Now that we’re heading into May and Equal Pay Day is behind us, it is crucial to remember that the most important parts of our compensation efforts are our people, having engaging and transparent conversations, accomplishing what we set out to do, and ultimately, paying fairly. In fact, we should probably focus on paying fairly year round. What made me think of it, you may ask? I was preparing a slide deck to use in an upcoming training about modern compensation, searching for an image for CEO. My google image search results showed a plethora of male images including images of males in front of the most recognizable names like HP, Walt Disney, Google, and McDonald’s. The very first woman that showed up in the CEO search was CEO Barbie. While this may be great strides for Barbie, it doesn’t bode super well for narrowing the uncontrolled pay gap for women. I’ve done a fair amount of speaking and writing about fair pay this month. A few questions have come up that bear sharing.
Why should I care about fair pay?
The most recent US Bureau of Labor Statistics (BLS) data shows that Americans 25 and older with a four-year college degree, have an unemployment rate of 2.8%. It’s an incredibly tight talent market out there, with Millennials moving into management roles and expecting more from their employers and the first Gen Z workers poised to enter the workforce in June. Paying fairly is a critical step in keeping the talent you have, and bringing new talent in the door.
Paying fairly is also good for business. Diverse teams lead to better business results. Infusing your talent pool with greater diversity gets people used to thinking in new ways, more creatively, more innovatively, and leads to finding new solutions to existing challenges.
What does paying fairly actually mean?
There are lots of different ways to ensure fair pay. Some are required by various state and national laws, some are good business. Here are a few considerations:
– Pay fairly relative to the market or markets in which you compete for talent. Complete a market study to know where your employee pay stacks up to the market. Paying fairly may not mean using the same strategy for all functions. You may decide to target a more competitive market for some jobs or a less competitive market for others.
– Pay fairly across the different functional areas of your organization. One benefit of having all your jobs on one compensation structure is that it allows you to see how your jobs relate to one another. Your entry level job in customer service will probably not line up in the same grade as your entry level job in IT. And, that’s fair. Evaluating your structure regularly will make sure that you’re always positioning your jobs and functional areas in the right spot relative to one another.
– Pay fairly across individuals in the same job. That means taking into account performance, compression, and protected classes to ensure that every individual lines up in the right part of their pay range. Here again, paying fairly doesn’t mean paying everyone the same. In fact, if you pay everyone the same you’re neglecting some of the key differentiators that legally and appropriately should differentiate pay, like performance, experience, education, and skillset.
Is there really a gap between women’s wages and men’s?
Yes. But the size of that gap differs depending on how you measure. Having read and talked to folks with all kinds of opinions on the gender pay gap, I can comfortably say that we all agree on two important things to consider when looking at your pay gap:
– Paying fairly for all people doing similar work. This is something that’s often legally required. In some states (CA & NY), and most Canadian provinces, you have to demonstrate that you’re not discriminating in your pay practices for women and men with the same skills and experience doing the same work. The exact requirements differ by law, so if you aren’t sure what is true in your area, talk with an employment lawyer. In the PayScale Gender Pay analysis, this is called the “controlled” gap.
– Paying fairly across the whole organization. This is the “uncontrolled pay gap.” Using PayScale’s new gender pay comparison feature, in addition to examining fair pay by job, you now have the ability to understand overall pay practices at your whole organization.
You may find that job by job, you have fair pay between men and women, and yet when you look at your whole organization you still have a difference between the average pay for men and the average pay for women. That happens when your leadership and high paying functional roles are predominantly occupied by men. This isn’t something that is currently legislated, so is technically legal. This is the point where agreement around the gender pay gap ends. The whys and hows and what “should” be done can vary, so it’s important to turn your attention to the needs of your organization. If you decide you want to narrow your overall, uncontrolled gap, make sure you’re providing access to the highest paying jobs in your organization, checking for overt or unconscious discrimination that may prevent anyone from competing for those best-paying jobs.
What should I do about fair pay?
Decide what fair pay means for you, your organization, and your competitive landscape. Think about the best definition in order engage your existing employees. Consider what you need to do to attract new talent to your organization. Are you in a highly competitive environment? If so, you’ll need to be an employer of choice. Many large tech companies are making their pay diversity data public and differentiating themselves that way.
No matter who you are and what you’re hoping to accomplish in terms of fairness, the very next step is to take a look. If you want to pay fairly to the market, are you? If you want to ensure that you’re appropriately prioritizing pay for your key functions, are you? And if you want to ensure that individuals are compensated both legally and according to the things your organization values most, do you? Take a look!