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Workspan Weekly

Examining the Next Steps Toward Pay Equity

On the legislative front, 2021 saw some strides being made toward achieving pay equity in the American workplace. States have taken this issue into their own hands, and a number have enacted salary history bans and pay transparency laws in recent years in an effort to combat the wage divide.

In the meantime, companies everywhere can be taking steps to stay ahead of evolving pay equity laws, and to move their organization closer toward more equitable compensation, said Jim Hudner, a managing director at Pearl Meyer.

Assessing the organization’s compensation infrastructure—job architecture, pay ranges, pay management guidelines—is probably the most important step, Hudner said.

“There is a significant relationship between an organization’s compensation infrastructure and pay equity issues. In short, if an organization has an up-to-date and sound compensation infrastructure, it is less likely to have pay equity issues. However, if the infrastructure needs attention, the probability of pay equity issues increases.”

With most legislation focusing on jobs performing comparable or equal work and pay differences that can be explained by permissible factors such as experience [and/or] performance, “it is critical that pay is managed within well defined and applied structures and policies,” added Hudner.

He also recommends emphasizing ongoing reviews of internal pay equity, as opposed to conducting such assessments “every so often.”

In the current labor market, for example, employers are increasingly concerned with pay compression, which, as Hudner noted, can highlight the need to assess potential equity issues with the influx of new staff at more aggressive pay levels.

“Employers can also begin to focus on ensuring they have robust data for use in pay equity analyses,” he added. “A comprehensive and accurate set of data on an organization’s array of jobs and employees allows for a more thorough and accurate pay equity assessment.”

For instance, most organizations do not track directly related previous work experience, said Hudner. However, some are beginning to collect this information in an effort to better understand possible rationale for pay variations among employees in comparable jobs.

And, while he urges organizations to focus on issues that could affect pay equity, “they should also not lose sight of issues that can impact an organization’s pay gap, which is the median or average pay for females as compared to males, or of under-represented minorities compared to all others,” he concluded.

“While there are many factors that contribute to an employer’s pay gap, one of the more significant factors—over which employers have some control—is the percentage of women or under-represented minorities in executive and management roles. While this is not a new issue, it is one that deserves continued vigilance.”

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