What, Exactly is Pay Equity ?

Pay Equity
Pay Equity

Have you noticed the growing trend of new state equal-pay laws? If it hasn’t already, it’ll likely affect your organization soon. So, it may be time to review your company’s compensation policies. But, first things, first: what, exactly is pay equity? Read on. 

The Issue 

As the push continues in the business sector to narrow the gender pay gap, and more state laws are passed that broadly cover fair pay for more employees, human resources professionals should consider going over their organization’s policies and practices. 

Going beyond the federal Equal Pay Act, which requires employers to compensate men and women equally for “equal” work, most state laws offer wider protection by mandating that employers pay men and women equally for “substantially similar” work. Further, some states’ fair-pay requirements have grown to include race and other factors. 

What is Pay Equity? 

Broadly speaking, pay equity is compensating employees according to the same guidelines when they perform the same or similar job functions; accounting for factors such as experience level, job performance, and time on the job. 

State laws on the subject mostly call for increased workplace transparency and protection of workers from retaliation when they blow the whistle on — and seek to correct — pay disparities. In some states, employees are protected from retaliation when they, in open discussions with colleagues, broach their pay. 

Why Should Pay Equity Matter to Employers? 

By ensuring that employees are compensated equitably, employers can boost efficiency, creativity, and productivity by attracting high-quality employees, lowering turnover rates, and heightening organization commitment.  

What About Those Pay Audits? 

The rise of state pay-equity laws has been met with an uptick of equal-pay litigation against employers. Two years ago, for example, a technology firm agreed to shell out $7 million to settle claims of gender- and raced-based pay discrimination. 

Employers can use an audit, however, as a tool for getting info they need to identify pay disparities as well as opportunities to do better. They can also use the audit to learn whether issues can be explained by credible, nondiscriminatory reasons such as seniority or education. 

Be aware that states including Massachusetts and Oregon provide legal defense for employers that conduct self-audits, so long as the employers take swift and smart actions to remedy any unjustifiable disparities. 

Some experts recommend that employers conduct pay-equity audits under the category of attorney-client privilege, allowing the employer to examine itself while capping the risk that the assessment will be discoverable in a future lawsuit.   

Promoting a Positive Culture 

Employers can expect morale, turnover, retention rates, and performance to all improve when workers believe an employer is big on pay equity. Employees who feel valued are typically more invested in the organization and will join the push to help the company achieve its goals.  

Best Practices for Fair Pay 

There are ways employers can promote pay equity. Those steps include: 

  • To help ensure consistency, establish transparent compensation programs and metrics that are based on recruitment, performance, advancement, and pay. 
  • To build trust with the organization, communicate frequently and candidly with employees about the metrics and their progress. 
  • Make sure all decision makers are well versed in the compensation system and proper decision documentation. 
  • Think about putting in place standard compensation ranges or guidelines for individual positions or job classifications. 
  • Make certain that job descriptions are current to ensure work being performed, and skills needed to accomplish the work are accurately reflected. 


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