HR Is the Key Battleground in the War on the Gender Pay Gap

HR Is the Key Battleground in the War on the Gender Pay Gap

Hiring managers are probably the people most crucial to combating income inequality overall.

"Would you feel comfortable taking that on?"

Questions like this may seem innocuous enough, but an increasing body of research into the causes of income inequality finds that it's just these sorts of moments that are sustaining the gender pay gap at an astonishing 27 percent in the United States. In a context where male applicants are more likely to claim competence for extra duties while actually being no more qualified for them than their female co-applicants, it will take a concerted effort by hiring managers to prevent a gender pay gap from arising at their organization.

A new white paper from the ADP Research Institute®¨called "Rethinking Gender Pay Inequity in a More Transparent World" makes the situation clear: If leaders want to avoid the ill effects of gender pay disparity, then the relative rates of pay at time of hire simply must change. And that means going back to the drawing board when it comes to the process of hiring, incentives and promotion.

The Subtle Causes of Income Inequality

The disparity in pay between genders is present (and statistically significant) at every stage of employment, from hiring to promotion to lifetime earnings, but the earlier it starts, the more insidious its effects. "Lower incentive pay may create a hidden bias against the promotion of qualified women versus their more highly compensated male peers," according to the ADP Research Institute. "Lower negotiated incentive pay at time of hire may become a limiting factor that prevents career advancement years down the road."

What this means is that the gender pay gap arises from both base salary amounts and the more ad hoc process of determining incentive pay at time of hire. In its research, the ADP Research Institute found that "females start with a base salary gap of 82 percent, which deteriorates to 81 percent because of the disparity in incentive pay which is where the gap is 69 percent."

When prior success dictates future opportunities, seemingly small distinctions in treatment can balloon over time. Women who are less comfortable negotiating aggressively for higher pay and bonuses at time of hire may come to feel more comfortable doing so later on, but that might not matter, if their historically lower income drags those negotiations down. This, in turn, can create long-term income deficits relative to male workers, who then receive more frequent promotions on the assumption that their higher relative pay represents higher relative achievement. These promotions then become self-sustaining, as well.

This is why hiring managers are probably the people most crucial to combating income inequality overall.

The Key to Real Progress Is Enforcement, Not Ideals

The biggest and most glaring problem, from an employer's perspective, is one of oversight. An insight uncovered by the study is that many employers have not structured their HR systems so that it is easy, or even possible, to detect a gender pay gap that includes incentives like stock options and 401(k) contributions. The No. 1 priority for these employers is to set up a more transparent payroll system that allows an accurate diagnosis of the problem.

That was the experience at Adobe, which has worked tirelessly to eliminate the gender pay gap among its own workforce. Adobe found that it needed to begin even before the point of hire, with educational initiatives like Girls Who Code and Technovation "making tech careers more accessible and appealing to young people."

After diagnosis and action comes the process of continued enforcement and a willingness to offset the momentum of income inequality by refusing to weight past compensation, particularly bonus compensation, too heavily in the decision-making process. In the short term, the only way to achieve this is oversight in the form of audits.

In fact, most of the proposed solutions boil down to oversight of one kind or another. Whether it's the need to develop robust technological platforms that allow the easy sharing of crucial data or to review hiring practices to identify procedures that introduce a reliable bias, by far the most important part of fixing the problem is becoming and staying aware of the form the problem takes at your particular organization.

Take Radical Action to Avoid Radical Consequences

A failure to conduct effective internal audits could lead to the sort of extreme reaction seen in Iceland last year, when the government decided it would start auditing corporations to enforce pay equality on its own. If leaders don't proactively take the steps necessary to address it, they may find their businesses saddled with far less desirable mandatory measures aimed at achieving the exact same thing.

One such idea is that leaders should look back through salary history and determine where income inequality has already struck, in order to compensate employees retroactively. This shows a real commitment to pay equality and could be a major investment in PR as well. It also eliminates any budgetary incentive to exploit pay inequality to reduce overall spending, since any gap later discovered will have to be paid for, eventually. But remember that success depends more on small daily practices than grand one-time expenditures.

"Fair pay practices are not merely an important 'corporate value,' or a tool for managing compliance risk," says ADP. "Rather, fair pay practices are also a core strategy for creating a vibrant, high-performing workforce." That being the case, HR needs to proactively remind the highest levels of management that gender pay equity is worthy of real investment to acquire its very real potential to impact on the bottom line.

Read the latest whitepaper from the ADP Research Institute, Rethinking Gender Pay Inequity in a More Transparent World.