Breaking Down the Pay Gap

We have entered a new world of work - a world where humanity in the workplace is no longer an option. Progressive organizations are using this as an opportunity to look internally at their own policies and procedures, with the goal of creating a safer, more equitable environment.  

One way to make this new normal more human? Ensuring employees are paid fairly for their work, regardless of race, gender, or disability. 

Equal pay for equal work may seem obvious for enlightened business leaders, but achieving parity is not as easy as it sounds. In fact, this was a topic covered in a WorldatWork 2020 Total Resilience Conference session, yet there is still much work to be done.

Here, we recap the ever-important issue of pay equity, with insights from an all-women, multidisciplinary expert panel and how to achieve it. The panelists included: 

  • Elizabeth Bradley – Shareholder; Partner at Fortney & Scott, LLC
  • Joanna Colosimo – Director of EEO Compliance & Analytics; DCI Consulting Group, Inc. 
  • Michelle Duncan – Attorney at Law; Jackson Lewis P.C. 
  • Lisa Hart – Principal Consultant & Practice Lead; DCI Consulting Group, Inc. 

Breaking down pay equity

Pay equity comes down to compensating employees equally for performing similar duties. Ideally, pay equity accounts for other factors such as experience, performance, and tenure. For organizations looking to uncover pay discrepancies, Michelle first asks, “what is your end goal?” That seems like a straightforward question, “but in the area of pay equity, it’s a little bit more complicated.” 

Before getting started, she suggests asking, “what do we want to achieve, and what do we want to do once we’ve completed the project?” Once that is established, the next step is determining whether to conduct a pay gap analysis or a pay equity analysis.  

Joanna explained that a pay gap analysis “is really just an overarching comparison – average salary differences between males and females or minorities and non-minorities.” 

pay equity analysis, on the other hand, answers “whether there are unexplained pay differences among folks who are doing similar work, while accounting for job-related factors,” Michelle clarified. 

Whichever method you choose, all four panelists emphasize the importance of accountability. If pay discrepancies are found, Lisa questions, “is the company prepared to investigate the reasons for that and how they want to address it?” A successful analysis requires resources and time, but when done thoroughly, it can help organizations on the road to a more equitable workplace. 

Why pay equity matters

Why should pay equity matter to employers? Attorney Cheryl Pinarchick writes for SHRM, “By ensuring employees are paid equitably, employers can increase efficiency, creativity, and productivity by helping to attract the best employees, reduce turnover, and increase commitment to the organization.” Bottom line? Happy employees are productive employees, and being paid fairly is one way to achieve that. 

How to reach pay parity

Once the method is chosen, “we define who is part of the project team,” Liz explained, emphasizing that it’s best to keep it a small group within the organization. The team also must decide whether the analysis will be conducted internally or externally. Most importantly, “make sure legal is included in all communications” and “make sure the work is clearly at the direction of counsel.”

Joanna encourages organizations to look at wage gap issues holistically. “It’s really important for us to look at pay equity and ask, ‘are there barriers in how women are distributed within our own workforce?’” When considering how to fix these issues, she asks, “what are we doing to get women into higher paid positions? What does our pipeline look like? Are we encouraging STEM programs or internship programs?”

Nuts and bolts of pay equity analyses

This panel focused specifically on the gender pay gap, but Michelle reminds us, “the pay gap is also very much driven by race,” and recommends employers engaging in the analysis to look at both race and gender. After the preliminary steps are taken, the organization is ready to conduct the analysis. Lisa lays out the key components of an equity study:

  • Identify groupings Regulations require employees to be grouped together based on similar job content in terms of duties, responsibility, skills required, and level of effort.”
  • Identify job-related factors that influence pay – “These factors can be identified through an examination of pay policies and procedures and interviews with internal subject matter experts, such as your talent acquisition and comp teams.”
  • Availability of data – Determine whether you have the data necessary to measure those differing factors. “Some will be more readily available, like tenure. Others may require the use of a proxy, such as age as a proxy for prior experience. And others just may not be available, such as specific skills or prior experience.”
  • Conduct regression and interpret results – “Regression is the gold standard that can be used for large groups because you can actually control for these job-related factors.” Using the P-value determined from the regression, an organization can identify any significant pay disparities. 

“Statistical significance of a pay disparity is not proof of discrimination,” Lisa reminded us. “When you’re looking at lots of paid groups and a large number of employees, significant disparities help point to groups where further investigation is warranted.”

Conduct follow-up work – Look back at the study and determine whether the groupings were appropriate and if there were any pay factors missing. “You may very well find data errors of grouping issues, which warrant rerunning studies after fixing the error.”

What now?

After the study is complete, organizations must then act on the results. “If there are groups which the investigation fails to find job-related reasons for the pay differences,” Lisa urges organizations to consider adjusting salaries and other policies and procedures to level the playing field. After all, we’re all human and achieving pay parity is one step closer toward a more inclusive and equitable workplace.  


7 Steps to Address the Pay Gap

The Future of Total Rewards: Exclusive Interview With Peter Newhouse

Work Needs to Get Woke: A Modern Look at Gender Inequity

About the Author

Sarah Bloznalis

Sarah Bloznalis is a content marketing coordinator at Workhuman from Dorchester, Mass. When she's not writing about the future of work you can find her in the library, at the beach, or exploring the city.

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