Pay discrimination has been the source of workplace conflict for decades. However, the pressure for pay transparency has recently reached new levels. People are now aware of the disparities that exist in wages based on gender, race, and other protected classes and demand action. Employees want fair compensation for their work, and top talent flocks to companies that are transparent with their salaries and benefits to the public.
However, in several states across the country, pay transparency is not just encouraged but mandatory. New laws and regulations require companies to share salary information upfront in job postings and prohibit employers from requesting an applicant’s salary history.
Wage transparency is necessary for all businesses to establish employee trust, attract new talent, and benefit your business’s reputation. It’s a compliance issue employers must take seriously to avoid potential litigation.
What Is Pay Equity?
Pay equity is the compensation approach ensuring employees are paid fairly for their work, regardless of gender, race, ethnicity, or other protected classes. The process goes beyond removing biases related to personal factors, but includes the analysis of other employee aspects, such as education and previous work experience, to determine fair pay.
Regulations surrounding pay equity first went into law in the early 1960s. One of the most well-known regulations is the Equal Pay Act of 1963 which prohibits pay differences between men and women who have equal work at the same business. The following year, Title VII of the Civil Rights Act of 1964 strengthened pay equity by barring pay discrimination based on race, color, and national origin.
While legislation has made significant strides to protect workers, discrimination is still prevalent. By implementing policies within your company, you can guarantee wage equality for your employees.
Why Does Pay Equity Matter?
Pay equity is crucial as it directly reflects how you treat your employees and affects their well-being. It’s a matter of fairness; employees who perform the same work should receive the same pay. Discrimination based on personal beliefs or backgrounds is simply unacceptable in the workplace.
While fair, transparent wages should be the standard, it also benefits you as the employer as it attracts and retains top talent. Open communication between upper management and employees about pay establishes trust. Your employees are more likely to stay with a company that pays them fairly and offers opportunities for growth and advancement. A happy workforce leads to a decrease in turnover and an increase in both productivity and overall morale.
Pay equity can be equally harmful as it is beneficial if you ignore new regulations. These laws vary from state to local government and range in severity, so you must stay current on legislation in your area. Presently, states including Colorado, Maryland, California, and New York are among the handful of states taking severe action to implement transparency measures. Some of the most popular regulations include:
- Mandating the inclusion of minimum and maximum salary ranges in job listings
- Prohibiting employers from requesting an applicant's salary history
- Prohibiting the discrimination of applicants who request salary information or refuse to provide their salary history
- Requiring employers to provide the salaries of similarly positioned employees
- Requiring the disclosure of employer benefits for each job opening
How Do Raises Relate To Pay Equity?
Salaries don’t start and end after onboarding; annual bonuses and raises continuously affect wages and, therefore, must be a part of your pay equity policies. They help motivate and retain employees by providing opportunities for growth and advancement, increasing the likelihood of staying with a company.
Equity increases would be a raise in salary after finding a discrepancy in an employee’s compensation in an effort to reconcile the issue. These can come directly from conducting a pay equity analysis which examines your current pay practices to discover any disparities.
How To Implement Pay Equity And Raises Effectively
Promoting pay equity in your workplace requires a commitment to fairness and a willingness to examine your current pay practices. Implementing pay equity and raises effectively requires careful planning and communication. Here are some tips for implementing pay equity and raises effectively:
- Conduct a pay equity analysis: You must understand where you stand before implementing pay equity. Conduct a pay equity analysis to identify any disparities in pay based on gender, race, ethnicity, or other protected classes. This analysis helps identify any areas where pay equity may be lacking and provides a roadmap for addressing these disparities.
- Develop a pay equity policy: Once you've conducted a pay equity analysis, it's crucial to develop a pay equity policy that outlines your commitment to pay equity and how you will achieve it. When giving out raises, it's important to communicate clearly with employees about why they are receiving a raise and how much it will be. This helps build trust and transparency with employees.
- Review your job descriptions: Review your job descriptions to ensure they accurately reflect the work to ensure that employees who perform the same responsibilities receive equal salaries.
- Provide training: Train managers and employees on pay equity and how to promote it in the workplace. This helps build awareness and understanding of the importance of pay equity.
- Monitor and adjust: Finally, it's important to monitor your pay equity and raise policies and adjust as needed to maintain pay equity and attract and retain top talent.
Steps To Perform A Pay Equity Analysis
Performing a pay equity analysis is significant in promoting pay equity in your workplace. It involves examining your current pay practices to identify any disparities in pay based on gender, race, ethnicity, or other protected characteristics. Here are the steps to perform a pay equity analysis:
- Identify the scope of the analysis: The first step in performing a pay equity analysis is to identify the size of the investigation. The scope includes identifying the job titles, departments, and locations included in the analysis. You should have a clear purpose for what you hope to identify through this process.
- Research your pay policies: It's particularly important to collect historical pay rates to help you understand how current rates were determined. All data collected must be in a way that protects employee privacy and confidentiality.
- Collect data: Depending on the purpose of your audit, you collect different information. While this step is time-consuming, it's essential as all analysis connects back to these data points. In general, this will include:
- Job title
- Job level
- Department
- Education level
- Gender
- Age
- Race
- Hire date
- Starting salary
- Current salary
- Overtime or bonuses
- Analyze the data: Using statistical analysis, you can compare the pay of employees who perform the same or comparable work, considering the factors that impact pay. Similar work can include positions across departments, and states have defined what counts as comparable work. This analysis can help identify any pay disparities based on illegal discrimination.
- Identify areas for improvement: Based on the results of the analysis, you can identify areas where pay equity may be lacking and develop a plan to address these disparities. It's important to note that pay differences between employees performing similar work can be legally justified. Earnings based on seniority, merit, or production measuring system are all legal by federal law. On the contrary, any discrepancies found on sex, race, color, religion, or national origin are illegal and must be corrected immediately.
- Communicate and take action: Finally, it's important to communicate the results of the pay equity analysis to finance or human resources to get approval on wage increases. Then you should implement the salary increase and inform the employee(s) accordingly. Moving forward, the results of the pay analysis help establish payment policies for future hiring or wage decisions.
Performing a pay equity analysis requires careful planning and attention to detail. By following these steps, you can identify any disparities in pay and develop a plan to address them, promoting fairness and equity in your workplace.
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Managing Payroll With Pay Equity In Mind
Pay equity and raises are important topics for both employees and employers. Pay equity ensures that employees are paid fairly for their work, while raises help to motivate and retain employees. Implementing pay equity and raises effectively requires careful planning and communication, but doing so effectively will help you attract and retain top talent while reducing legal risks.
As a business owner, you have enough on your plate, and while you want the best for your employees, you don’t always have the time. By partnering with a professional employer organization (PEO), we help you with all your HR needs, from recruiting a qualified workforce to ensuring fair compensation for your employees.
At GMS, we manage the time-consuming task of payroll, so you have one less thing to worry about, and your employees will remain motivated knowing their employer cares about them. Instead of spending your time on administrative tasks, pass them off to us. We offer an extensive range of services, including:
- Ensuring your business stays compliant with new regulations
- Developing an equitable pay structure
- Writing job descriptions
- Conducting competitive pay analyses
Additionally, our advanced payroll software, GMS Connect, streamlines the payroll process to simplify timekeeping and give users access on the go. Contact us today to learn more about how our payroll services benefit both you and your team.