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Do’s and Don'ts of a Successful and Effective Pay Equity Discipline

Jen Dewar
Mar 18, 2021 6:15:00 AM

Almost half (46 percent) of compensation professionals plan to conduct a pay equity analysis in 2021, compared to just 38 percent who said the same last year. As more consider the state of pay equity within their own organizations, we can make more progress toward closing the wage gaps overall. 

Whether you’re just getting started with pay equity or want to make a stronger impact, read on for some guidance on a successful and effective pay equity discipline. 

Don’t ignore pay equity. Do make it a priority.

Pay equity has been left on the backburner—or completely out of mind—for far too long. The gender wage gap currently sits at 18 percent, while Black men see a 13 percent pay gap and Latinos see a nine percent pay gap. 

Every employer needs to do their part to close the wage gap by paying attention to their own internal pay inequities. It’s not only the right thing to do, it’s good for business. Pay inequities can lead to turnover, negatively affect revenue, and put you at risk for litigation. In the United States, it’s also illegal to pay people differently on the basis of gender, race, color, religion, sex, national origin, age, or disability.

It’s time to prioritize pay equity.

Don’t think a pay equity audit every two years is enough. Do implement a continuous pay equity practice. 

While some employer liability may be reduced by conducting a pay equity audit every year or two, it’s important to also ensure pay equity between audits. Pay equity can quickly be thrown out of whack as you hire new employees, make off-cycle promotions and raises, or allow team members to transition to remote work.

Stay on top of pay equity throughout the year with a continuous pay equity discipline. This can help you make more informed compensation decisions, and should result in fewer and smaller fair pay adjustments over time.

Don’t look at just cash. Do include bonus and stock as well.

Pay equity means more than salary. While women earn 82 cents for every dollar a man earns, they own just 47 cents in equity for every dollar men own. Black and Latinx employees make up a very small proportion of employee stakeholders, and hold a disproportionately low percentage of total equity wealth. This only exacerbates pay inequities, and is actually illegal under the United States Equal Pay Act, which requires that employees be paid in the same form.

To get a thorough understanding of pay equity, it’s important to look at salary, bonus, and stock. 

Don’t just justify inequities. Do focus on comprehensive pay equity.

True pay equity means providing equal pay for substantially equal work and providing equal opportunities at all job levels and disciplines. 

For instance, people from underrepresented groups may be paid appropriately for their roles, but be underrepresented in higher paying job levels and disciplines. Upon deeper inspection, you may find that they have the tenure and performance record to be promoted to the next job level, but simply haven’t been.

Make it a practice to look at all of your systems in unison to practice comprehensive pay equity. This includes looking at performance, tenure, promotion rates, and internal mobility. Compare these by demographic group, including intersectional groups, and be discerning when something doesn’t look right.

For instance, performance-based compensation can be highly subjective and inconsistent. A data analysis from Xactly found that women in sales roles earn lower salaries and commissions than men in sales roles, even when performing three to four percentage points higher. Rather than blindly justifying these inequities – or worse, creating justification – dig in to ensure true pay equity.

Don’t try to do this all in spreadsheets. Do use the right technology.

Effective pay equity reviews look at many different angles to identify pay differences. For example, you may want to review average salaries and compa by demographic overall, and by department, location, and function. Then you may drill down to look at each area by intersectionality. Pulling the right reports, combining data sources, and analyzing results would be a tedious process in spreadsheets, limiting how often you could perform such an analysis.

The right compensation management platform, however, can provide an instant snapshot of internal pay equity. You can quickly slice and dice your data to gain a full understanding of where you have pay differences, and proactively identify trends that need to be addressed.

A modern compensation platform can also guide you toward making better compensation decisions. Imagine if you could quickly see which employees were below band, then quickly review each person’s range penetration and compa ratio, how long they’ve been with the company, and details about their last raise. Or if you could identify managers that could benefit from compensation training.

Utilizing the right technology can really level-up your pay equity discipline. 

Final thoughts

Pay equity is an important topic that deserves our attention, and requires action. There’s more to a pay equity discipline than identifying and justifying pay differences. Dig in to understand why pay differences exist, and what you can do to eliminate them. Focus on diversity within every job level and function, and ensure that compensation is distributed consistently across your team. Only then can you achieve true pay equity.

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