Understanding pay equity and reducing pay disparities in your organization can help you achieve several HR goals. That includes achieving diversity, equity, and inclusion initiatives and winning the war for talent.
It’s no wonder then that more companies than ever planned to perform a pay equity analysis in 2022, according to a survey by Payscale. Two-thirds (66 percent) of companies surveyed said they planned to perform pay equity analyses, a 20 percent increase from the previous year.
Of that number, over half planned to specifically conduct gender- or race-based equity analysis, the first time a majority of companies have planned that kind of analysis in the 13-year history of the report.
If you’re implementing a pay equity initiative or planning to do so, keep in mind that reducing pay gaps has as much to do with improving total reward as it does salary. Below, we discuss three key features of pay equity initiatives and how rewards management can help achieve them.
Extensive Pay Equity Analysis
Pay equity analysis is a vital first step in uncovering and fixing potential pay disparities.
“The fundamental starting point for reviewing compensation and adjustments is to collect and analyze the relevant data,” writes the team at Fisher Phillips. This can include:
- Job title.
- Department.
- Job level.
- Gender.
- Race.
- Age.
- Start date.
- Wage.
- Bonuses.
- Benefits.
Good data is essential when conducting a pay equity analysis, says Joanna Kim-Brunetti, chief legal officer and executive vice president of regulatory affairs at Trusaic, a software company that specializes in regulatory compliance. “If you’re making compensation decisions based on faulty data, it can be costly and ultimately create more pay inequity issues,” she writes.
To get the full picture on pay equity gaps, incorporating rewards data is essential. HR teams must leverage their rewards tools to understand which employees have access to which benefits, and, more importantly, whether employees are actually accessing rewards available to them. If employees can’t use the rewards they’re entitled to, they might as well not have them — regardless of their value.
Technology makes accessing this information easier, Payscale’s Shelly Holt and Amy Stewart write. “Although you still need to have a formal compensation strategy and structure, compensation technology lets you build statistical models around factors that influence pay differentials at your organization such as years of experience, location, skills or performance,” they explain.
“You can apply these filters to your employees’ pay data to offset legitimate reasons that some employees with the same job are paid more than others and then measure whether there is still a gender or racial pay gap for specific positions, and generally across the organization.”
Fast Remediation to Close Pay Gaps
If you do identify pay gaps, it’s important to take steps to close them quickly. This can be tricky as any adjustments will need to take the rest of the company into account.
“You need to evaluate the overall cost of the total adjustment for the affected employees and determine how much to give each employee without negatively affecting other groups or employees,” says the team at Salary.com. “You don’t want your solution to, in turn, create more issues so take the time needed to get this right, reviewing individual salaries and job-related factors.”
Rewards can be an excellent tool to help level the playing field without negatively impacting other employees. In addition to introducing new rewards for employees from certain backgrounds, you can also use discretionary bonuses to bump pay.
What’s more, a rewards management tool will make it easy to see what changes to particular rewards will have to the total compensation of other employees.
Ongoing Action to Increase Pay Equity
Pay gaps don’t magically shrink once you’ve identified issues and taken steps to improve them. It takes time for your actions to take effect and, even then, your pay equity initiatives will need to be revisited annually.
“HR leaders must do their due diligence, but they also must be prepared to keep doing it every year,” says Benjamin Arendt, a senior consultant at coaching platform BetterUp. Companies must find a way to continually identify and address potential issues.
A rewards management platform lets HR teams aggregate rewards data and analyze it at an employee level. This simplifies two important tasks:
- Pay equity reporting that analyzes rewards-related gaps between employees of different demographics.
- Modeling rewards packages for new employees to ensure they are in line with the company average.
You can’t close pay equity gaps using rewards alone, but they are a valuable tool in finding and eliminating gaps now and in the future.
Images by: Towfiqu barbhuiya, LinkedIn Sales Solutions
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