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Ignore Pay Transparency at Your Own Peril

Let’s be clear: While the hot-topic terms gender pay gap and gender pay equity are often used interchangeably, they are two very different things.

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The gender pay gap is a broad, societal issue that takes the median pay of all women divided by median pay of all men, regardless of position. Gender pay equity speaks to the concept of equal pay for equal work and is covered under laws like The Equal Pay Act.

These two issues sound similar, but they aren’t. What they do have in common, however, is that they are often misunderstood, draw attention and spark debate.

Partly driven by the attention both pay issues command, the broader topic of pay transparency has become a focus in the media, politics and general public discourse. This elevated level of scrutiny is challenging companies to act and many are doing so by:

  1. Proactively addressing the gender pay gap and, in many cases, voluntarily disclosing how they stack up to emphasize a commitment to social responsibility;
  2. Conducting formal pay equity assessments so any inequities can be remedied quickly and appropriately to mitigate the risk of legal action; and
  3. Revisiting compensation communication strategies to make any necessary messaging adjustments in order to maintain control of their own narratives.

Not surprisingly, pay transparency has become quite complex. There are disclosure laws that require companies to share compensation data in public filings, and there are activist investors who demand that boards publish more information on gender and racial pay gaps.

But the key thing to remember is how your employees view pay transparency. To them, it’s personal; it’s far less about pay gap statistics or knowing everyone’s salaries. Instead, what’s really at the crux of pay transparency is an employee’s interest in understanding that their own compensation is based on myriad factors (experience, tenure, education, market value and performance) and grounded in methodologies and governance practices that create fair and responsible compensation structures. Employees want to be reassured that they are being paid competitively and fairly based on their specific roles within their organizations.

Tactically, this means different things for different companies. Some companies create PowerPoint presentations and develop communication toolkits with FAQs, while others establish more face-to-face interactions or more formal training for leaders. Regardless of their approach, companies need to be confident and prepared to answer questions about pay ranging from “What’s your company’s gender pay gap?” to “Do you pay equally for equal work?” to “Why do I get paid less than the person who sits next to me?”

Given the current environment, especially as these issues continue to be conflated in the presidential run for 2020, it would be irresponsible for companies to ignore the groundswell of public debate on pay

This is a powerful opportunity for companies to highlight their commitment to social responsibility and their efforts to close the gender pay gap. It’s an opportunity to ensure that pay structures are unbiased and legally sound, that they reinforce messages about how compensation is designed and delivered based on culture, business strategy and talent objectives. And most importantly, it’s simply good governance.

About the Author

Sharon Podstupka Bio Image

Sharon Podstupka is a principal at Pearl Meyer.


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