Many states have recently adopted laws that require companies of all sizes to close the gender pay gap. The principle underlying these laws is simple: Pay men and women based on their contributions to the work being performed without regard to gender.
However, for employers trying to comply with these laws—while acquiring and retaining top talent—the devil is in the details: Complying is not as straightforward as the principle behind the new requirements.
Research confirms men and women negotiate differently. And a persistent wage gap ensures that new hires arrive at the front door with expectations that differ from those of tenured employees. In a bullish market when wages inflate, how does a company both minimize differences with the external market—to keep up with the free agent market—and ensure it doesn’t do so in a way that favors external men or disfavors internal women?
Keys to closing the pay gap
When addressing pay equity in your company, consider these three points:
Any effort to eradicate pay disparity in the workplace must have executive commitment. Boards of directors, CEOs, and HR managers should constantly assess risk and evaluate the company’s commitment to pay equity. This process will make the organization aware of necessary changes in the employee lifecycle, including hiring, pay levels, promotions, terminations and turnover, and reorganizations.
Committing to pay equity will also heighten awareness around other opportunities for fairness throughout the full employee experience, from hiring to internal movement and development.
Failing to analyze your company’s pay equity incurs the unnecessary risk of gender-based lawsuits and loss of top talent because they feel their pay is unfair. Employees want to believe they have the opportunity for movement and growth. Ineffective managers don’t often make those opportunities known, leaving employees feeling overlooked, stuck, and stagnant.
These common workplace scenarios show how imperative it is for executives to continually assess pay disparities within the organization that may emerge over time.
The journey to pay equity must be transparent. Trust and transparency are two sides of the same coin. When leadership is not transparent with its employees about its effort to tackle pay differences, it misses out on a tremendous opportunity to build trust, especially among female employees.
Far too many companies keep their efforts buried deep in confidentiality and privilege, advised by their lawyers that the alternative is a litigation risk. That practice misses the mark.
Most women aren’t looking to sue their employer. They just want equal pay for equal work. Even if a company admits to a pay gap—the reality is that nearly all companies have one, somewhere— the honest effort to solve the problem engenders good will and creates accountability.
The pay-equity journey is not “one and done.” The process of closing pay gaps requires ongoing commitment. If one-and-done pay efforts worked, there would be no lingering pay gap. Companies that are serious about pay initiatives know that maintaining the delicate balance they worked to achieve requires vigilance over time.
Closing the gap for underpaid employees is the right thing to do, but unless companies work to identify the underlying policies, practices, and manager behaviors that led to those disparities to begin with, the gaps will reappear quickly and regularly—hurting a company’s bottom line.
Learn inclusive leadership practices to ensure that all employees are heard, recognized, and appreciated.