This article was updated on June 29, 2018.
Organizations have made huge strides toward equality in the workplace, but there's still a lot of work to be done. According to Business Insider, women across the globe earn anywhere from 5.6 to 36.6 percent less than men, depending on the country. On average, for every $100 (USD) a man earns a woman will only earn about $80.
While your organization may not be able to solve everything on its own, there are steps you can take to create better pay equality.
Benefits of Pay Equality
Working toward pay equality isn't just a nice thing for your enterprise to do, it can actually improve your bottom line. When you have unfair pay in the workplace, it can hurt morale and cooperation between your employees, but it could also set your organization up for a possible lawsuit for gender or racial discrimination. Pay equality could also serve to improve employee retention. If any talented employee feels underpaid, they could be more likely to leave.
Depending on the facts and circumstances causing the pay discrepancy, your organization could also be violating the federal Equal Pay Act or corresponding state laws. Governments around the world are considering legislative changes to address this issue. California and Massachusetts have both passed pay equity legislation, while the Financial Times reports that Germany recently enacted laws aimed toward promoting equal wages. As laws trend in this direction, it would be a good time for your organization to get ahead of the issue.
1. Review Compensation Trends
One reason pay inequity occurs in organizations might be because they don't keep track of salary trends for gender and race. As a financial leader, you can work with your HR leaders to use HCM data to figure out where you are as an organization with pay equity and then use that data to adjust disparities. You and your HR department should track how compensation matches up to different groups of employees. Are all employees with the same years of experience and results getting paid the same, or are there differences based on gender and race?
You should also use industry averages as a benchmark for your hiring and compensation practices. Does your organization have the same percentage of female and minority employees in senior positions and is their salary appropriate for your industry? If you don't have an immediate answer to these questions, the ADP Research Institute® has compiled a Workforce Vitality Report that lets you track wage growth from each quarter by gender, industry and region, so you can see how you compare against similar organizations. By actively aggregating this data and visualizing its impact, you can catch issues before they go too far.
2. Consider More Pay Transparency
Organizations like to keep salary information private, but this is how pay inequality can hide. If employees know how much they're all getting paid, it's harder to develop unfair compensation based on gender and race. So if someone gets a raise, your managers will need to justify the decision to the rest of the team based on the employee's actual performance.
If you don't want to make payroll public to all employees, another option is to make raises and bonuses a group decision for your managers. Instead of having individual managers deciding by themselves, they should have to explain each decision to a group of other managers. This will force them to find a performance reason for raises and help prevent biases against certain races or gender.
3. Ban Salary Negotiations
Another solution is to ban salary negotiations, as this can put women and minorities at a disadvantage. Instead, make salary decisions for new hires based on up-to-date benchmarks for the role, location and industry. Don't make raises based on who asks or threatens to leave the organization. Rather, base decisions on clearly communicated objectives. This can create a fairer compensation structure while giving employees extra motivation to reach their goals.
Keeping the Peace
You should present your goal as a way of leveling the playing field for everyone, not helping one group at the expense of another. It's imperative you communicate to your employees that you aren't arbitrarily taking money away, you're creating a compensation system based on performance and years of service. Pay equity is an issue that will progress with time, but by taking these steps, your organization will do its part to create a fairer world.
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