With pay equity constantly appearing on social media and in media headlines, organizations need to tackle this issue to gain their employees’ trust and be in compliance with the law. From all perspectives, paying employees equally and fairly is difficult. Each employee holds different titles, experiences, and education levels, so there is no one-size-fits-all answer to this ongoing problem. However, there is one thing for certain. Wage rates should never be based on discrimination against women, people of color, or other unequal factors in workplaces as it is now time to close the racial & gender pay gap once and for all .
Gender discrimination has been taking place since the 1940s when millions of American women joined the workforce during World War II and is still running rampant in American corporations today. In 2020, Pew Research found that if this is broken down by gender, every dollar a man makes, a woman earned 84 cents.
Unfortunately, women are not the only underpaid workers in America increasing the gender wage gap. Latinx and Black communities are being heavily impacted by wage gaps caused by biases or discrimination. In 2021, Black and Latinx workers had the lowest annual compensation by race compared to all other races.
Salary disparities can have a huge impact on your organization and work culture. As pay transparency begins to become the new “norm,” employees will start to see the salary trends and equity issues that typically take place behind the scenes. It is time for organizations to prioritize handling pay equity issues and begin to close the gap by gender and race.
What is Pay Equity?
Pay equity is the practice in payroll management of paying employees equally and fairly despite race, gender, and other demographics that affects pay discrimination. Pay equity should be based on the quality of work and responsibility each employee has, not their uncontrolled identities. However, there are differences that should qualify for higher pay, such as education level, years of experience, and qualifications.
For obvious reasons, fair earns are important to implement in your organization to close the wage gap. No one wants to consciously marginalize their own employees but creating a plan to eliminate wage gap issues can solve unconscious bias or future issues with the law.
Compliance with the Law
In America, the Equal Pay Act was passed by Congress in 1963. The act targets abolishing gender pay disparities. It mandates that women and men are given equal pay for equal work in the same workplace. This act has made major changes to the workforce and has helped eliminate gender inequality in the workplace.
Also based on this legislation, there are four different justifications that employers can use to differentiate pay: a merit-based pay system, a seniority-based pay system, a pay system that is based on quality or quantity of product, and other measurements based on anything besides demographics.
If your organization is not in compliance with the law, your organization could face fines of up to $10,000, imprisonment of up to six months, compensation to those impacted, and more. It is important to protect yourself lawfully, but also treat your employees with respect. If your organization eliminates pay gaps with transparent practices and regular monitoring, your organization is within good standing of the law.
Achieving a Competitive Advantage
Pay gaps are more than just a legal issue, they can heavily impact your company’s talent pool as well as it would be more male-dominated. In a 2017 study:
More than two-thirds of American employees say they would not interview at a company in which they believe a gender pay gap is prevalent.Glassdoor
Your organization will also be committing a disservice to itself. Pay gaps can be detrimental to your employer branding and ultimately lead to recruiting issues and a decrease in retention rates among female employees. It is imperative to remember that a diverse team is a strong team. Every member can bring a unique set of skills to the table and that should be valued no matter what their gender or race may be.
A Plan for Measuring and Improving Pay Equity
Once you’ve identified the need for ensuring wage equality, your organization’s human resource department should create, implement, and analyze a transparent compensation plan to comply with the law, but also to protect your employees and employer branding. Compensation management is no easy task since unfair wages can impact an organization’s efficiency, morale, and productivity. Through earnings gap, there won’t be an incentive for employees to work hard as they will feel as it doesn’t matter as there isn’t any fair labor standards within the industry.
This is why it is essential to choose the right compensation plan, software, and team to manage the salaries, progress, and benefits of each employee across the organization. To begin, start by analyzing your employee population, conducting pay equity analysis, implementing fair compensation practices, training honest decision makers, and monitoring pay equity for the years to come.
Step 1: Get Visibility on your Employee Population
When developing any compensation practices, it is imperative to analyze your employee population. In order to create a comprehensive report, measure the demographics of your employee population, such as race, age, and gender, and the salary and turnover rates among those demographics. This will allow your HR team to fully grasp where your organization currently stands in the equal employment opportunity sector.
This can more easily be done when all your employee data is in one place and consistent across the organization. Centralized data allows for a single source of truth and easier reporting. Centralized data hubs can be achieved through HR platforms, such as PeopleSpheres. This way, your organization will have more organization and put the extra time into reassuring that there isn;t any employment discrimination.
Once you have gathered the employee population metrics and other necessary information, your human resource department should begin conducting a pay equity analysis.
Step 2: Conduct a Pay Equity Analysis
A pay equity analysis is the practice of investigating pay rates in your organization and comparing them to demographic factors, such as race, sex, age, and other criteria. To start conducting your pay equity analysis, begin by understanding why the pay rates were given previously and how they were calculated. This can help your HR department get to the bottom of pay inequality present in your workplace.
Once you have seen how your organization previously calculated pay rates and gathered the necessary data from your employees, compare your company’s salaries and job responsibilities to other companies similar in industry and size of yours. This will not only help your organization identify wage inequality, but will give your company a competitive advantage in compensation when taking action to adjust salaries.
Step 3: Implement a Transparent Compensation Practice
Since over two-thirds of potential candidates stated that they would not interview at an organization that they perceive has a wage gap, your company needs to actively reveal the efforts HR is taking to implement transparent compensation practices. Even if a company is speculated to have discrimination in the workplace, your talent pool will take a huge hit.
One way to create a transparent compensation practice is to define your organization’s roles and levels. You can create a chart that shows which roles and levels are equal to each salary. This will standardize salaries amongst your employees and put an end to any pay inequality which may take place.
By creating a transparent compensation strategy, your employees will feel appreciated for their time and effort at your organization. It may also boost morale among current employees and reduce turnover rates drastically.
Step 4: Train Decision Makers
If companies or institutions base less compensation decisions on other factors besides a role and level chart, your human resource department needs to be adequately trained to do so. If your decision makers are biased and lack current pay trend knowledge, your organization could lose out on top recruits and loyal employees.
In order to train your HR department and hiring managers into being the best decision makers they can be, educate them on the compensation strategy your organization has created and how to document all decisions. Lack of proper documentation can lead to potential issues in pay inequality and may put your organization at fault legally. This will also come with a decrease in people feeling comfortable with the organization as they see this lack of equal-rights as the main image of the company.
Step 5: Continuously Monitor Pay Equity
As you train decision makers, create unbiased compensation strategies, and conduct pay equity analysis, make sure you continuously monitor pay equity to tackle salary gap. Revisit frequently to address compensation based on inflation, promotions, and current job skill demands in the workforce.
When employees feel adequately paid for their work, they will become more likely to stay at your organization and be more productive which will save your company thousands in recruiting, training, and onboarding costs that has to be paid every time there is a new employee. Transparent wage practices will also keep your workplace strong, diverse, and inclusive. Sundar Pichai once said, “a diverse mix of voices leads to better discussions, decisions, and outcomes for everyone,” which is extremely true for all industries and organizations.
Transparent compensation strategies are extremely important for every organization in this day and age of wage discrimination. Implementing sound compensation plans will not only protect you from discriminatory lawsuits, but also will boost your employee productivity and give your company a comparable-worth in pay equality and inclusion.
One of the easiest ways to address and monitor pay equity disparity is by centralizing employee data into an HR platform, such as PeopleSpheres. PeopleSphere’s cutting-edge technology will help your organization, collect accurate salary and performance data, and compare it to current market trends for similar positions in your general area.
What PeopleSpheres can provide for your company
You can collect real-time data and help simplify pay equity analysis to identify wage gaps in the labor-force. HR platforms can be a real game changer when addressing company-wide issues, such as pay transparency in annual earnings.
Make it a human resource priority to pick the best compensation strategy and software in this wage disparity. This will help your organization address pay equity and monitor it for years to come. Ensure that your HR team has a firm grasp on employee data, pay equity analysis, fair compensation practices, non-discriminatory decision making, and monitoring pay equity to guarantee your pay practices will never be unaligned again.