Topics:   Compensation

Topics:   Compensation

March 5, 2019

Gender Pay Equity Analysis Is Here to Stay. Is Your Company Doing It Right?

March 5, 2019

Equal pay for equal work by people of different genders is top of mind for most companies in 2019, with a December World Economic Forum report noting the gender pay gap is on track to persist for the next twenty decades.

There is absolutely no reason for the pay gap to persist, and some actors have begun taking steps on what they have realized is a solvable problem. For example, many states are enacting laws that require organizations of all sizes to close the gender pay gap. Shareholder activists, third-party organizations, and activist fund managers are pressing companies for transparency on their pay equity to avoid facing a shareholder proposal. Within companies, employee networks are more frequently sharing their own pay information when pressing their employers on pay equity.

But more than the legal requirements or external and internal pressure, gender-based pay equity is the right thing to do. When employees know a company takes pay practices seriously, they are more engaged, happier, more productive, and less likely to leave. Employers that are transparent about their commitment to pay equity earn trust, and a reputation for pay equity is also the number-one way to attract top talent.

The current solutions for addressing pay disparities between men and women may actually be perpetuating the problem. Employers wisely choosing to address pay equity are often left thinking that fixing the problems is an expensive, complex, and time-consuming task that may not be worth the investment because—year after year—they must hire legions of lawyers, experts, or consultants with advanced degrees to find pay gaps. The industry has conditioned employers to believe the process is fraught with peril.

Because these costs appear to be so prohibitive, the industry recommends a “one-and-done” model in which companies pay for this massive undertaking once a year. The truth is the “one-and-done” model exists because few companies can afford to do it more than once a year, or want to endure the process more than once.

What’s worse, one-and-done reviews don’t sufficiently address the root causes of disparities in pay between genders. They are forever behind—rather than ahead of—risk. The old model looks backward, helping companies explain and maintain differences to assure leaders that while differences exist, they are explainable and won’t lead to lawsuits. Remedial action, or “catch-up” payments made to underpaid women annually, is tantamount to fixing symptoms each year but never addressing the underlying problems.

If “one and done” actually worked, by definition, we would be “done.” And yet the gap persists.

So, how do you know whether your company is engaged in meaningful pay analyses and committed to eradicating pay disparities between workers of different genders? We’ve compiled several questions to ask, which will enable you and your board colleagues to understand more deeply whether your company has seriously and genuinely addressed pay equity.

Seven Questions Every Board Member Concerned About Pay Equity Should Ask:

  1. Did the company conduct a pay equity analysis this year? If not, is that because pay fairness is not a priority? Is it not prioritized due to fear of finding a problem, or some other reason? Is that reason acceptable?
  2. What were the results, and can you show me those results in a clear and dynamic dashboard?
  3. How long did the process take, and at what cost?
  4. Are the results presented in a way that is usable for you to take action?
  5. If compensation changes were made as a result, what did you learn about the underlying problems that led to the disparities? What policy or behavioral changes will be made?
  6. Are all compensation events analyzed? This includes base pay, new hire starting pay, stock grants, mid-year changes, bonuses, reorgs, or re-leveling exercises and the like.
  7. Does the company analyze pay during the pay-setting cycle so that changes can be made before pay is finalized? And does the company monitor pay equity throughout the year?

Once you have the answers to these questions, you will be able to assess risk and evaluate the company’s commitment to pay equity. Most companies engage in ongoing changes in the employee lifecycle, including hiring, setting pay, promotions, terminations and turnover, and reorganizations. Companies not analyzing pay equity, or doing it just once per year, are incurring unnecessary risk—and doing so at a time when third parties are becoming dramatically more sophisticated in pressing companies to demonstrate gender pay equity results.

One of the most important elements of employee satisfaction and engagement is fair pay. A company genuinely committed to pay equity is not only doing the right thing. It also has an incredible opportunity for brand marketing and public relations, as well as a differentiator for recruiting top talent.

If you’d like to talk more about an ongoing or new pay equity initiative at your organization, get started in the comment section below.

Zev Eigen is the founder and chief data scientist at Syndio. Eigen speaks on the topic of pay equity at regional NACD events, most recently at the Colorado Chapter meeting in December 2018.

Comments

Read Related Content