Do you know what pay equity means for an organization? We’ve compiled all of the relevant information for you here so you can stay informed on all of the latest in pay equity, the gender pay gap, pay transparency and much more.

Let’s Talk Pay Equity

Every worker has the right to expect equal pay for equal work regardless of their gender, race, religion, national origin, age or physical/mental abilities – whether they work full time or are part time workers. In addition, a lot of attention has been given to pay equity in recent years thanks to recent laws enacted at the state level as well as greater enforcement of legislation at the federal level (e.g. The Equal Pay Act of 1963, Title VII of The Civil Rights Act of 1964,The Lilly Ledbetter Fair Pay Act of 2009).

Employers engage in pay equity analysis to ensure equal pay between employees in similar roles. The objective is to determine that pay inequities are justified by compensable factors, like location and tenure, and not by unjustified factors, like gender or race. According to the PayScale Compensation Best Practices Report, 38 percent plan to conduct some type of pay equity analysis in 2020.

Even with all this activity and attention, wage gaps persist. Part of the issue is that pay equity is often misunderstood. Additionally, the solution takes time and investment and a willingness to acknowledge and correct past practices that may have been unfair. No organization can do one thing – say a pay equity analysis – and expect that the work is done. Pay equity is an ongoing commitment that requires a high degree of integrity.

The Numbers: A Tale of Two Gaps

At PayScale, we’ve been fortunate over the years to be able to get a high-level view of pay equity due to the compensation data we see from both employees via our free salary survey and employers via our compensation management software for businesses. We have published research on the gender pay gap for years and recently have been able to dig into race as well.

There are two important gaps to talk about — the uncontrolled wage gap, which doesn’t control for any compensable factors like job level or experience, and the controlled wage gap, which controls for as many factors as possible, including job title, industry, location, years of experience, education, etc.

For example, the uncontrolled gender wage gap is currently 81 cents on the dollar when comparing all working women to all working men regardless of job occupation, industry, education, geography, etc. This metric is useful in analyzing the opportunities of women compared to men holistically, as women are more often funneled into lower paying positions or incur a wage gap penalty for having children or being capable of having children.

The controlled gender wage gap is much narrower, but it’s not zero. PayScale’s latest numbers place it at 98 cents on the dollar. This number is what is meant when the term “equal pay for equal work” is used. This number has also not changed for many years.

Pay equity advocates sometimes conflate these two gaps. They’ll use the uncontrolled wage gap of 81 cents on the dollar and say that women aren’t getting “equal pay for equal work”. As we just explained, this isn’t correct and can undermine the fight for pay equity. The uncontrolled gender pay gap is still important, though. It is evidence of inequality when talking about the representation of women in higher paying occupations, such as STEM-related fields or executive leadership, and the barriers that inhibit women from achieving more advanced careers compared to men.

There are two gender wage gaps – the uncontrolled wage gap signifying equal opportunity and the controlled wage gap signifying equal pay for equal work.

True Pay Equity: Equal Access to Higher Earning Potential

To put it simply, women, people of color and other historically marginalized populations experience barriers to many of the best-paying jobs in the labor market. The jobs with the highest compensation include STEM jobs and executive leadership roles. According to Catalyst, women make up 35.5 percent of all STEM fields in the United States, with underrepresentation particularly in engineering and computer or information sciences. Despite constituting 50 percent of the population, women also make up only 5 percent of Fortune 500 CEOs.

This is why it is important to look at both the uncontrolled and controlled pay gaps and consider representation of historically underrepresented people on executive teams, boardrooms, and high-paying job families as part of pay equity analysis. Pay equity isn’t just about equal pay for equal work. It is also about equal opportunity, economic empowerment, and wealth distribution, and the systemic issues, unconscious biases, and social norms that constrain people from achieving all that they might.

Solving for pay equity holistically is a tall order, but there is plenty that organizations can do to cultivate an environment that leads to more equitable outcomes for all employees.

Let’s talk about a few of them.

Intentional Recruiting

There is robust evidence that diverse teams produce better outcomes. When an organization builds diversity into its DNA, it’s more likely to ask more and better questions. Diverse teams are also less likely to be assumptive and more likely to rely on factual evidence for answers, ultimately resulting in higher returns on equity and higher net income growth.

If your organization lacks diversity, don’t assume you can solve that issue without significantly disrupting the recruiting process. Many organizations fall into patterns — e.g. recruiting from the same set of schools or relying heavily on employee referrals. But patterns result in more of the same, even with the best of intentions.

PayScale published a study examining employee referrals and found that they disproportionately benefit white men. That’s not to say you can’t hire candidates referred by employees, but you should still take measures to expand your candidate pool and implement processes, like blind resumes, that ensure all candidates are evaluated fairly.

Competitive Job Offers for All Employees

At PayScale we have a mantra: “Price the job, not the person.”” Before you even talk to candidates about a job opening, the work of determining the salary range for the open role should have already been done.

For years, it has been standard practice to ask job candidates about their salary history during the recruiting process to set the stage for negotiation. However, recent legislation prohibits employers from asking about salary history in a number of states. Whether you are in a location that has passed legislation on pay history or not, it would be wise to avoid this tactic. What someone has made historically isn’t necessary relevant to the open position under discussion and basing compensation on salary history has been shown to disadvantage women and people of color.

If you focus on pricing the job rather than the person, bias is removed from the equation. Instead, an offer is determined based on qualifications and where a candidate falls into a pay range based on compensable factors like education, years of experience and geography. If it’s lower in the range due to inexperience, consider how you’ll plan to move them through the range over time. If it’s higher in the range, consider how the employee might progress or be promoted within the company.

If you focus on pricing the job rather than the person, bias is removed from the equation. Instead, an offer is determined based on qualifications.

PayScale's 2019 Equal Pay Day Panel

Compensation industry leaders from various sectors gathered to discuss pay equity challenges and best practices.

Watch the Video

Equitable Employee Experience Start to Finish

Inclusion is a concept that has received a lot of focus in the last few years, but few organizations are getting it right. Diversity and inclusion expert Verna Myers provided some helpful framing: “Diversity is being invited to the party; inclusion is being asked to dance.”

Representation alone is not enough. Historically underrepresented groups must also become involved and encouraged to participate. If employees don’t feel they belong and have a path to advance within the organization, they’re unlikely to stay. You know you have a problem if the progress you’ve been making in terms of diverse hiring is all within junior positions. If everyone doesn’t have the same opportunity to advance, then pay equity will always be out of reach.

PayScale published a study on how employees are treated when they ask for a raise and found that women of color are 19 percent less likely to receive a raise compared their white male peers, even in the controlled group. Even more surprising, men of color are 25 percent less likely to receive a raise compared to their male white peers.

Not enough companies make a concerted effort to uncover and correct unconscious bias in the workplace. Most biases that affect underrepresented groups in the workplace begin at the decision-making level, and currently, the people with the most decision-making power are white men. To combat unconscious bias, you should have standardized processes around pay communications, merit-based raises, and career progression. You also need to be training managers on these processes.

Benefits that Support Equitable Participation

The majority of organizations still expect the bulk of employees to work on-site surrounded by other employees for at least 40 hours per week. However, flexible work locations, flexible work hours, and remote work opportunities are becoming more common.

Advancements in technology make telecommunicating more effective than it has ever been, which has the benefit of opening up the labor market to a workforce that has been traditionally unable to contribute. This includes people with disabilities that make a standard work environment challenging or impossible. It also includes women with children, men with children, or adults who must care for other adults.

Flexible hours and remote work opportunities are also beneficial to the standard workforce, as it allows for easier management of home and family and general work/life balance. According to PayScale’s 2020 Compensation Best Practices Report, 48 percent of companies now offer remote work opportunities. As technology continues to advance, this number is likely to grow over time, as will the eligible workforce.

All this is to say that pay equity is only one piece of equal opportunity in the workplace and that forward-thinking organizations can differentiate their employer brand in a tight labor market by considering all the measures that can be taken to create equal opportunity, celebrate diversity, and build a rewarding experience for all employees.

PayScale on Pay Equity

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