This article was updated on July 30, 2018.
Compliance with legislation designed to address the gender pay gap in the U.S. is critical. Here's what you need to know to get ahead of the curve.
Many states have passed laws designed to promote equal pay, including California, Colorado, Delaware, New Jersey and Oregon, reports the National Women's Law Center. The amended California Fair Pay Act SB 358, for example, specifies that employers demonstrate that employees doing "substantially similar" work are paid the same. Employers are not permitted to discourage discussion of compensation or to retaliate against employees who have claimed pay discrimination. Employers must keep records for three years, and cannot use location as a sole rationale for a pay differential.
Wage secrecy is thought to be one of the causes for the pay disparity. The New York law is one of several state laws that discourage wage secrecy, and some states, like Michigan, have had laws prohibiting wage secrecy on the books since the 1980s.
The Lilly Ledbetter Fair Pay Act was the first legislation signed by Barack Obama when he took office. The Fair Pay Act discourages employers from running out the legal clock by concealing discriminatory pay. On top of that, the Equal Employment Opportunity Commission (EEOC) requires that employers with 100+ employees report both demographics and pay data on an EEO-1 form, as noted by the EEOC.
Midsize firms, less likely to have a dedicated, official EEO function, should still be aware of regulation intended to identify employment trends. The aforementioned EEO-1 report is required for employers with federal contracts valued at more than $50,000, or with 50 employees or more. Even employers with no federal business are required to file annually if they have at least 100 employees.
Midsized firms tend to have reduced Employment Practice Liability Insurance coverage than larger firms, according to Law and Policy, published by the University of Denver. Lacking this specialized assistance, midsized firms should consider putting additional effort into issues of gender pay to avoid possible litigation. Establishing a systematic approach to gender-neutral position descriptions and compensation policies are a good place to start for most midsized organizations.
Getting ahead compliance-wise should entail a confidential audit to identify roles, job classifications or promotion tendencies in your organization and highlight patterns of gender pay gaps and weak diversity.
Audit data can help HR move ahead with internal policies and recommendations for hiring managers outside HR. For example, according to The Atlantic, when the CEO of Salesforce commissioned a review of all 17,000 positions, he was shocked to find women's pay in the organization lagged behind men's. In response, Salesforce added $3 million to the payroll in an attempt to pre-empt internal dissension and in deference to ongoing concerns about diversity and the gender pay gap in the tech sector.
For large enterprises, the impact will go far beyond HR. Serena Fong, VP at research firm Catalyst says on Shattering the Ceiling that initiatives should include not just HR, but mid-level managers. In addition to audits, HR will need effective compensation monitoring programs that collect data to support aggressive analytics to gain control of recruitment, position classification and promotion data and processes.
Some HR departments will read the tea leaves and take proactive steps. Some will not. Those who do will help their organization stay ahead of your competition and legislation, instead of lagging behind them.
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