In recent weeks, many organizations have been examining racial diversity and equity within their firms. Organizations can take various approaches to promote equality and inclusion in the workplace, one of which is achieving pay equity.
Why is pay equity important?
Pay equity is mandated and protected by legislation including:
- Equal Pay Act
- Title VII of the Civil Rights Act,
- Age Discrimination in Employment Act
- Americans with Disabilities Act
- State pay equity laws
Even organizations that are compliant with these laws may have pay practices that inadvertently lead to pay gaps. Some common causes of pay gaps are:
- Inconsistent hiring, promotion, and annual salary adjustments practices
- Compensation practices (annual salary review, bonus payments, etc.) are based on discretionary processes
Minimal structure and oversight during the process of determining compensation can decrease employee engagement and may cost your organization its competitive edge. 67% of employees say they would not apply to work for a company where they believe a pay gap exists and 34% of under-engaged employees cite fair pay as the reason for lack of engagement. On the flip side, organizations with high employee engagement have 4.3x higher growth rates. Eliminating pay gaps can boost your engagement and growth.
How are pay gaps remedied?
Organizations can tackle pay equity by conducting a pay gap analysis to identify gaps and modify the pay practices behind them. The road to pay equity may require several adjustments over a long period of time and conducting a pay gap analysis will provide your firm with a road map for changes to your compensation practices going forward.
When conducting a pay equity analysis,
- Work under attorney-client privilege
- Include all compensation analysis, not just base pay
- Develop a methodology for addressing identified pay gaps
- Put off the analysis until a claim is filed
- Forget to develop a communications plan
- Remediate pay gaps without consulting with legal counsel
Many organizations have reservations about analyzing pay gaps within their organization as it may unearth some unfavorable practices and impact employee relations. As compensation experts, we urge you to set your fears aside and take whatever measures necessary to achieve pay equity. It will protect you from legal consequences, increase your employee engagement, and provide balance and diversity within your firm.
Our nation is currently experiencing a wave of activism for racial equality, and many organizations are capitalizing on this time to examine internal practices that can be adjusted to promote inclusion and equity. Now is a perfect time to conduct a pay gap analysis in your organization. If your analysis returns results that indicate few changes need to be made, your employees will appreciate you for demonstrating your equitable approach to compensation. If your analysis reveals several issues, you can take the opportunity to communicate clearly with employees about the changes you will make to resolve pay equity problems, and they will appreciate your commitment to identifying and remedying compensation gaps. Take advantage of this time when transparency and change are valued and accepted to investigate your compensation practices and resolve any pay gaps.
How can we help?
Compensation Works can partner with you to assess potential risks and conduct a thorough pay gap analysis, . We don’t just identify pay gaps; we analyze the results to determine root causes and provide you with recommendations to remediate pay gaps and avoid them in the future.