Pay equity is now more than just a matter of basic compliance for many organizations today due to increased social awareness and workplace transparency. Forward-thinking businesses who put fair pay practices in place may be able to enhance their organization's reputation, maintain employee engagement, and draw in fresh new talent in addition to avoiding potential litigation.
Why is pay equity important?
Pay equity is vital to an organization or company's bottom line as well as its social responsibility. By implementing new pay equity philosophies and policies employers may be able to:
Prevent discrimination lawsuits
Comply with equal pay legislation
Improve productivity and morale
Reduce workplace turnover
Attract new skilled employees
How organizations can implement or improve their pay equity policies?
Implementing a new pay equity philosophy often starts by taking an in depth look at existing company policies and making essential changes, such as:
Documenting pay equity strategies and updating job descriptions and pay structures to align with the new philosophy and policies.
Communicating with shareholders and management about the organization’s pay equity goals and how it plans to achieve them.
Adjusting recruitment and talent management tactics to align with the new philosophy and policies.
Conducting a pay equity analysis to identify any potential wage gaps that may result in discrimination and correcting them.
What is a pay equity analysis?
A pay equity analysis is a statistical way of identifying pay gaps within an organization. It does so by cross referencing pay scales against any number of criteria, such as gender, ethnicity, education, seniority, and time in the industry. Discrepancies that cannot be explained by legitimate, non-discriminatory reasons are subject to further investigation and corrective action.
How does Glocal Services perform a pay equity analysis or audit?
A pay equity audit is a complex process that requires data analysis and the expertise of financial advisors and attorneys. Businesses that have these resources available to them generally follow these steps:
Formulate a plan
Confer with key stakeholders on the reason for the audit, its methodology, scope, budget and timeline.Utilize historical perspective
Knowing how the current pay scales were created helps explain any correlations or disparities that are found as a result of the audit.Collect workforce data
The scope of the audit largely dictates the type of information gathered, but most look at job function, gender, race, experience, length of service and job performance, among other factors.Compare employees with similar job functions
During the comparison, it is important for employers to understand the pay equity laws at each level of legislation. Some local authorities may have broader definitions of “equal work” or “equal pay” than those at the federal level.Review and interpret the findings
If salary differences are discovered, further investigation is required. Those based on merit, seniority and performance are generally acceptable. Look for wage gaps that could be directly related to protected class characteristics.Correct wage gaps that are not justified
Consult with leaders in HR and finance on the most fiscally responsible way to close the gap of the wages that are not justified. Cutting a salary to equalize wage gaps is generally prohibited, and is not how we do business.
What are some best practices for fair pay?
In addition to performing a pay equity audit, organizations may be able to reduce pay inequality by following best practices, such as:
· Review compensation trends
Track how pay matches up to different groups of employees and use external benchmarks to create hiring and compensation practices that are consistent with industry standards.
· Be transparent about pay
Then employees know how pay decisions are made, it helps create an environment of trust and compels managers to justify that salary increases are based on performance.
· Adhere to the compensation philosophy
Rely on clearly communicated objectives by increasing awareness and understanding of the various inputs of the compensation package to employees which enables them to make informed comparisons against competitor offerings.
· Prioritize budgets
Because compensation policy is a financial investment, closing wage gaps requires careful budget planning and the ability to manage conflicting priorities.
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