Don’t Be Afraid of the Numbers
Tackling pay issues head on makes a better workplace.
When I started my career, I held on to the notion that many things about one's employment should stay confidential, in particular, individual pay. As I’ve grown in my career, I’ve been on the other side of pay with full knowledge of what every individual at the company makes. I’ve also realized how common it is to uncover pay discrepancies. So how do these discrepancies happen? And what can you do about it?
When I do pay equity audits with companies, the results often aren’t great. Many pay discrepancies are due to the lack of a clear pay structure. Pay is often decided by individuals who have no training in the subject, who have no data to rely on, and who bring incredible amounts of personal bias to the table.
Pay fairness is most successful when the company has a structure for how and why people get paid what they do. In the companies I’ve worked with, this only happened in select roles and rarely across the board.
What is pay fairness?
What do we mean when we say pay fairness? There are two key concepts:
The pay gap
Equal pay for equal work
The pay gap
The pay gap describes the overall gap between groups when it comes to pay. When we look strictly at gender groups, we know that men make more than women. The Institute for Women’s Policy Research reported that in 2018, women made 81.6 percent of men’s median annual earnings for full-time, year-round workers.
In my experience with pay audits, pay inequity by race and gender was even more notable when I looked at leadership positions. The Women in the Workplace report, published by McKinsey & Company each year, points to one cause of this inequity at the leadership level called “The Broken Rung.” This is a missing step on the ladder, where women are not promoted but men are and contributes to the overall pay gap. McKinsey’s report stated,
“Despite gains for women in leadership, the ‘broken rung’ was still a major barrier in 2019. For the sixth year in a row, women continued to lose ground at the first step up to manager. For every 100 men promoted to manager, only 85 women were promoted—and this gap was even larger for some women: only 58 Black women and 71 Latinas were promoted. As a result, women remained significantly outnumbered in entry-level management at the beginning of 2020—they held just 38 percent of manager-level positions, while men held 62 percent.”
People who argue against the validity of the pay gap will tell you that it is insignificant because we are not comparing the same jobs. However—even if we ignore the opportunity gap that causes women and people of color to not advance in their careers past a certain level, or not be considered for the same jobs as white men due to discrimination, lack of access to education, incarceration, and more—there is still a gap.
Equal pay for equal work
When we look at Equal Pay for Equal Work, the gap is much smaller but it is still there. According to payscale.com’s report, Pay Transparency Closing the Gender Wage Gap, the pay gap between gender when looking at the same job is 2%, meaning that women get paid 98 cents for every dollar that a man is paid.
How to make pay more equal
What are the solutions to the issue of equal pay? One solution is pay transparency at an organizational level and another is clear pay philosophy and structure.
Pay transparency
There are many reasons to have greater pay transparency in your organization— and many ways pay transparency can look—and pay transparency consistently leads to greater pay equity. I go into more detail on this in my article, Greater Pay Transparency, How to Persuade Your Leadership You Need It.
Pay philosophy
The company’s pay philosophy should clearly articulate how the employer determines pay. Things to consider include:
Whether an employer should lead, lag, or meet market averages
Who the company is competing with for talent when assessing market data
Which positions are considered key (these can be hard to fill, essential to the business, or both).
Conduct regular pay audits
All companies should be completing Pay Equity Audits annually. Check out How to Conduct a Pay Equity Audit, and to learn how to conduct a pay equity audit from start to finish, take our digital course: Cultivating Equitable Compensation.
