Equal Pay Day marks the point when the average woman’s current earnings, combined with what she earned in the previous year, equals what the average man was paid last year. This year, equal pay day came early, on 15 MSalaryarch, because the gender wage gap in the US narrowed by 1% Now, women generally earn, on average, 83 cents to every dollar earned by the average male. Importantly, we have not yet reached equal pay day for Black, Native American, Latina, and certain subpopulations of Asian women.
The ‘wage gap’ is not just about wages; in fact, wages are only one piece of this complex puzzle. The greatest tool for attacking the wage gap in any workplace is a robust pay equity analysis coupled with a root cause assessment. The analysis identifies the gaps, but the root cause assessment identifies the driver and the solution.
Getting to the root cause of a pay gap involves:
- organising an interdisciplinary team that includes representatives from compensation, total rewards, diversity and inclusion, talent acquisition, performance management, training and development, and in-house and outside legal counsel;
- establishing legal privilege over the assessment to protect it from disclosure;
- looking for patterns.
Looking for patterns can involve some or all of the steps and approaches described below.
Identify whether the pay gaps are isolated to a particular department, level, or job category such that the disparity may stem from a particular manager or decision-maker.
Determine if the pay differential stems from a disparity in base pay or an add-on, such as the annual bonus or long-term incentives.
Review starting pay for the impacted group in comparison to their counterparts. Is your company still asking applicants for their salary history? Is there a negotiation process? What factors are taken into account when determining starting pay?
If the disparity stems from the annual bonus or stock award, consider how those decisions are made. Are there guidelines in place and, if so, have they been followed?
Many companies say they ‘pay for performance’. Confirm that your pay equity analysis shows a correlation between pay and performance ratings. Also, are there checks in place to minimise biased performance ratings? If there is not a correlation between pay and performance ratings, what are your actual drivers of pay?
Consider representation by gender and race/ethnicity in your workforce. For example, are female employees, including women of colour, concentrated in lower-level positions? Are they being promoted at a slower pace than their comparators? If the answer to any of these questions is ‘yes’, you may have a glass ceiling problem.
Is attrition among the impacted employees greater than expected, either throughout the company or concentrated in certain areas? Review internal complaints for patterns such as allegations of a hostile work environment or lack of opportunities for training or advancement.
Rarely is the solution to a pay equity issue easy. However, there are tremendous benefits to be gained by getting pay equity right: lower attrition, improved employee performance, enhanced morale, positive public image, material cost savings, and significantly less legal exposure.
This article was written by our colleagues from Ford Harrison LLP, the US Ius Laboris lawfirm.