This blog is the first in a series of four that will provide organizations with actionable strategies and guidance to address the root causes of pay disparities.
Many organizations today are publicly and privately focusing on pay equity, i.e., paying the same salary to employees who have the same job (with some variances based on the employees’ experience, job performance, and time with the company). Some are signing equal pay pledges and others are transparently sharing their processes and results for the world to see. While these efforts are both laudable and critically important, we offer a word of caution:
If your company is serious about addressing pay inequities, do not simply focus on compensation–because pay inequity is not just about compensation.
And do not stop at a pay analysis and salary adjustments–because your pay disparities will surely return in the future.
That’s because pay inequity isn’t the actual problem. It’s merely a symptom of a broader, more systemic concern. If you only address the current salary issue, the real root causes will continue to manifest in your organization. In other words, pay audits and adjustments are simply band-aids for pay equity (albeit necessary and important ones). To truly reconcile inequities in pay, we must address the root causes, which will stop the bleeding and solve the underlying problems.
Key Terms About Pay
- Pay Equity – compensating employees the same when they perform the same or similar work, while considering experience, tenure, and job performance
- Pay Equality – requires equal pay for the same job
- Pay Gap – the difference between the average pay of two different groups, often men and women
Pay Equity: a longstanding, but elusive goal
According to the World Economic Forum, it will take more than 250 years to close the (uncontrolled) pay gap between men and women globally, when the aggregated salaries of all men are compared to those of all women. While the gender pay equity gap, which controls for compensable factors such as job level or experience, is smaller, the disparity between men and women still exists and needs to be addressed.
Additionally, it’s necessary to recognize that gender isn’t the only type of pay disparity. Pay inequities are compounded by race, with Black, Native American, Hispanic (or Latino/a/e), and Pacific Islander men and women earning even less than their White* counterparts. Biases, policies, and/or practices related to an employees parental status, ability, age, work history, and body type can also impact compensation.
Most organizations do want to pay fairly. It’s a business imperative, is critical for legal compliance, and is necessary to create an inclusive workplace and be an employer of choice. Beyond the legal ramifications of pay discrimination, pay equity issues also make it more difficult to recruit and retain employees. Consumers are increasingly making buying decisions based on whether companies’ actions are aligned with their values, and organizations with pay equity problems can lose valued customers.
If everyone understands that pay equity is critical, why is it so hard to attain?
It’s not the salary: it’s the system
If we only look to solve a pay disparity, we only understand part of the story. Pay inequity is actually a lagging indicator of many issues that span the entire employee experience.
For example, let’s look at Angie, a female manager in an organization. Despite having similar responsibilities, experience, and performance, Angie does not make as much as her male counterpart. Providing a salary increase, is one step in remediation, but without action to address root causes of the pay disparity, there risk that her pay could fall behind in the future and it won’t address whatever contributed to the initial inequity or prevent the next female manager from experiencing the same wage gap.
Instead, you must take a more in-depth look at your organization and the entirety of your talent management systems, including recruiting, hiring, development, promotion, and retention practices. For example, when Angie was hired, was she paid the same as male employees entering that role with similar qualifications, regardless of her salary history? Was she given similar opportunities for developmental projects, mentoring, actionable coaching and feedback, and advancement as male counterparts? It’s not only whether Angie was paid the same, but it’s also whether Angie had the same opportunities to be paid the same.
While a large focus of this example is centered on gender, talent practices that result in pay inequities must be viewed through additional and intersecting lenses to gender, such as race/ethnicity, age, representation at senior management levels and other identifiers, to holistically make progress toward pay equity.
In short, there may be many organizational practices that are inadvertently causing or exacerbating pay disparities in your organization. All of these must be examined and addressed to solve-and prevent-pay disparities.
COVID-19 and pay equity
Sometimes, even seemingly unrelated events can affect your organization’s pay equity. Although COVID-19 challenges us all in many ways, it may have a disproportionate effect on working mothers’ careers.
According to Women in the Workplace, a large-scale study on the state of women in corporate America, one in four female employees is considering leaving the workforce because of the pandemic. Mothers are significantly affected because they are usually responsible for a greater part of household and childcare responsibilities, the survey said. They are also more likely to worry about their performance being judged because of their childcare responsibilities.
When women leave the workforce or reduce their hours temporarily, even if they return later, they may not have the same opportunity for career and salary progression as if they had stayed. And while these decisions prompted by COVID-19 may be made by an employee rather than an employer, these circumstances and pressures that impact one gender more than the other can create or exacerbate a salary gap.
The Need for a Holistic Approach to Pay Inequity
Creating and maintaining pay equity is complicated. But the first step is recognizing that it is not simply a salary issue. The inequity may be unintentional, but correcting it must take an intentional, consistent, and holistic approach.
In our next blog, we will take a deeper dive into one facet of this holistic effort: how companies can examine and retool their talent acquisition practices to ensure they do not lead to pay inequities.