Benefits of proactive pay equity measures
Pay data reporting is more than just a legal requirement. Pay transparency and pay equity is evolving into a global movement. Companies that prioritize and adopt pay equity are:
- 1.6 times more likely to meet or exceed financial targets
- 2.1 times more likely to attract the talent their business needs, and
- 1.7 times more likely to innovate effectively
Research from Josh Bersin found that while 71% of business leaders see pay equity as a "critical component" of their talent and business strategies, only 5% are "truly excellent" at pay equity.
Include salaries in all job listings: In the US, the clearest indication of a gradual shift towards pay transparency and the impact of legislation can be seen in job listings. Growing numbers of employers are including salary ranges in job listings. Over 40% of job postings on job site Indeed include salary information. That figure represents a rise of 137% in the past three years and includes areas without pay transparency legislation.
Employers that exclude wage ranges in job postings risk being left behind in the race for talent. 6 in 10 job seekers cite the inclusion of pay ranges on job listings as the most important factor in their decision to apply. Research also shows that two-thirds of workers would change jobs to work for an employer with greater pay transparency.
Pay equity best practices
Follow pay equity best practices and pay data reporting to create an effective compliance roadmap and a more inclusive working environment.
Understand the pay data and pay equity legislation applying to the states and regions your company operates within. Partnering with a company like Trusaic ensures you not only stay up to date but comply with the increasingly complex pay equity laws.
Evaluate your current situation with a pay equity audit: A pay equity audit is the only way to identify existing pay disparities within your organization. One way to do this is by using software like PayParity® which conducts a pay equity audit at the intersection of factors such as gender, race/ethnicity, age, disability and more. The results of the audit identify risk areas for remediation and pay gaps within every employee group, and at every level in your organization.
Evaluate pay analysis groups: Create groups of employees performing similar work to make pay comparisons. This step involves identifying statistically significant pay differences within your employee groupings. Conducting a regression analysis on each pay group, enables employers to determine whether apparent gender and race pay gaps exist for reasons beyond legitimate business factors, such as differences of skill, effort, and responsibility.
Quantify risk: After accounting for business factors, the next step is to identify remaining pay disparities across gender and race/ethnicity. These pay differences are potential pay discrimination liabilities. The pay equity audit will allow you to view these potential liabilities from multiple perspectives. For example, in terms of their statistical significance, their implications for overall annual compensation at the workforce level, the individual employee level, and at a variety of steps in between.
Validate your findings: There are at least five dimensions through which a pay equity audit will assess the accuracy of any pay disparities found. A key tool here is to make cohort comparisons. This compares smaller employee groups, while focusing on one or two legitimate business factors that those employees have in common. For example, a cohort comparison could measure an average gender pay difference among employees in the same job level and department. By performing multiple comparisons, employers can understand and analyze how well supported the regression-based pay disparity findings are.
Identify the root causes of pay inequity: What commonalities exist among those most affected by the pay disparity? How do disparities vary across time, location, and organizational level? The answers to these questions will assist your organization in identifying causes of pay disparities, not just symptoms. Multiple issues can influence your organization's pay equity. For instance, certain groups of employees may not have equal access to jobs or promotions, and cannot progress to higher roles. Recruiting and hiring policies must be equal and consistent for all employees and job applicants. Pay equity software can help employers identify factors such as unconscious bias, or processes that may be affecting, or causing, pay disparities.
Develop remediation strategies: Your pay equity audit should allow you to explore different strategies for addressing these risks that balance both cost and effectiveness.
Develop a compensation strategy with clear criteria: Identifying your pay disparities is the first step in shaping your compensation strategy. A compensation philosophy is a statement about two things: what your company is trying to achieve through employee compensation, such as workplace equality, and how you intend to achieve that.
Include your employees in the conversation: Your employees must also be part of the conversation around pay equity. You cannot have pay equity if your employees do not agree that you have pay equity. If a pay equity audit suggests your organization has no pay equity issues but your employees disagree, your company has a perception gap. A good way to gain their critical insights is to carry out a sentiment survey. According to Gartner only one-third of employees believe their pay is equitable, and less than one-third believe they are fairly compensated for their work.
Make your pay explainable: Pay transparency requires more than a "one size fits all" approach. For many organizations, this might mean going back to basics. Analyze your salary range and compensation, to break down and justify each element. For example, is the base salary competitive and commensurate with employee skills? To break it down into further detail, is the base salary competitive for the work required, the skills of the individual employee, and their performance against their objectives? Employers must also be ready to explain how they differentiate and define performance in setting base salaries.
Select equitable pay ranges: To comply with pay transparency laws, employers must choose fair and equitable pay ranges for all job listings. That involves integrating market data with the outcome of internal pay equity audits. A pay equity software solution like Salary Range Finder can help to determine competitive and fair salary ranges by overlaying internal pay equity audit data with that of external labor market data provided by LightcastTM. Fair salary ranges are instantly determined for your job listings by combining the two data points.
Monitor progress: If pay disparities by gender and/or race are identified, pay equity audits will allow you to monitor those pay differences over time. If compensation adjustments have been made, ongoing monitoring can monitor progress and avoid a recurrence of similar pay disparities. It also enables your organization to identify demographic changes in your workforce that can affect gender and race pay disparities.
Set aside an appropriate budget: Research from Josh Bersin found that only 14% of organizations set aside an appropriate budget and staff to mitigate pay inequities. Equally, only 14% use data and equity platforms to identify pay disparities. As global pay equity laws become more complex, investment in a robust pay transparency policy will be key to both compliance and your organization's ability to attract and retain talent, and achieve financial goals.
Create a compliance roadmap: Partnering with a pay equity software provider helps employers to develop a clear roadmap to meet complex reporting requirements and understand and stay up to date with compliance deadlines which are constantly evolving.
Ensure GDPR Compliance: Trusaic is GDPR compliant and can assist any organization in any EU state in meeting its obligations under both the EU Corporate Sustainability Reporting Directive and the EU Pay Transparency Directive.