Pay equity vs. pay equality, and why it matters to business

It seems like we hear about Pay Equity and Pay Equality nearly every day. In the U.S., the terms have recently been discussed at the Women’s March on Washington, addressed in new legislation across many states, and taken up publicly by high-profile actors, such as Jennifer Lawrence, Viola Davis and Emmy Rossum. The terms are often used interchangeably, but actually mean very different things.

  • Equity is defined as ensuring impartiality, fairness, and an unbiased and unprejudiced approach.
  • Equality is defined as the “state of being equal” in rights, opportunities, status.

The key distinction here is that what is equitable is not necessarily equal. This is important when it comes to pay. Pay equity is only the path to pay equality, not the end goal.

Pay equity is about making sure pay is administered fairly. This is where recent and emerging legislation is focused. In pay equity analyses, companies determine whether gender, ethnicity and age are factors influencing pay. Factors such as differences in performance, experience, and scope are evaluated to determine whether these are the predictors of pay differences. In an ideal world, these would be the only reasons differentiating pay for comparable jobs between incumbents. In short, pay equity is about comparable pay for comparable work.

However, what’s not being addressed is that, on average, the rate of pay for women is lower than the average rate of pay for men, that is, the “gender pay gap.”

Why is there a gender pay gap?

If we tackle the issue of similar pay for comparable work, we are left with the issue that women are not as represented in higher-paying levels and roles. Our analysis points to a number of reasons.

  • Women dominate fields that are lower-paid and men are often in higher-paying jobs.
  • Women reportedly ask for less money and don’t negotiate as much as men for promotions.
  • Women “opt out” of more restrictive roles at various stages in their careers to seek more flexibility for care-giving responsibilities.
  • Women are also more likely to exit the work force all together and re-enter later.

And some pay differentials go unexplained altogether, leading to the conclusion that there is still discrimination present in today’s workplace.

How can we close the gap?

Transparency is a core principle of today’s talent management programs

Compliance with any new or changing legislation – knowing that, as a starting point, pay equity is achieved – is the first step.

To truly close the gender pay gap, employers are doing more. This includes going public with their commitments to diversity and inclusion – viewing it as an integral part of their brand. They are realizing that transparency is a core principle of today’s talent management programs, which includes having a clear, defensible rewards program design that promotes diversity, is easily communicated and drives their organization’s unique employee value proposition.

This commitment requires careful examination of talent management programs.

While pay equity analyses help employers analyze programs’ effectiveness on a macro level, in order to ensure programs are driving workforce equality, employers have to dig deeper with additional analytics, such as these:

Leadership “high potential” programs

What percentage of those identified as “high potential” employees are female and minorities?

Workforce flexibility

What are the organization’s policies on flexible work programs like job-sharing and remote working? Are employees encouraged to take advantage of them? Are leaders modeling behaviors to promote these programs?

Pay delivery

  • What is the distribution of females and minorities across the salary structure? Across departments and roles? What patterns emerge?
  • What are the rates of promotions across gender and ethnic groups? How long are employees in positions before being promoted?
  • What do hiring rates look like? Are females at a disadvantage from day one?

These and other workforce analytics across the talent management life cycle can help organizations dig into the reasons for inequities as well as provide a road map for change to facilitate equality.

While pay equity and pay equality may mean different things, organizations must use both as lenses through which to effectively examine the outcomes of their talent management programs – and to ultimately maximize the potential of their entire workforce.


 

Guest blogger Nancy 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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