Equal pay for equal work may seem obvious, but statistics suggest today's companies haven't stepped up to the plate. Learn why equality in compensation is so important and how pay equity can be integral to a sustainable business model.
Equal pay for equal work seems obvious, but it's not. Women make just 82 cents on the dollar compared to men for the same work performed, according to the National Women's Law Center. Those figures fall even further for women of color, the Center for American Progress reports: Black women make 62 cents for every dollar that white males earn for the same job, and for Hispanic or Latina women, it's just 54 cents.
Focusing on pay equity can help finance leaders understand the issue and manage a transition to equal pay throughout their organizations. As compensation policies have many dimensions — social responsibility, financial results and long-term sustainability — the approach has to be specific to the concerns of each business.
A human rights issue
The human rights issue regarding pay equity is straightforward: is there any justification for paying people who do the same job with the same performance different amounts of money? If there is gender equality, then there should be equal compensation, too. Many governments around the world approach the issue from that perspective and mandate reporting as a way for organizations to demonstrate that they are in compliance.
Finance leaders who are ahead of the issue can help reduce the eventual costs of compliance and reporting. More importantly, they can create a culture that respects the rights of workers regardless of what may be required. In the past, executives relied on secrecy about compensation as a way to protect the organization, but that can be harder to maintain in a world of social media and Glassdoor. The news will likely get out, good or bad. If it's good, the organization's reputation can be positively impacted.
Handling the financial problem
Some finance leaders may be concerned that pay equity will hurt the organization's reported numbers, and that may be true in the short run. After all, one way to improve equity is to increase the pay of those workers who are making less because of discrimination rather than cutting the pay of those who are making too much.
Finance leaders have a key role to play here. As the numbers people, they are involved in how pay levels are determined and communicated. They understand the organization's budget and can train other managers on how to apply pay policies consistently while managing conflicting budget priorities. They also know the effects of penalties, both to finances and reputations. According to the U.S. Equal Employment Opportunity Commission, organizations paid $20.7 million in monetary relief for victims of pay discrimination in 2019 alone.
Sustaining organizations through pay equity
Managers may be tempted to allow inequitable compensation as a way to meet financial targets. In the long run, hitting the numbers by underpaying some workers is likely not a source of sustainable competitive advantage. The ability to attract and retain the best talent is. As executives begin to understand the long-run scope of the situation, they'll be better able to create policies that build a global reputation for fairness, regardless of the legal ramifications.
Go deeper into this topic by downloading this report from the ADP Research Institute®: Rethinking Gender Pay Inequity in a more Transparent World
Related article - Legislative Trends: Pay Equity Policies Require Careful Employer Review
Learn more about ADP's commitment to diversity, equity and inclusion at our Corporate Social Responsibility site.