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Pay Equity and Your Talent Equation

This is part one of a two-part series. Read part two here

At first blush, who wouldn’t agree that pay equity and equal pay for equal work are the right things to do?

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It seems like a no-brainer on the surface and it should be implemented globally now. But it’s not so simple, as you will find out. It’s a complicated issue rooted in bias and culture, which we know is hard to change. It also requires a two-sided understanding: the employee view of the issue and what they perceive as fair, and the employer view and what they perceive as fair. At times, these are polar opposite perspectives.

This issue has been around since 1963 in the United States. The U.S. passed the Pay Equity Act in 1963, followed by the Civil Rights Act of 1964 and the Lily Ledbetter Fair Pay Act of 2009. These laws offer solid legislative protection for equal pay and pay equity. Protections on an international legislative level exist, but are spottier. However, it still remains an issue in the U.S. and globally, despite almost 60 years of legislative action. Women, and particularly women of color, still make less than their counterparts, according to the Center for American Progress.

Walk into any board room or senior executive meetings today and you still see scant numbers of women and minorities. As you go lower down the food chain, this picture changes. At the non-executive levels and below, there are more women and more people of color who obviously make less and often have the same level of experience and education. 

According to the Huffington Post, 40% of American breadwinners are women, yet they bring home 23% less than their male counterparts.

Some high-profile examples have surfaced in the last year or so. The two stars of the Netflix’s series, “The Crown” had a glaring difference in pay. The star portraying Prince Charles, Matt Smith, was paid considerably more than Claire Foy, who portrayed Queen Elizabeth. One could argue the role of the Queen was the focus of the series, carried the show and, on a value basis, should have been paid the same or more than her co-star.

Email leaks from Sony Pictures highlighted women executives made less than their male counterparts in similar or equal roles. And the most recent example highlighted the difference in pay for the U.S. women’s soccer team compared to the male team. These examples ripped the Band-Aid off the pay issue in a very high profile and global way. The fact is that wage gaps between women and men has budged, but not enough. Clearly, we have a long way to go.

However, similar to getting women in executive positions and in the board rooms of the world, the results have been incredibly poor. Women and people of color worldwide still make less than men. Typically, women make 75 to 80 cents to the dollar to male workers, according to a recent Bureau of Labor Statistics report. We also know there is still an imbalance when it comes to equal pay for equal work of equal value. Traditional female-dominated roles such as nurses, teachers or cleaners make less than comparable jobs of equal value dominated by men, such as firefighters, truck drivers and construction jobs. While progress has been made, male-dominated roles have often implicitly discouraged women to seek these roles.

We clearly have not cracked the code into equalizing the compensation based upon the value of the job or the equality of the job. As women continue to gain power and more economic stability, this issue will not and should not go away.

On another front, the new generations entering the workplace are the most educated and diverse employee pool to date. I was recently at a Renaissance Weekend Retreat, sponsored by Ambassador and Mrs. Philip Lader, where key social issues were discussed among some renowned individuals. Children of the attendees were also encouraged to discuss essential and urgent issues. A panel of young women in high school cited the biggest issue for them in the workplace is pay equity. They are now starting to become activists in this area. It was quite heartening to see.

With a war for talent prevalent in today’s labor market, pay equity is not just about compliance, but how your employees feel about you and how your organization is viewed in the market.  Most importantly, it is about attracting and retaining your most precious asset — your people.

How Employees See the Issue
Employees view pay equity in several ways, but mostly through a personal lens. They view their pay not only in comparison to others, but in a very personal view of their worth to the employer.  They look at their experience, knowledge, education and market value. They also have an external lens where they compare their pay across industries and companies.

Glassdoor and other such sites have added a high degree of transparency to the issue. Not only do employees talk within their organization, but they can easily compare their compensation across the market and determine fairness through various online platforms. Transparency today has only heightened the complexity of this issue for organizations. Organizations and human resources leaders need to recognize that transparency in their pay practices must be a core tenant of their people strategy because employees can get the information — and will. If you are not open about your pay practices and strategies, this erodes trust and perceptions of fairness in the employees’ eyes.

Fairness is a huge issue that affects morale. When an employee feels they are not being treated fairly, they have many avenues of recourse. They can slow down their work, look elsewhere, constantly be looking for a raise or jumping around the organization to keep upping their salary.  Morale around pay can also lead to absenteeism and tardiness. All these issues fall squarely in the talent management and strategy arenas that need to be addressed in addition to the structural issues of policy, compliance and compensation.

Employees, particularly those who have high market value, will change organizations with the expectation of more pay. When asked in exit interviews, the pay issue often comes up as a key driver, along with the opportunity for career advancement and relationship with their manager. If managers play favorites, it can be demoralizing for other employees. If pay equity issues are pervasive, you are also fostering a culture of low innovation and motivation, which is very costly and time consuming to turn around. Once a culture is entrenched, it can take years to change.

How Employers See the Issue
It’s clear that employers must comply with the law, but the employer motivation is often around cost savings and shareholder value. The more enlightened employers know that having great talent is a key business differentiator and requires a holistic view of talent strategies in which they must look at compensation strategies regularly. This is obvious but having a fairness lens on what they are doing and looking at their whole talent strategy through a fairness value filter is important. 

Sadly though, there are more less-enlightened companies out there than there are those that truly value their workforce. The days of cost cutting are still here, hanging over from the 2008 recession days. 

Even with the most recent tax reform efforts in the U.S. that gave companies more tax relief, the increased savings was not necessarily used to the employees’ benefit. In many cases, employers chose to offer employees bonuses rather than true salary adjustments. Essentially, this strategy is a one-time shot in the arm for an employee, but it does nothing to equalize pay and provide long-term “cookie jar” money. Giving a one-time bonus does not increase the organization “run rate” as salary increases would. In many cases, companies chose to buy back stock, which helps the shareholders and rarely the employee — unless they are in the executive ranks where women and minorities are still relatively scant.

A recent survey of HR leaders cited that retention, morale and training and development were their top three issues. It’s hard to argue that pay equity does not directly affect these issues.

Pay equity is something that can’t be ignored. 

About the Author

Linda Sharkey, PhD. is an executive coach, public speaker and the author of the book, The Future Proof Workplace.


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