August 26, 2021 | 4-minute read (788 words)
When talking about pay equity, most people tend to focus on gender differences and usually end up offering stats about how full-time female employees earn less than full-time male employees. For instance, according to U.S. Bureau of Labor Statistics data, in 2020, women’s annual earnings were 82.3% of men’s, and the gap is even wider for women of color. That said, pay equity issues are not limited to gender discrimination.
What is pay equity?
Pay equity is the practice of eliminating pay inconsistencies based on gender, race, disability, LGBTQ status and other criteria. It can also be referred to as equal pay for work of equal value. This means if two different jobs contribute equal value to a company’s operations, then all staff members in those positions should receive equal pay.
High-paying positions and in-demand skills naturally pay more, but workers from marginalized groups tend to be left out of such roles. For instance, according to Bureau of Labor Statistics data, only about 3% of web developers are African American, as opposed to 79% who are white. Also, approximately 73% of office and administrative support professionals are women, and only 29% of CEOs are women. In this sense, pay equality also addresses opportunity gaps and occupational segregation.
There are myriad benefits to pay equity, such as:
Wage discrimination is illegal in the U.S., as well as many other places in the world. In 2020, the U.S. Equal Employment Opportunity Commission secured more than $535 million in monetary compensation for victims of discrimination in the workplace.
There are a number of laws that have been put in place to tackle pay equity:
- It sends a positive message about company values.
- It increases productivity by attracting talent and reducing turnover.
- It closes the widening wealth gap.
- It prevents lawsuits and enhances the firm's reputation.
- It helps maintain compliance.
- The Equal Pay Act of 1963: Administered and enforced by the EEOC, the EPA “prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort and responsibility under similar working conditions.”
- Title VII of the Civil Rights Act of 1964: This act “prohibits employment discrimination based on race, color, religion, sex and national origin.”
- The Age Discrimination in Employment Act of 1967: The ADEA “prohibits employment discrimination against persons 40 years of age or older.”
- The Americans with Disabilities Act: A civil rights law, the ADA “prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.”
- The Lilly Ledbetter Fair Pay Act of 2007: The Ledbetter Act “amends the Civil Rights Act of 1964 to declare that an unlawful employment practice occurs when a discriminatory compensation decision or other practice is adopted; an individual becomes subject to the decision or practice; or an individual is affected by application of the decision or practice, including each time compensation is paid.”
What employers can do to implement pay equity?
Check out these five best practices can help companies promote pay equity:
- Don’t ask about a candidate’s salary history: Knowing a candidate’s salary history can influence the hiring manager’s decisions with regards to compensation, which then maintain the long-standing wage gaps.
In the U.S., an increasing number of state and local governments are adopting laws and regulations that prohibit employers from asking salary history information from job applicants — and it seems to be working. Ever since these regulations have been put in place, data has shown evidence of positive wage effects on female workers as well as non-white male workers.
- Avoid asking about salary expectations, too: Asking a candidate about their salary history may also lead to unfair wage gaps. This is due to a gap in expectations. For instance, as per research, 65% of the time, when applying to the same job at the same company, women tend to ask for a lower salary than men. This translates to an average 3% wage gap in the compensation offered to men and women.
- Come up with salary ranges: Creating salary ranges along with job grades can help companies come up with more equitable compensation decisions during recruitment as well as promotions.
- Make pay equity a priority: For this, businesses should let their employees know that they can speak up if they come across pay discrepancies within their company.
- Audit pay equity regularly: Pay equity can get side-tracked even with the best of intentions. Put proper steps in place to identify and address pay discrepancies at least once or twice a year. Companies can even hire a third-party firm to run a pay equity audit.