based on media reports. However, there’s awareness among experts that these rates likely come from companies willing to share data, and good statistics arise from studying more than a handful of companies.
What Is a Pay Equity Audit?
In most fields of work, terminology gets confusing, especially when terms have similar meanings. When asked the difference between pay equity audits vs. analyses, Michael Fahey, Deputy General Counsel at HomeServe USA, summed it up nicely: “An equity audit is a tool to assess comparative compensation and benefits are provided within an organization. The audit results can be analyzed horizontally — to assess compensation between/among equivalent roles — or vertically — to assess compensation, and ratios of compensation, between/among different levels. Audits are tools that can be used in the overarching analyses.”
If you’re asking yourself whether or not your company should participate in a pay equity audit, you’re not alone. Experts acknowledge that this can be a stressful experience, as it could potentially bring to light inequalities you weren’t aware of, but in the long run it is important and might be mandatory in the future. Specifically, Autumn Bayles, VP Global Supply Chain at Aramark states, “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.”
Undergoing a pay equity audit provides your organization with complete transparency into your organization’s pay structure. In addition, 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 equal pay issues. It allows employers to minimize risk by identifying and remediating deficiencies, providing them with greater standing to defend against and win claims of discrimination.
Learn how a pay equity audit has affected other organizations in a report by Harvard Business Review Analytic Services, conducted in association with Trusaic, by clicking here.
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.