Employers are aware of the gender and race wage gap and the multitude of tools to “attack the gap.” Indeed, many employers have implemented robust annual pay equity analyses in an effort to identify whether they have a gender or race-based gap and implement any needed pay adjustments.
They do this for a myriad of reasons, including retaining talent, mitigating litigation risk and avoiding public shaming. Despite their best efforts, however, that stubborn gap persists and each year, well-intentioned employers make additional salary adjustments, each time hoping that this will be the year they close the gap.
Why have these well-intentioned efforts fallen short? It may be because they do not attack the multifaceted nature of the problem. The “wage gap” is not just about wages; in fact, wages are only one piece of this complex puzzle. To avoid a cycle of pay adjustments with no sustained progress, employers need to dig deeper into their pay analyses and recognize that the solution to the wage gap may lie in understanding how diversity and inclusion meet pay equity.
Assemble Your Team
The first step in getting to the root cause of a pay gap is building an interdisciplinary team. In addition to compensation and benefits representatives, this initiative requires input from, among others, diversity and inclusion, talent acquisition, performance management, training and development, and in-house and outside legal counsel. As with your pay equity study, it is critically important that research into pay disparities be protected from disclosure by the attorney/client and attorney work product privileges.
What Is Driving Your Pay Gap?
Take a step back from the analysis and consider the big picture. The goal is to identify the employment process or policy that is driving the pay differential. Start by looking for patterns.
- Identify whether the pay gaps are isolated to a particular department, level or job category such that the disparity may stem from a particular manager or decision-maker.
- Are the pay gaps concentrated at the senior management levels? Research shows that the pay gap for women widens as they move into the senior positions within an organization.
- Determine if the pay differential stems from a disparity in base pay or an add-on, such as the annual bonus or long-term incentives (LTIs).
- Review starting pay for the impacted group in comparison to their counterparts. Take a hard look at the process for setting starting pay. Is your company still asking applicants for their salary history? Is there a negotiation process? What factors are taken into account when determining starting pay?
- If the disparity stems from the annual bonus or stock award, how are those decisions made?
- What checks and balances are in place to minimize bias and promote consistency and compliance with company policies?
- Many companies say they “pay for performance.” Make sure your pay equity analysis shows a correlation between pay and performance ratings. Also, are there checks in place to minimize the biased performance ratings? Are managerial decisions reviewed in light of your pay equity goals?
- Consider the representation of women and minorities in your workforce. For example, are female employees, including women of color, concentrated in lower level positions? Are they being promoted at a slower pace than comparable men? If the answer to any of these questions is “yes,” you may have a glass ceiling problem.
- Is attrition among the impacted employees greater than expected, either throughout the company or concentrated in certain areas? Review internal complaints for patterns such as allegations of a hostile work environment or lack of opportunities for training or advancement.
Be prepared to act on what you learn. Rarely is the solution for a pay equity problem easy or quick because it requires that many parts of your company be fully engaged in crafting the remedy. However, there are tremendous benefits to be gained by getting pay equity right: lower attrition, improved employee performance, enhanced moral, positive public image, material cost savings and significantly less legal exposure.
About the Author
Consuela Pinto is a shareholder and head of the pay equity practice at FortneyScott.