What Employers Need to Know About Pay Equity and How to be Proactive
Questions and Answers
Q: Are you aware of any other states considering safe harbor?
A: Based on public information, we are not aware of any other states currently considering any safe harbors.
Q: How does pay negotiation work in the context of pay equity. i.e., are employers citing negotiation from employees as a valid reason for pay inequity?
A: If you are referring to pay negotiation ability, if that ability is essential to the job function, then it can be a bona fide factor to consider in pay equity analytics. We note that research does not support gender differences in pay negotiating ability.
If you are referring to the pay negotiation process (i.e., before a candidate takes on a position), consider the following scenario. Suppose an employer has two identical job positions for a job range of $18 to $20 per hour), there are two qualified candidates (one man and one woman), and the male candidate negotiates to receive $20 per hour and the woman negotiates to receive $18 per hour.
The net result would be a gender pay gap. The ideal framework would be documented to reflect that the candidate that negotiated the higher pay rate has some attributes that are job-relevant and thus could justify the higher wage. Importantly, one reason for a negotiation differential is that the high wage negotiator (e.g., male) had a higher prior wage. In many jurisdictions, a higher prior wage is not a bona fide factor.
Finally, measuring negotiating ability might prove difficult and counterproductive. If the negotiation process were documented for all offers, and there were established guidelines for what the initial offer was and what the sequence of responses would be, if women end up with lower offers then men, there could be a charge of disparate impact in that negotiation process.
Q: Sources of pay disparity: Is this from quantitative research or the questionnaire response from the respondents' perceptions?
A: As we understand this question, whether our slide discussing “sources of pay disparity” came from quantitative research or from the HBR survey, which posed the question to the respondents.
Q: Is it better to do your audit on salary or total compensation?
A: We typically look at both. Audit of the total compensation takes into consideration all elements of compensation, such as bonuses and the like, to identify disparities in compensation and not just a part of compensation.
The analysis of the differences in salary vs total compensation can reveal further insights regarding the sources of pay disparities.
Q: Sometimes doing nothing, other than solid internal peers comparisons when making offers and promotions, seems like a good way to go because of the risk you open up when doing a study. Can you talk about what you are seeing on the horizon for companies who choose to do nothing?
A: A company that chooses to do nothing is effectively burying its head in the sand. While an internal peer comparison may have value, there are likely incomplete. It may lull a company into believing that there are no pay disparities but the groupings may be flawed. A meaningful pay equity analysis will reveal whether the groupings are valid.
If your organization is at least 100 employees, remember that the EEOC already has your raw pay data. That data is enough for the EECO to identify raw gaps without consideration of any bona fide factors, which could reduce the apparent pay gaps.
You leave your organization open to regulatory/litigation risk exposure with no ready defense if you do not conduct a meaningful pay equity audit. (For example, that EEOC data can be made available to those who have filed discrimination complaints with the EEOC via Section 83 request.)
If a pay equity study is overseen by counsel, privilege protection may be accorded to avoid the risk of mandatory disclosure while still obtaining that meaningful pay equity audit. That way, the organization can control the messaging.