Living up to U.S. pay equity

It is certainly is shaping up to be a year for challenging the status quo; from U.S. presidential election issues to the Brexit vote, there is a restlessness for change. That same restlessness underpins the advancing traction of gender pay equity legislation.

American Association of University Women members with President John F. Kennedy as he signs the Equal Pay Act into law, 1963

American Association of University Women members with President John F. Kennedy as he signs the Equal Pay Act into law, 1963

It’s certainly nothing new.  The Equal Pay Act in the United States was signed into law in 1963, but challenges still persist. Just ask actress Jennifer Lawrence (who spoke out publicly about gender pay differences in Hollywood in 2015) or the U.S. Women’s Soccer Team.

The White House has urged more attention on the issue, and the Federal Equal Employment Opportunity Commission and a number of states (including New York and California) have answered the call with more regulatory guidance.

At the same time shareholder activism and a world where sharing pay details is as easy as logging on to Glass Door is pushing a pay transparency agenda like never before.

Sounds simple, doesn’t it?

Equal pay for equal work seems straight-forward enough. Check the headlines. “Women make X cents in comparison to every $1 men make.” And then “double click” on that headline in the context of your own organization. You know that in the design and administration of your base pay program, many factors affect how much your employees are paid:

  • how jobs are valued (both in the market and internally)
  • geographic location
  • experience
  • education
  • performance
For pay equity, success is measured by having no statistically significant relationship between gender and pay.

to name a few. Taking an average of women’s earnings vs. men’s doesn’t take into account all of the factors that go into how people are paid.

So how do you ensure your pay practices are truly equitable across your employee population?  That requires a deeper level of analysis.  For pay equity, success is measured by having no statistically significant relationship between gender and pay.  Said another way, you will want to ensure that only the expected factors predicting pay (e.g., salary grades, job classification, performance) are actually predicting pay and can be used to explain pay differences between individuals.

How does the analysis look?

It starts with collecting your own data.  This includes the factors that show what jobs are comparable to one another (e.g., job architecture, job levels or grades, etc.) and also the factors that drive individual pay differences for comparable jobs (including, but not limited to performance, geographic location, education, etc.).

Then, you need to conduct the analyses to make sure your programs are doing what you have designed them to do. A pay equity analysis is a detailed comparison using a multivariate regression that examines factors such as job level, performance, etc. and the degree to which they predict pay.  The regression model uses the factors to predict pay and then compares actual pay to predicted pay. The results “flag” employees who are outside of the range of prediction and therefore will require more in-depth review. Based on this, you will be able to conduct a case-by-case investigation of flagged cases to determine if there are any predictors of pay that you have overlooked.

Delivering on the intent of pay equity starts by ensuring you are doing everything you can to make sure your programs are doing what you’ve intended.

The reality is, just like life, data are not perfect: The analysis will only get you so far. However, delivering on the intent of pay equity starts by ensuring you are doing everything you can to make sure your programs are doing what you’ve intended.  Although you may not have a systemic problem, you may need to make adjustments — whether they are changes to the manner in which your programs are documented or your employees paid — to ensure that you do not have a situation where the only way to explain a pay difference is gender.

How can you close a pay equity gap?  Start by knowing where you stand. And once it is part of your ongoing governance routine, it does not need to be as onerous as it sounds.

It’s also about communication

How do you talk about something that you typically don’t talk about?  The move toward greater transparency is real. Recent pay equity legislation specifically speaks to ensuring employees have the ability to openly discuss their wages.  So it is more important than ever before to think about how you are designing and communicating your reward programs.

Design your programs so your employees are paid competitively and are rewarded for their contributions in helping your company be successful. It’s time to engage in the broader discussion. If your managers can’t explain how employee contribution and rewards are valued, the headlines might fill in the gaps for you.

In conclusion….

Equal pay for equal work is a straightforward concept that can be a challenge to implement. But by taking the care to maintain your employees’ data, perform the appropriate analyses and have a consistent and continuous conversation with your employees about their rewards, you can uncover the mystery and any unintended gaps to ensure equal pay for equal work is, indeed, a reality.

 


 

Nancy RomanyshynNancy Romanyshyn is a Consultant and Project Manager with Willis Tower Watson’s New York Rewards Practice with over 17 years of experience. She has worked with clients in a variety of industries, including healthcare, retail, pharmaceutical, insurance, energy, financial services and manufacturing.

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