Managing Pay Equity

California’s upcoming requirement for employers to file annual equal pay reports, as of March 2021, is but one of many initiatives falling into place around the country to address pay disparity issues. Alongside California’s, similar actions are coming forth in Colorado and some 12 other states. 

In other words, managing pay equity has become a strong focus for C-Suite and HR leaders. Organizations are increasingly being required to take strong action around the issue. With that in mind, here are some best practices toward managing pay equity within your company. 

Perform a Pay Equity Audit

In order to address an issue, you have to understand the extent of the problem. The key is to evaluate workers on a like for like basis. Now within that, it’s OK to take experience, education and performance into consideration. However, those elements must not be tainted by considerations of gender, race or age. 

Note the amount of time each employee has been with the company, and the classification of their duties, in addition to their gender, age and race. As you strive to measure like against like, this may require some realigning of job titles within your organization. 

When these factors identified, it will be easier to spot any outliers — the disparities made obvious by factors other than those directly related to job performance, educational background or employment history. This is where most businesses discover subjectivity is in fact taking place in their compensation structure. 

Closing the Gap

Based upon the findings of the audit, some effort is likely to be required to close pay equity disparities. Mercer, a leading worldwide HR management consulting company, uses a Pay Equity Calculator™ to gain insights into pay gaps by ethnicity and gender to evaluate pay distributions among each group.

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The calculator also gives you the ability to run simulations of a variety of adjustment strategies in order to arrive at a remediation strategy. The tool also enables you to determine the impact of the actions you’ll need to take to make correcting any issues as benign as possible to your bottom line.  

Finding the Source

It’s key to discover how these biases manifested themselves in your organization in the first place. It may be as simple as inconsistent job classifications that need to be overhauled and brought into alignment. Or, it might be the existence of disparate hiring practices that need to be made uniform throughout your organizational structure. 

It’s important to note pay disparity is something upon which an eye must be kept, as it tends to creep back in over time. To this end, it’s critical to ensure your HR team is tasked with evaluating hiring, promotions and compensation on a regular basis. People leave jobs, new hires come aboard, duties get reassigned and departments reorganize. All of these factors will contribute to equity disparities creeping back in after you’ve eradicated it. 

Understanding Your Why

Yes, legal compliance is rapidly becoming a concern in this area. However, fear of litigation is a rather poor reason to engage in this undertaking. Ethics and competitiveness are much stronger — and more compelling — reasons for doing so. 

Paying your employees well is a good way to retain top talent. Meanwhile, approaching this issue from an ethics perspective gives you an opportunity to demonstrate your company really cares about maintaining a diverse, inclusive and accepting work environment. This is yet another way to demonstrate your concern for your workforce and engender its loyalty. 

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Simply put, making a decided effort toward managing pay equity within your organization will benefit you in a number of very important ways, the least of which is legal compliance. 

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