Equal pay, also known as pay equity, is the concept that equal work deserves equal pay, irrespective of an employee’s race, age, ability, gender, marriage status, sexuality, or religion.
In this article, we’re going to give you the comprehensive lowdown on equal pay and the state of workplace inequality around finance.
A clear understanding of what it is, and how to implement it, is key to maintaining a happy and healthy workforce.
What is a pay gap?
Put simply, a pay gap is a disparity in earnings between two groups of workers.
There are multiple pay gaps today, functioning across gender, location, and industry, but the most widely discussed is the gender pay gap, which refers specifically to the average earnings of men and women in the workforce not equating to the same.
In recent years, and with the help of emerging labor unions, measures have increasingly been taken to ensure gender pay gap reporting and fair pay for all.
The United States does not mandate pay transparency on a national level, but eight states have enacted, and at least 15 states are considering, salary range transparency laws.
States that have enacted salary transparency laws include: California, Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island, and Washington.
The trend is also growing particularly fast in Europe, with a growing number of European countries requiring employers to publish or provide their employees access to gender pay data in an effort to squash salary disparity.
What factors influence the gender pay gap?
Gender-based pay discrimination is one of the most prominent today. The gender pay gap specifically is a complex issue with many contributing factors, ready?
Discrimination is a key element, followed by age, parenthood, education, and gender stereotypes.
For example, if a woman chooses to have a child, she is more likely to work conventional hours, preventing her from taking on overtime or irregular shifts for non-desk and frontline workplaces.
It’s important to remember that gender pay discrepancies are not the only potential area of discrimination.
Pay gaps across ethnicity and sexuality are still very prevalent.
Taking things a level deeper with the racial pay gap
Looking at the earnings across racial and ethnic categories shows an alarming pay disparity between the income of Black and Hispanic women, compared to white men.
In 2022, Black women only earned 70% of what white men earned, while Hispanic women earned 65%. While white women stood at 83%, Asian women were closer to parity with white men at 93%.
There have been talks for years of efforts around closing the pay gap, yet change is slow and sometimes stagnant.
The variations in the gender wage gap among different racial and ethnic groups can be attributed, to some extent, to differences in education, experience, occupation, and other factors.
However, new research has revealed evidence of continuing hiring discrimination against various racial and ethnic groups, as well as discrimination against other groups such as LGBTQ and disabled workers.
When these factors overlap, for example an LGBTQ person of color, the pay gap is often widened further and in some places wage inequality runs rife, and deeper than ever before.
For Latinas, Native and Black women, the lifetime losses translate to about $1 million or more, meaning many women of color would have to work to 80 or 90 years old—beyond their life expectancies—to ever catch up.”
First and foremost, equal pay is essential to ensuring diversity in the workplace.
It’s needed to create a fair and just society where individuals are valued based on their skills and contributions, rather than their gender or ethnicity.
Further, equal pay is needed to address the long-term repercussions of the pay gap, which mean that certain industries are still heavily weighted—against women or other discriminated groups.
Here are some examples of the disparity between earnings for men and women:
Even at the executive level, women consistently earn less than men—and they’re alarmingly underrepresented, as only 8.8% of Fortune 500 CEOs are women.
Introducing: The Equal Pay Act a pay gap solution
Today, pay equity is required by law in the US. In 1963, the Pay Equity Act made it illegal to pay women lower rates for the same job as their male counterparts.
A significant step towards abolishing wage disparity based on gender, it requires people of all genders to be given the same pay for the same work.
Defined as ‘substantially equal’ jobs, various factors are taken into account including:
Skill: required for the job, based on experience, ability, and education
Effort: the mental or physical exertion required
Responsibility: the duties of the employee
Working conditions: physical surroundings and hazards
Establishment: distinct physical place of business, rather than an entire business or enterprise
The Equal Pay Act covers all forms of compensation, including salary, overtime pay, bonuses, life insurance, holiday pay, and more.
The Act also stipulates that, if there is an unfair inequality in wages, employers must raise wages to compensate but may not reduce the wages of other individuals.
Are we making progress? Debatable.
We are, but only gradually. Even with the passage of five groundbreaking laws to prevent discrimination in the workplace, for example the Civil Rights Act and the Fair Labor Standards Act, the gender pay gap is still a problem across the world.
When the Equal Pay Act was signed, women in the US were earning 59% of men’s wages, which increased to 74% in 2000.
However, in 2022 women still earned 17% less on average than men.
Put another way, in 1963, women made 59 cents for every dollar earned by a man. In 2010, that figure had reached 77 cents per dollar.
This translates to an annual increase of half a cent. On that basis, you’re likely wondering how long it will take to reach gender pay equity.
Experts are divided. The Institute for Women’s Policy Research predicts that it’ll take until at least 2059 for Western Europe to achieve pay parity.
This estimation nearly doubles for other parts of the world: the World Economic Forum predicts East Asia to ‘take up to 171 years, and North America to 165 years.
“In places like California and New York, there's more talk about salaries now. It’s not hidden in the shadows anymore.
Companies are being extra careful setting pay rates – nobody wants legal trouble. It’s a bit rocky for some businesses, especially the old-school ones, but overall, it’s pushing them towards fairer pay.”
When it comes to addressing the pay gap, every business can play a part.
In addition to creating a fairer and more inclusive world, there are numerous business-oriented benefits to implementing an equal pay system.
Not only does it send a positive message about your organization’s key values and lift employer branding, but it also increases efficiency and productivity by reducing staff churn.
It has been proven that pay equity helps employees feel valued, which in turn means higher levels of both morale and output.
Improved staff retention also lowers hiring and training costs.
It’s worth noting too that equal pay forms a fundamental part of your company’s CSR (corporate social responsibility) goals, which are ever more important for stakeholders.
Social change starts within your organization—and if each business focused on leveling the playing field, we might reach pay parity faster.
Providing equal pay for employees will also help you avoid facing an equal pay claim, which risks company reputation, high legal fees, and damaged employee relations.
Let’s examine the ways in which you can guarantee fair and equal pay for your employees.
Carry out regular equal pay audits
Otherwise known as a pay gap analysis, it’s important to hold a company-wide salary audit at least once a year—specifically if you have HR teams in multiple markets.
Carrying out frequent audits not only keeps you compliant, but can also highlight any other existing equality issues, such as under-representation.
Reviewing your pay data is essential to spotting anomalies and trends—even if you’re not under a legal obligation to do this.
“Open up about pay. Seriously, just being transparent about what everyone earns can be a game-changer. No more whispering about who gets what.
Check yourselves regularly. Like going to the doctor for a health check-up, and doing pay audits to spot and fix any unfair gaps.
The tough part? Getting the real data on what everyone’s earning. Best way to do it? Keep your data clean, maybe get an outsider to help analyze it, and be ready to actually do something about what you find.”
—Nikki J.
If you do identify equal pay inconsistencies, then it’s so important you’re transparent about your findings, raise salaries to meet the higher paid person where they’re at, and offer an equal compensation payment for the time the lower paid member of staff has been with the company unfairly.
Address equity in recruitment and hiring practices
It can be very valuable for employees who have recruitment and selection responsibilities to receive training in avoiding unconscious bias.
This occurs when an opinion about a candidate is based exclusively on social stereotypes or preconceived notions of the individual, held on a subconscious level.
Unconscious bias (aka hiring bias) comes in many forms, including gender bias, confirmation bias, and affinity bias.
Because of this, many talented people are overlooked in selection processes.
It is a widespread problem, with 79% of HR professionals agreeing that unconscious bias exists in both recruitment and succession planning decisions.
Suitable training can ensure that recruiters can identify and avoid unconscious bias in the hiring process, supporting a more diverse and inclusive organization.
There are multiple tools available, for example Codility, which help mitigate any existing bias.
“It’s more than just ticking a box. It’s about building a place where everyone feels they’re paid fairly.”
—Nikki J.
Provide a transparent payroll
Pay secrecy encourages pay disparities. Traditionally, many employees have been either discouraged or forbidden from discussing their pay with their colleagues.
Today, however, in many states (e.g. New York) employers are legally prohibited from restricting employees the ability to discuss their wages with other employees.
Unfortunately, this is an increasing trend across countries and industries.
“We clearly defined our compensation philosophy and ensured that all employees were aware of the factors that contribute to pay decisions. This helped to eliminate any ambiguity or misconceptions about how salaries were determined.
In addition to tracking metrics, we also conduct employee surveys to gather feedback on their perceptions of pay equity. This feedback helps us identify areas where we can improve our communication and training initiatives.”
When it comes to discrimination, sunlight is the best disinfectant. This means that keeping things transparent and accessible is the best way to ensure pay parity.
A transparent process for deciding which salary to offer new starters or existing employees means that both employees and company stakeholders can be confident that there is no bias.
Where is the pay gap heading?
Achieving more substantial progress in narrowing the pay gap depends on fundamental shifts in societal and cultural norms.
This involves addressing any preconceptions head-on, in an attempt to avoid unconscious bias, which perpetuates discrimination.
We can also encourage enhanced workplace flexibility, another factor influencing how men and women are paid.
Even in countries like Denmark, where family-friendly policies are prevalent, parenthood continues to contribute significantly to the earnings disparity between men and women.
Recent studies suggest that family-friendly policies in the U.S. might be hindering the closure of the pay gap.
Additionally, gender stereotypes and discrimination, though difficult to quantify, are persistent obstacles to moving forward.
Ultimately, the benefits of reaching pay equity are just as impactful and far-reaching as the disadvantages, instead orienting us towards a fairer and more equal society.
Fairly paid employees feel more valued, trust their organization, and are more engaged in their work.
Which ultimately leads to an increased bottom line, enabling equal pay all the more.
But, one cannot happen without the other. What comes first, the chicken or the egg?
Olivia Millard is a writer and assistant editor at DSLX, with two years’ experience in B2B SaaS, having previously worked as an SEO writer for SaaS company Opportunity Network. When Olivia is not writing or editing for SEO, she’s doing it for newspapers and magazines.
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