Three Steps to Assess and Address Pay Equity

Updated April 12, 2021.

Employers usually don’t intend to pay employees inequitably. But, without clear compensation philosophies, practices and salary ranges, it can easily happen without even realizing it. In fact, even with the best compensation programs, different perspectives and practices by managers can result in inequity.

In Week One of RESOLVE Increments, I defined pay equity, how to identify pay gaps and what to do if you’ve got them. To watch the full replay and gain access to the presentations and resources shared, go here.

Pay equity is defined as paying employees equally when they perform the same or similar job duties, while accounting for other factors such as experience level, tenure, job performance and working conditions.

Although the Equal Pay Act was passed nearly 60 years ago, pay equity continues to be at the forefront today. In 2020, when looking at the uncontrolled gender pay gap, women earned:

  • 81 cents for every dollar earned by men, considering the median salary of all men and women regardless of job type or worker seniority.
  • 98 cents for every dollar earned by men, considering the median salary for men and women with the same job and qualifications.

Gender pay gaps widen even further for people of color. When uncontrolled, women of all races and ethnic groups earn less than white men.

The stories behind the numbers can be even more shocking. In January 2021, a federal appeals court renewed an employment discrimination lawsuit of an Indiana high school science teacher. When she was hired, she was allegedly told her starting pay was sufficient, because her husband worked and together they “would have a fine salary.”

It’s clear inequities in pay still exist. So, what can you do about it? Here are three steps to assess and address pay equity at your organization.

Step 1: Conduct analysis and identify pay gaps

As I mentioned previously, organizations do not aim to pay people unequally. To help you understand whether you’re paying your people equitably, you must complete an objective analysis to determine where your gaps are, if any.

Your criteria should be consistent with your diversity, equity and inclusion philosophy and typically include gender, race and age. Then, determine the outliers using a multiple regression or other statistical analysis. Carefully research and analyze statistical outliers to determine if there are other allowable factors that can reasonably explain the gap.

Step 2: Close pay gaps

Once you’ve identified the pay gaps from your analysis, determine which adjustments need to be made to close those gaps. I recommend budgeting annually for pay equity adjustments and work with managers to communicate increases within the context of your overall compensation philosophy.

Step 3: Align your philosophy and practices for the future

Last, plan for the future by aligning your compensation philosophy and practices. Critically assess your practices and policies by asking questions such as:

  • Do certain employee groups generally wait longer than men for promotions?
  • Are certain employee groups channeled into lower-paying jobs?
  • Are performance reviews based on subjective factors that can be clouded by unconscious bias?
  • Is your culture inclusive of diversity?
  • Are there differences in other areas of compensation, such as bonuses, overtime opportunities and stock options?

After answering these questions, update your policy and practices, and continue doing so as needed. You should also complete a pay audit regularly; annually is the best practice. This is especially important after an annual increase or bonus cycle when significant changes are made.

Pay equity can be a challenging issue. But, the first step is knowing whether you’re paying your employees equitably. With this knowledge, you can close gaps and align your practices to ensure your diverse workforce is paid equally when they are performing similar work. This will provide a solid foundation for an equitable and inclusive culture for all.

Gain full access to the talk and resources from RESOLVE Increments Week One here.

If you have questions about how to assess and address pay equity at your organization, I’d be happy to help. Feel free to reach out to me directly or drop me a note on LinkedIn. Or, drop us a line or tweet at us!

The Case for Mindfulness and Compassion in the Workplace

Now that you’ve learned how to be more intentional about pay equity, let’s shift our focus. Week Two of RESOLVE Increments examined mental health and well-being. Join First Person and LinkedIn’s Scott Shute for an inside look at how LinkedIn’s compassion program helps its employees. Get your on-demand webinar here.

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