Pay Equity by Ginny McMinn, Alliance Partner and HR Expert

When I began working in Human Resources, my family-held employer routinely processed increases of $100-200 per month for male employees, $75-100 per month increases for female employees, and $100 per month raises for new fathers. This was well after the passage of our nation’s Equal Pay Act (EPA), yet this practice was blatant, illegal and ongoing.
Let’s explore how your practices measure up with a Pay Equity Audit.

As the legal basis for Pay Equity, the EPA requires that employers pay employees working jobs of equal skill, effort and responsibility under the same working conditions the same amount unless one of the following is in place as a basis for differentiation:

• Seniority system
• Merit system
• System measuring quantity and quality of work, or a
• System differentiating wages on another basis other than sex.

It has been 56 years since passage of the EPA. For many years, the Department of Labor (DOL) has compared average pay for men and women. The women’s rate has been slowly rising as a percentage of the men’s rate. In 2018 this comparison reached the rate of 81.1 cents for women’s pay compared to $1.00 for men’s pay.

In various studies, the DOL and Women’s Bureau have looked at causes for this gap. It is frequently described as a result of absences from the workforce for birth and care of children, poor negotiating skills, inherent bias toward pay for male heads of household compared to pay for the number of often unrecognized female heads of household.

Yet the Equal Pay Act assigns responsibility to the business entity to see past these “causes” to the gender-neutral administration of pay. Certain government contractors are now required to submit salary data by gender for workers on the government contract or within the organization more generally. And where there are local or state laws related to Pay Equity, other employers will be expected to account.

Pay Equity Audit
In a typical Pay Equity Audit, here’s where I look to see whether the business is paying fairly on a gender-neutral basis:

1. First, is there a systematic way of determining and administering pay within the organization? This should include a way of determining the relative value of jobs and work within the organization, known as a Job Evaluation System.
   2. Next, are there pay rates and ranges established based on the relative value of jobs rather than paying based solely on market comparisons? Capturing and using market data means incorporating gender bias that is present in the market, particularly in traditionally male jobs (think construction, truck driver) and traditionally female jobs (think admin assistants and teachers).
   3. Third, once these pay rates are established is there a pay administration system with ranges and guidelines for administering pay within those ranges? What are the rules governing the portion of the range available for new hires with little experience? With 5 years of experience? And so on.
   4. What is the typical increase for a promotion? What is the pre-determined link between performance appraisal rating and resulting increase in a merit-based or pay for performance system?
   5. Does your application or interview process ask for salary history before making an offer of pay? If so, this will incorporate past pay discrimination into salaries going forward. This is increasingly banned by state and local statutes. The more legal and equitable practice is to ask for salary desired from candidates of both genders, not history.

Pay Audit Determinants

In a Pay Equity Audit, I use information about pay range, range administration policy, total job-related experience in years, current company job-related experience in years, and performance appraisal rating to determine what current pay is and what it should be based on policy and guidelines. If there is a disparity between the projected and actual salary rates, then we look for causes and solutions.

Best Defense

In a complaint or government audit situation, you can be required to adjust pay upward toward equity. (By law, you may not reduce the higher paid individuals pay to create equity.) In publicly held organizations, boards of directors often require a Pay Equity Audit to ensure no such liability applies.

If you are not thinking about pay in systematic ways and are not sure of your status as a gender-neutral payer, you run a risk of not being able to defend your pay system and decisions, and not being able to attract and retain employees who are disadvantaged under your system. Individual employees may not feel recognized for their performance and contribution and may even challenge their pay decisions internally or even externally.

To learn more, or to schedule your pay audit, contact HPISolutions.