Close
Learning Methods
Classroom
A traditional classroom couples on-site learning with the added value of face-to-face interaction with instructors and peers. With courses and exams scheduled worldwide, you will be sure to find a class near you.
Interaction
Highly Interactive
On-going interaction with instructor throughout the entire classroom event
Interaction with peers/professionals via face-to-face
Components (May Include)
Onsite
On-site instructor-led delivery of course modules, discussions, exercises, case studies, and application opportunities
Supplemental learning elements such as: audio/video files, tools and templates, articles and/or white papers
E-course materials available two weeks prior to the course start date; printed course materials ship directly to the event location
Duration
One + Days
Varies by course ranging from one to multiple days
Technical Needs
Specific requirements are clearly noted on the course page
Virtual Classroom
Ideal for those who appreciate live education instruction, but looking to save on travel. A virtual classroom affords you many of the same learning benefits as traditional–all from the convenience of your office.
Interaction
Highly Interactive
On-going interaction with instructor throughout the entire virtual classroom event
Interaction with peers/professionals via online environment
Components (May Include)
Live online instructor-led delivery of course modules, discussions, exercises, case studies, and application opportunities
Supplemental learning elements such as: audio/video files, tools and templates, articles and/or white papers
E-course materials available up to one week prior to the course start date. Recorded playback and supplemental materials available up to seven days after the live event.
Duration
Varies by course ranging from one to multiple sessions
Technical Needs
Adobe Flash Player
Acrobat Reader
Computer with sound capability and high-speed internet access
Phone line access
E-Learning
A self-paced, online learning experience that allows you to study any time of day. Course material is pre-recorded by an instructor and you have the flexibility to view content modules as desired.
Interaction
Independent Learning
Components (May Include)
Pre-Recorded
Pre-recorded course modules
Supplemental learning elements such as: audio/video files, online quizzes
E-course materials are available online within one business day of purchase
Optional purchased print material ships within 7 business days
Duration
120 Days - Anytime
120-day access to e-course materials available online within one business day from the date of purchase
Direct access to all components
Technical Needs
Adobe Flash Player
Acrobat Reader
Computer with sound capability and high-speed internet access
Close
Contact Sponsor
E-Reward
Online
Paul Thompson
Phone: 1 44 01614322584
Contact by Email | Website
Close
Sorry, you can't add this item to the cart.
You have reached the maximum allowed quantity for purchase in your cart or the item isn't available anymore.
Product successfully added to your cart!
Price
View your cart
Continue shopping
Please note our website will be down this Friday, November 5 from 9pm ET – 11pm ET for routine maintenance. We apologize for any inconvenience.
WORKSPAN
WORKSPAN DAILY |

The Impact of Pay Compression on Pay Equity

051222-payequity-780x450-SM.png

The U.S. labor market has been on a roller coaster ride, from massive job losses at the start of the COVID-19 pandemic to unprecedented growth in last year.

According to the Economic Policy Institute, the labor market lost 22 million jobs in spring 2020.  In the past 12 months, however, the economy added 6.6 million jobs and is on track to return to pre-pandemic labor market conditions before the end of 2022. Unfortunately, there are not enough people looking for work to fill available positions. According to the Bureau of Labor Statistics, nearly 5 million people, who left the workforce at the start of the pandemic, have not returned and are not looking for work.  

In December 2021, the Society of Human Resource Management projected that labor shortages would continue through 2022 with wage growth topping 4%. Because of the tight labor market, employers are driven to offer higher starting pay to attract qualified talent to fill critical roles. When employers fail to take into account the impact of higher starting salaries on compensation levels of existing employees in comparable or more experienced roles, they inadvertently create a pay compression problem.

Pay compression occurs when there is little difference in pay between employees with different levels of skill, responsibility and/or qualifications. The current race for talent has created pay inequities between newly hired and long-term experienced employees and between subordinates and their supervisors.  

Offering higher starting pay addresses employers’ current labor shortage problem. But the resulting pay compression inevitably leads to increased turnover among the more senior and/or highest performing employees. Pay compression also negatively impacts pay equity exposing employers to significant legal risk and reputational harm.

Pay Inequity: An Unintended By-Product of Pay Compression

Pay compression often results in co-workers performing the same or similar jobs being paid differently with the most recent hire earning more than a long-term employee. Countless articles have been published on the impact of pay compression on employee morale and turnover rates.  However, very little has been reported on the effect of pay compression on pay equity and related legal risks. This is surprising given that current labor market conditions create the perfect storm for creating pay inequities.

To minimize the risk of biased decision-making, employers manage pay equity and legal risk by implementing a comprehensive compensation policy that guides pay decisions, assigning positions to pay ranges based on market drivers, and employing a system of checks and balances to prevent bias. However, when faced with challenging labor market conditions, policies and guardrails are often pushed aside in an effort to attract much needed talent and fill critical roles quickly at any cost. The result may be similarly situated employees who are paid differently, which may allow for the inference of biased decision-making.  

Discussions related to pay equity focus almost entirely on the impact on women and employees of color. However, where pay compression is the driving force behind the pay inequity, employers should not overlook the risk of adversely affecting older employees with more company seniority who may be paid less than younger, newly hired workers. 

Role of Pay Transparency

The idea that pay rates for any role are confidential is an antiquated notion. Indeed, the current buzzword in pay equity circles is “pay transparency.” Twenty states and the District of Columbia have passed legislation prohibiting employers from taking adverse action against employees who discuss their pay.

On the federal level, the National Labor Relations Act gives employees the right to communicate with other employees at their workplace about their wages. Similarly, federal contractors subject to the jurisdiction of the Office of Federal Contract Compliance Programs are prohibited from firing or discriminating against employees for discussing, disclosing or inquiring about their own pay or the pay of their coworkers.

The most recent trend in the push for pay transparency is at the state level. There is a proliferation of state and local laws and proposed bills requiring employers to provide salary range information to applicants for posted positions either when requested or at specific points in the hiring process. Colorado is the most progressive, requiring pay ranges be included in job postings. New York City passed a similar bill in December 2021 requiring employers to state the minimum and maximum salary in all posting for an open posting, promotion or transfer opportunity.

Minimizing Negative Impact on Pay Equity and Managing Legal Risk

Pay compression can lead to an unintended impact on employees based on gender, race, ethnicity or age.  Further, as discussed above, the heightened transparency around pay makes it more likely that employees will become aware of the fact that they are paid less than recently hired colleagues. There are steps employers can take to minimize legal risk and preserve or even enhance their pay equity status.  

•    Continue to conduct annual companywide pay equity analyses under attorney/client privilege. In addition, during this period of rapid competitive hiring, periodically review pay differences between employees in the same or similar jobs for equity imbalance. Make adjustments where necessary.

•    Review current pay grades against current market trends. Adjust grades where necessary, ensuring appropriate pay differentials between each level. Also, consider whether certain ranges for hard-to-fill roles need to be expanded to allow more differentiation between employees. Identify any current employees who are not paid in-line with the current market rate for their role. Implement a plan for raising the pay of employees who are out of line with the rate for their roles.

•    Maintain contemporaneous documentation of the legitimate, non-discriminatory reasons for offering new hires starting wages close to or more than their comparators.  Documentation is critical to defending against pay discrimination claims.

•    Consider offering new hires a one-time signing bonus rather than a base pay rate that exceeds the pay rate of current employees in similarly situated roles.     

Implementing a compensation program that eliminates and minimizes the risk for gender and race/ethnicity-based wage gaps is time and resource intensive. It can take multiple years to achieve pay equity. It takes almost no time to undo all the work that went into developing and implementing a fair compensation program.  

Thoughtful decision-making, monitoring compensation decisions and implementing adjustments where necessary is critical.


About the Author


Consuela_Pinto (1).jpg

Consuela Pinto is a partner in FordHarrison’s DE&I and Affirmative Action/OFCCP Compliance practice groups.


About WorldatWork

WorldatWork is a professional nonprofit association that sets the agenda and standard of excellence in the field of Total Rewards. Our membership, signature certifications, data, content, and conferences are designed to advance our members’ leadership, and to help them influence great outcomes for their own organizations.

About Membership

Membership provides access to practical resources, research, emerging trends, a professional network, and career-building education and certification. Learn more and join today.