Addressing pay equity at your business

Businesses today are under increased pressure to fully understand and thoroughly respond to the issue of pay equity. And neither of these two broad undertakings is particularly easy.

First, fully understanding what pay equity is and whether and how it’s played out at your company calls for research, analysis and perhaps some difficult discussions. The second part, responding to it in practical and effective ways, can entail changing long-standing employment processes and investing in additional training and communications initiatives.

Philosophy and practice

Simply defined, pay equity is the philosophy and practice of “equal pay for equal work.” That doesn’t mean everyone receives the same amount of pay. It means compensation is free of unjust biases historically related to demographic factors such as age, race, gender, disability, national origin and sexual orientation. Employees’ pay, both upon hire and as adjusted through raises, should be determined on the basis of objective, relevant factors such as education and training, experience, skills, performance, and tenure.

As mentioned, determining whether pay inequities exist within your business will entail a careful and honest assessment. Many companies conduct a formal pay equity audit. This is a thorough statistical analysis of compensation history, policies, and structure. The audit’s objective is to identify any inconsistencies, gaps, and incongruities that can’t be rationally explained.  We encourage including a legal team in the audit process to ensure that applicable employment laws are also being considered.

Best prevention practices

To prevent instances of inequitable pay at your company, here are some best practices to consider:

Use only initials or random ID numbers during early screenings of job candidates. Minimizing the ability to distinguish candidates by ethnicity or gender can reduce the likelihood of biases in hiring and initial compensation decisions. While this is a great practice for larger employers, it’s not always possible for some small or mid-size employers who may not have an Applicant Tracking system with this functionality.

Refrain from asking candidates about their pay histories. Women and people of color are more likely to have been paid less in their previous positions. Using historical compensation to set their current salaries only compounds pay disparities. Instead, consider asking candidates for their salary expectations for a new position.

Generate objective criteria for recruiting, hiring, compensating, evaluating, and promoting employees. Implement standard pay ranges that reflect each position’s value to the business.

Limit the ability of managers or supervisors to single-handedly adjust pay for specific individuals. Such one-off decisions can lead to pay inequities.

Help managers and supervisors understand pay equity. Training is critical in helping them recognize how to best develop a culture that embraces pay equity and how to discuss the issue with their employees. Particularly if managers or supervisors are in any way involved in setting new hire wages, they should have training around pay equity in general and the company’s compensation philosophy.

Communicate openly and regularly with staff. Let employees know how you set compensation and reassure them that they can discuss pay with their supervisors without fear of retaliation. More transparency tends to foster greater pay equity.

Tough questions

Make no mistake, pay equity is a tricky issue that can raise a lot of tough questions. Dealing with it won’t be a “one-and-done” activity. However, establishing your business as one that pays equitably will bolster your “employer brand” in today’s competitive labor market. Our HR & Payroll team can help you conduct a pay equity audit as well as better understand all aspects of your compensation structure – contact us today.