Beginning in October of 2016, salary history bans have been expanding across the U.S., with the goal of making sure organizations do not perpetuate the gender pay gap. Since then, a number of tech companies such as Amazon have voluntarily banned their recruiters from asking candidates for their salary history. Just a few months ago, Google was sued by a group of former female employees for gender-based pay disparity at the company.
If you haven’t been paying much attention to this topic, now is the time to do so, because pay equity laws are about to affect a lot more organizations.
By April 4, every company and public agency with 250 or more employees in England, Scotland or Wales must report on the pay disparity between their male and female employees (see official guidance from the U.K. government). This law applies to local companies as well as multinationals with offices/employees in the U.K.
Each organization must disclose the mean and median gender pay gap on “ordinary pay” (a.k.a. “base pay”) and bonus pay. Organizations also need to disclose the percentage of male and females in each quartile of pay bands. This law is estimated to affect around 9,000 companies and public agencies.
Of the companies who’ve disclosed their salary information, the vast majority report higher median salaries for men and more men in the top pay band.
Orgs With Pay Gaps Have All Kinds of Excuses
The main point of the reporting exercise is to trigger a debate about how men and women are paid. There are no sanctions for having a big pay gap, but the idea is that companies will be forced to examine their record and improve.
Unfortunately, most orgs have yet to go down the difficult road of self-reflection and problem-solving (though most organizations affected by the legislation have yet to publicize their reports). In fact, some of these companies seem quite perplexed as to why this issue merits so much debate. Some of the largest brands have said that the gender pay gap is not their problem. They’ve tried to rationalize their pay gap with this sort of logic:
- Yes, we have large pay differences at the firm, with women making significantly less than men.
- Employees in the highest pay band are mostly men; while employees in lower pay bands are mostly women.
- The pay gap is perfectly legal; it can be explained by the fact that we have more males in senior positions,
- But we certainly care about equality and “we believe in giving people the chance to shine.”
You can see more details in this Guardian article.
“Junior Women Are Feeling Very Dispirited and Upset”
After this bout of disclosures came out, some female employees have said that this data has crystallized their desire to quit. One woman from Barclays said, “Junior women are feeling very dispirited and upset. The figures made me feel that this organisation isn’t the right place for me, that it won’t let me achieve my potential.”
Do these companies really think that their narrative — “the pay gap is simply due to having fewer women in senior roles” — will land well with their female employees? Do they realize how much having a negative pay brand can hurt their talent pipeline?
I’m wondering how many of these women, after seeing their company’s report, will decide to quit because they feel undervalued. And once all organizations publish their gender pay gap reports, all employees will be able to choose where they apply for jobs based on objective data.
Why Employers Should Care About Gender Pay Equity
In today’s highly competitive talent market, where millennials and other demographics are watching and choosing employers based on values, organizations who want to retain and attract top talent cannot afford to ignore pay equity issues.
A whole body of research suggests that an organization’s pay brand — the way its employees feel about the pay and rewards at the organization — has a significant impact on its ability to attract and retain talent. PayScale’s gender pay gap study found that if employees believe their employer is taking no action to address gender inequity, 71 percent of women and 74 percent of men plan to find a new job within six months.PayScale’s gender pay gap study found that if employees believe their employer is taking no action to address gender inequity, 71 percent of women and 74 percent of men plan to find a new job within six months.Click To Tweet
What’s more, even if your organization’s leaders and managers do not think the pay gap affects your firm, or that you’re already addressing the issue, your employees may not agree with you.
PayScale’s research found that employees are more likely to identify gender inequity issues at their place of work than are their managers or company leaders. Or, if these issues are acknowledged by the company, employers are more likely than their employees to report that those issues are proactively being addressed.
The Corporate Chasm
In our gender pay gap study in 2016, roughly 57 percent of employers said there is no gender inequity issue at their business that needs to be addressed, whereas only about 47 percent of employees felt the same way, a “perception gap” — or “corporate chasm” — of about 10 percent. When gender inequity issues were acknowledged, 16 percent of employers said that their organization was proactively addressing them, while only 14 percent of employees agreed, a gap of 2 percent.
What’s interesting is that in the U.K., a whole industry is emerging around how companies should be communicating the message to employees once their pay gap data is released. One company, Atlas Partners, among other things — advises organizations on the importance of explaining to female employees why the gap is there and laying out what they are doing about it.
Even if your organization does not have workers in the U.K., now is the time to consider the implications of the gender pay gap your employer brand. In addition to avoiding litigation (see Google’s gender pay lawsuit), by making a commitment to promoting fair pay and equal opportunities within your organization, you can establish your reputation as an employer of choice.
And you don’t necessarily need to hire a consultancy to help you communicate the message. There are a few companies that have already built a playbook for tackling pay equity issues. For example, Salesforce has publicized their actions to promote equal pay and equal opportunities on their website.
PayScale can help: We’ve created lots of resources and software to help you address pay issues at your organization and communicate effectively with employees. Here are a few places to get started:
The Pay Equity Action Plan (Ebook)
The Transparency Spectrum (Webinar)
Tell Us What You Think
Is your organization taking steps to close the gender pay gap? We want to hear from you. Come talk to us in the comments.
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