Pay equity — or the topic of whether men and women are paid the same compensation for performing the same job — has been in national media headlines. According to SHRM, women earn on average $.76 for every $1 earned by their male counterparts. As a spotlight shines on companies that are performing well in this area, and those that are not, transparency and equal pay can be a key differentiator for companies. Understanding the implications of this issue is also critical for compliance purposes. Here's what business leaders need to know.
The Importance of Pay Equity to Employers
A commitment to equal pay in the workplace and transparency about a company's stance on the issue can help attract top talent. Recently, many large companies have adopted branding campaigns and are promoting their commitment to equal pay. Others have made a high-level overview of their practices available to the public, such as internal audits and past-salary blind compensation analyses.
What's the core advantage? At a high level, transparency around and focus on pay equity can build stronger employee branding. Talented women are more likely to go where they'll be paid fairly for their labor, and employees who are focused on equality are more inclined to support companies with fair practices. As a result, an employee may be more likely to take a job with an organization that has a policy in place regarding this issue.
Retention and the Role of Pay Equity
Pay equity isn't just an advantage in hiring talent; it also plays a critical role in retaining top workers. Consider how an employee is likely to react if she learns she's being paid unfairly. Not only does this put the company at potential legal risk, but it can erode trust between the employer and employees. Unbalanced pay practices may increase the chances of losing your best talent to the competition. Some employers are choosing to consult their legal advisors and move forward with a pay equity analysis, and to correct any gaps that are found, as a preemptive measure.
Pay Equity: An Emerging Compliance Concern
Legislation around this issue began with The Equal Pay Act in 1963, which aimed to abolish wage disparities based on one’s gender. As SHRM notes, new legislation is emerging in states like Massachusetts, which prohibits employers from asking applicants about previous salaries to help eliminate a source of gender-based pay bias. However, one recent ruling by the U.S. 9th Circuit Court of Appeals potentially challenged that idea, stating that there may be a pay difference if it's based on factors other than gender. In addition, many states and local jurisdictions are developing laws that support or expand on the Equal Pay Act and their own existing pay equity laws.
For HR leaders, it's important to understand the emerging focus on pay equity, from both a compliance and branding standpoint. Discuss how this issue impacts your business, based on federal, state, and local laws. Determine if there are any steps needed to remain in compliance, and take a closer look at how your approach could potentially impact hiring, employee retention, and company brand.