More Companies Are Paying Attention to It, But We’re Still a Long Way Off from Pay Equity
With recent social movements and factors coming to the forefront, companies have been met with employees demanding greater transparency, especially when it comes to compensation. Historically, this has been something that has been tight-lipped within organizations, but now, it seems as though forward-thinking employers who implement fair pay policies, along with other practices, may be able to retain and attract new talent, benefitting companies in the long run. “It’s a huge loss in a company for an employee to leave and go somewhere else because of an employer’s incompetence and failure to make them feel safe, comfortable, and valued,” Nicole Smith, a Research Professor and Chief Economist at the Georgetown University Center on Education and the Workforce, tells BlogHer.
However, just because more companies are paying attention to it and being transparent with employees doesn’t mean that we’re seeing a workforce-wide trend where all employees are being paid equally. According to Automatic Data Processing (ADP), pay equity is the concept of compensating employees who have similar job functions with comparably equal pay, regardless of their gender, race, ethnicity, or other status. And while it may seem simple enough, it’s a practice that is actually more complex.
How to identify pay inequity
“It’s very hard to identify pay inequity,” Daniel Hamermesh, a U.S. economist, and Sue Killam Professor in the Foundations of Economics Emeritus at the University of Texas at Austin tells BlogHer. Why? “It’s very hard to make sure that two people are doing the same job,” Hamermesh says. He adds, “I would not identify pay inequity unless it truly is exactly the same job, the same work is required at the same time for the same number of hours per week or per day.”
This way of thinking isn’t uncommon amongst employers as they must weigh other factors, like the employee’s education and work experience, the responsibilities of the position, and the organization’s long-term financial stability when determining pay equity according to ADP. That being said, according to Bloomberg Law, determining pay equity boils down to three questions for employers. What groups of employees are appropriate for comparison? Do factors such as geographic location, job skills, and relevant experience explain the pay differences among similar employees? Is there a statistically significant pay difference between employees in different protected classes?
What role does communication play?
Smith notes that unless employees build a rapport with their colleagues and feel safe to ask them about compensation, that information isn’t going to necessarily be easily available. “If you have that kind of cohesion amongst workers where they can talk to each other, that’s great to know, but you can’t expect that to happen across the board for all different jobs, particularly for larger organizations that might have a hierarchical structure that doesn’t permit that type of exchange of information,” Smith says. “So, you have to rely on more general data sources to try to figure out what you should expect based on your area, occupation, level of experience, and expertise,” she adds.
However, if employees want to broach the compensation topic with their employer, Smith says there are two things employees should do. The first is to ensure you’re negotiating from the beginning. “You have to make sure you start off well, because very often when you get a pay bump, it’s a percentage of your existing salary,” Smith says. Second, if you are already at the company, employees should evaluate themselves and show their value. “You are human capital,” Smith says. “You are an asset to your firm, but in order for you to demonstrate that, you need to show them what you’re worth and what you bring to the table.”
How pay equity has made strides over the years
Hamermesh notes there have been strides for pay equity in the sense that people are much more concerned about it. But on the other hand, it has become more difficult to determine pay equity based on job type. “It used to be on an assembly line, punching out machine parts,” Hamermesh says.
“It’s easy to say that work is the same, but today with more and more jobs we have, nobody is doing the exact same thing as somebody else. The nature of jobs has made it more difficult to measure and with that pay complaints are much harder to deal with because of the increased heterogeneity of the kind of jobs people have.” In terms of legislation, many strides have been made in that department (you can see the current state of equal pay laws here), but that doesn’t mean we’re home free. “We need to acknowledge that we’re better off today than we were yesterday, and we’re better off than we were definitely 50 years ago, but it doesn’t mean that there isn’t work to be done,” says Smith.
Why is pay equity crucial?
People do care about pay equity, especially as it concerns employee satisfaction. “Research over the years shows when the work is the same and there is pay inequity, there’s tremendous dissatisfaction,” says Hamermesh. One survey found that employees’ perception of whether they are paid fairly is a top predictor of job satisfaction. Furthermore, when employees understand how salary decisions are made and are free to discuss their pay with colleagues and managers as mentioned above, they feel valued and are more likely to trust the organization and its leaders.
Company compensation trends
When asked if she thought more companies are trying to pay their employees equally before it’s addressed internally, Smith admitted that she didn’t know the answer, noting that human nature sometimes prevents employers from paying employees higher wages. However, she did note that a good company goes beyond pay equity. In order for an organization to be seen as “the best” it needs to provide something to its employees that others aren’t.
For example, Philip Morris International has confirmed that its actual pay practices match its good intentions with the Global EQUAL-SALARY Certification. The EQUAL-SALARY Foundation is an independent, non-profit organization based in Switzerland. This Certification verifies that organizations have sustainable policies and practices to ensure that they pay their male and female employees equally for equal work.
“The EQUAL-SALARY Foundation is having a tangible and global impact on the gender pay gap improving the condition of women all around the world,” says the Foundation’s co-CEOs Lisa Rubli and Noémie Storbeck. “By next year, our certification will have covered half a million employees in 90 countries. We are actively changing the workplace, one company at a time.”
The Inclusive Future content on BlogHer is sponsored by Philip Morris International (PMI). BlogHer has independent editorial responsibility for the content. The views expressed by the authors and contributors may not represent the views of PMI except for those quotes directly attributed to PMI executives.
