Pay equity is top of mind for many company leaders and compensation professionals. While we’ve made some decent progress in narrowing wage gaps, we still have quite a bit of work ahead to fully close them.
Every organization has a responsibility to do their part to close the pay gap. If you’re not sure where to start, or need some new ideas to continue making progress, these best practices can help.
Women earn 82 cents for every dollar men earn. Black men earn 87 cents for every dollar White men earn. People with disabilities earn 66 cents for every dollar those with no disabilities earn. Knowing a candidate’s salary history can influence your compensation decisions and perpetuate these long-standing wage gaps.
That’s why salary history bans are being enacted in a growing number of jurisdictions across the United States—and it’s working. Following salary history bans, women saw an eight percent increase in pay, and Black employees saw a 13 percent increase. This is a great first step toward pay equity.
Rather than asking a candidate about their salary history, some employers will ask for salary expectations instead. This can help ensure that neither party wastes their time if expectations don’t align with the budget—but it may also lead to unfair wage gaps. This is due to the expectation gap.
For example, women in the technology industry ask for lower salaries than men 65 percent of the time—for the same job at the same company. This translates to an average 3 percent controlled wage gap between men and women.
The expectation gap varies by race and gender, and nearly mirrors the eventual wages paid to each group:
It could be assumed that a candidate’s current earnings influence their expectations. Asking about expectations would only perpetuate the wage gap in the same way that asking about salary history would. If you choose to use this question during your recruitment process, consider doing so early on, and keeping this information isolated from compensation decisions.
Take a more proactive approach to setting compensation targets by building salary ranges and job grades. This can guide you toward more equitable, strategic compensation decisions during recruitment, review cycles, and promotions.
Some states even require employers to share salary ranges with candidates during the recruitment process. California and Maryland require employers to furnish salary bands upon the request of an applicant, while Colorado and Pennsylvania require employers to disclose salary ranges in job postings.
Make sure that company leaders and team members know that pay equity is a priority for your organization. You need manager support to make pay equity a reality, and team members who know they can speak up if they feel there are pay discrepancies within your organization.
Share the steps you’re taking to self-audit, as well as your plan for addressing any pay disparities. When you make adjustments, let employees know that you’re doing so, and when they will see the changes in their paychecks. This level of transparency will help you build an organizational culture that people want to be a part of—ensuring your organization’s long-term success.
People from marginalized groups are underrepresented in every level of company management. For example:
While representation of people of color and all women drop at each level of management, White men see increased representation at each job level. They hold 35 percent of entry level roles, 44 percent of manager roles, and 66 percent of C-suite roles.
Lack of representation in management roles impacts salaries and lifetime earning potential for women and people of color. Track representation and internal mobility to ensure people from marginalized groups are being hired and promoted into leadership positions. If not, dig into your data to understand why—and address the problem. For example, if you see that women aren’t being promoted at the same rates as men, a mentorship or sponsorship program could help.
Data shows that salary negotiations don’t benefit all groups equally:
Rather than allowing salary negotiations to create or widen pay gaps, rely on salary bands to make fair, competitive compensation decisions. When you present an offer or a raise, explain why you’ve assigned that particular salary, and what the team member can do to earn more in the future.
If you find that negotiations are truly necessary to close candidates and retain team members, that’s a sign you need to revisit your salary bands. Then, adjust compensation for all eligible team members.
Even with the right intentions, pay equity can get off track. Analyze pay equity at least once or twice a year to find and address discrepancies, rather than allowing them to perpetuate. This may include hiring an outside firm to run a pay equity audit, using compensation management software during your regular review cycle, and tracking key performance indicators in a spreadsheet. Reporting pay equity statistics to leadership helps keep the focus on the importance of this company goal.
Pay equity means more than salary, so make sure to include bonus and stock for a comprehensive analysis. Slice your data in different ways to look for pay gaps by gender, race, and intersectionality.
A typical organization makes pay equity adjustments for between one percent and five percent of their employees, and the average increase is 5 percent. The most common approach is to make those adjustments during compensation cycles. Doing this in tandem with merit-based adjustments and cost-of-living increases allows you to prioritize spending your budget where it’s needed. If you use a platform like Compaas, you can even see the effects your raise cycle will have on pay equity—before changes hit payroll.
Achieving pay equity requires an intentional, ongoing commitment to equal opportunity and fair compensation. These best practices are a good starting point, but it’s important to fine-tune your pay equity strategy to play to the strengths and opportunities of your organization. For instance, a company that’s transitioning to permanent remote work may choose to make pay equity adjustments as people relocate. A company that struggles to hire people from underrepresented groups into leadership roles may introduce unconscious bias training. The path to pay equity won’t be the same for any two companies, but the journey will be well worth it.