Blogpost

Advancing DEIB through pay equity

Jeremy Spake

Senior Principal, Thought Leadership and Advisory Services, Cornerstone

As talent management professionals continue to focus on diversity, equity, inclusion and belonging initiatives to drive more inclusive workplace cultures, a critical aspect of ensuring success is considering how inequities present themselves throughout the employee lifecycle — from recruiting and performance management to identifying high potential employees and how people are ultimately paid.

Equal Pay Day was established in 1996 as a variable holiday symbolizing the wage gap between women and men. Further analysis, including the intersections of race, highlights how pay disparities are exasperated for BIPOC communities in the United States. Equal pay for equal work is not a reality for many people of color.

The Equal Pay Act of 1963 and the 2009 Lilly Ledbetter Fair Pay Act have provided legislative frameworks for organizations to ensure equal pay for equal work. While progress has been made to close the gender pay gap, COVID-19 has forced many women out of the workforce. By January 2021, 80% of working adults who left their jobs were women, and the impact on women in the workplace has been called an “unprecedented disaster.”

“We now see a rate of labor force participation that’s the lowest since 1998,” according to Emily Martin of the National Women’s Law Center. “We’ve lost a generation of progress there.”

Total Rewards specialists are critical to championing pay equity as an ideal that organizations should strive towards. However, they are also tasked with developing and operationalizing guidelines employers need to protect themselves against potential pay discrimination litigation.

To learn more about pay equity best practices, we sat down with Katie Bardaro, CRO at Syndio Solutions, a pay equity software solution provider based in Seattle with the mission of bringing fairness to work.

“Pay equity is becoming more in the forefront for businesses in their compensation and human capital strategies — more people are paying attention to it,” she said.

Katie works with organizations to embrace an ongoing pay equity strategy — one which she finds is both something organizations are increasingly concerned with — and one which many are making increasingly transparent.

“We’re seeing this really interesting shift in the market where people now only want to do pay equity studies more regularly but communicate that they’re doing it and even potentially communicate their results,” said Bardaro.

Where to begin

Pay inequities can present significant cultural, retention, legal and financial challenges to employers.

Organizations seeking to embrace ongoing pay equity analysis as more than a compliance-centric, check-the-box activity in response to pay discrimination litigation are often faced with the challenge of knowing where to begin.

Bardaro and Syndio share how to analyze pay equity guidance, including these foundational steps:

  • Engage internal stakeholders - Ensure your senior leaders are on board and aligned on the organization’s pay equity plan and expectations.
  • Group employees doing substantially similar work - Pay equity is about equal pay for equal work, or more specifically: “comparable” or “substantially similar” work. To create groups of employees doing substantially similar work, consider skill, effort, responsibility and working conditions.
  • Control for job-related factors - Apply controls once you set your groupings. A control is a compensable factor that can justify differences in pay, even for individuals doing the same job.
  • Identify and review protected classes - Pay equity laws at the federal and state levels don’t merely protect one race, gender or certain ethnicities. The laws require that employees are paid without regard to these protected classes, which means that, with a few exceptions, employees don’t have to be in a historically disadvantaged group to bring forth a lawsuit.
  • Make adjustments before allocating budget - When you work to group people together accurately and use the right controls, it will be easier to make adjustments and account for business changes (e.g., mergers, acquisitions) on an ongoing basis.
  • Take action - Work with HR and the Compensation team to remediate salaries once you complete your pay equity analysis. And be transparent — with leadership, employees and even the public.

Executive support

Commitment from leadership is critical to ensuring pay equity is a cultural hallmark of your organization.

Salesforce.com has been heralded for its workplace culture and has sat atop FORTUNE magazine’s “100 Best Companies To Work For” list for 12 years in a row. In 2018, Founder & CEO Marc Benioff sat down with 60 Minutes to discuss how a “best place to work” can still have a gender pay disparity despite his personal commitment to promoting and retaining women.

In the interview, Benioff reacted, “that’s not possible,” when approached by CHRO Cindy Robbins about potential pay inequities in the “Best Place To Work.”

“We don’t play shenanigans paying people unequally,” he stated. “It’s crazy,” he continued — because he had personally prioritized promoting and retaining women at Salesforce. But, he never ordered an audit to ensure inequities weren’t slipping through the cracks. Benioff ordered a pay equity audit, revealing an almost $20 million gap in how men and women were paid at the “Best Place To Work” — despite all the right messaging “from the top.” Salesforce adjusted affected employees’ salaries and has since committed to ongoing pay equity audits as a central part of their Total Rewards strategy.

Lesson learned

When managers throughout any organization operationalize people processes, unconscious bias can creep in and influence how those managers make pay and promotion decisions for their teams.

The Salesforce example is one of note in that even in organizations with all the right cultural levers pulled to promote inclusivity and equality, there will continue to be areas where unconscious bias creeps in, causing potential deleterious effects on how people are paid and rewarded for their performance.

Embracing a continuous pay equity review process that your organization embeds in its normal people processes regularly is important to ensure the cultural hallmarks of your organization are being adhered to and that no one is left with unequal pay for equal work.

“We see that nearly every organization is either taking action or has DEI on their radar. This shows momentum to close the pay gap and move toward more diversity and inclusion in the coming years,” says WorldatWork president and CEO Scott Cawood.

Advancing DEIB

The Employers for Pay Equity consortium comprises companies placing pay equity analysis as central to their diversity and inclusion strategies.

Unconscious bias is a leading cause of pay inequity — particularly for people of color. Training for managers on how to mitigate and recognize bias is critical to all aspects of a robust talent management strategy, as well as providing clear, transparent and comprehensive guidance around how salary structures are set, the organization’s over-arching compensation philosophy and how to best operationalize the pay-for-performance narrative many organizations committed to.

“If you’re not thinking of pay equity as part of your broader DEIB strategy, then you’re doing it wrong,” says Katie Bardaro. In her parting call to action, she challenges organizations: “don’t let fear get in the way and instead determine how can you embrace a tangible action in pay equity relative to your broader DEIB strategy that can make a difference for your employees’ lives.”

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