Estimated reading time: 8 minutes
I ran across a statistic from a USA Today survey indicating that 56% of respondents are planning to leave their jobs over pay. As human resources professionals, we often dismiss pay concerns because we see surveys saying that employees want purpose and meaningful careers. And it’s true. Employees do want those things. They also want to pay their bills and save for the future.
When it comes to pay, there are two questions that organizations need to consider. First, is an employee’s compensation externally competitive? Second, is the employee’s pay internally equitable? We’re going to talk about the second question today.
To provide us with some insights, I reached out to our friend Heather Bussing. She is a California employment attorney with over 30 years’ experience providing sensible and strategic advice to employers. Her deep experience with business, humans, technology, and work gives her a unique perspective focused on preventing and solving problems rather than fighting about them.
Heather has been interviewed and quoted in the New York Times, Wall Street Journal, CNN, Business Insider, and NPR. She is also the co-author of a new book “Get Pay Right: How to Achieve Pay Equity that Works” where she and Salary.com CEO Kent Plunkett offer practical guidance on addressing pay equity in organizations.
Oh, and before we go any further. Please remember that Heather’s comments shouldn’t be construed as legal advice or as pertaining to any specific factual situations. If you have detailed questions, they should be addressed with your friendly neighborhood labor and employment attorney.
Heather, thanks so much for being here and congratulations on your new book. You know I like to start our conversations with a definition. I noticed in “Get Pay Right” you’re introducing a different perspective on pay equity. Tell us your definition and why the distinction matters.
[Bussing] We define pay equity as ‘equal pay for comparable work that is internally equitable, externally competitive, and transparently communicated.’
The basic idea of pay equity is that people who are doing the same work should be paid the same. But there’s no such thing as work that’s exactly the same, which is why the law talks about comparable work instead of equal work.
Next, pay equity depends on what other people make inside the organization but that is always significantly influenced by what is happening in the market so we talk about internal equity and external competitiveness.
Then to effectively address pay equity, you need clear information and communications about why people make what they make. Transparency is part of fairness and also required as a part of compliance under many state pay transparency laws.
So, we defined equity in a way that covered the concepts needed to actually address the problem in a way that will work from a business perspective.
Compensation (both direct and indirect) is such an important topic to both employees and organizations. But because it’s so important, shouldn’t it already be a priority? I guess what I’m asking is … in your experience, why are we still talking about pay equity?
[Bussing] We’re still talking about pay equity because there have been laws on the books for over 60 years and we’re not making progress. The Economic Institute recently reported that in the U.S., there has been no meaningful progress toward eliminating gender pay discrimination in the past 30 years. The picture is even worse for women of color.
We’re also dealing with long predicted labor shortages based on aging populations, boomer retirements, declining birth rates, and immigration policies. This was all exacerbated by COVID.
In the meantime, after being told things can’t change for decades, suddenly everything changed with the pandemic. Things people were told were impossible happened quickly —remote work, reduced travel, flexible schedules, more autonomy. Employees could see that employers’ words and actions weren’t matching. Employees learned that they needed to be more assertive about what they needed, wanted, and would not accept.
Another big factor is the new tech and the focus on data and people analytics. Pay is data and pay equity is math (with some fancy statics thrown in). Pay gaps are one of the easiest forms of discrimination to see with data, which makes them easier cases to prove.
These factors have the attention of the Equal Employment Opportunity Commission (EEOC) and state legislatures who are increasing enforcement and passing new legislation on pay transparency and pay data reporting to encourage employers to do pay equity audits and address problems.
One of the most common ways that employees discover pay inequities is when they find out what their colleagues are being paid. First, from a legal perspective, can organizations prohibit employees from talking about their pay? Second, where do pay transparency laws factor into these conversations?
[Bussing] Employees have federal rights under the National Labor Relations Act (NLRA) to discuss wages, hours, and working conditions with their colleagues, regardless of whether there is a union. So, employers cannot prohibit employees from discussing pay with each other.
An interesting twist is that with salary history ban laws, employers also cannot force employees or candidates to tell employers what they made at their last employer. Employers can’t keep secrets about pay but employees can. This reflects the unequal resources and bargaining power between employers and employees.
Pay transparency laws are designed to keep the employers focused on what the work and role is worth instead of trying to benefit from past pay discrimination. Gaps in pay compound over time and exacerbate the problem. Women have 70% of the retirement savings of men. Because their career earnings are lower, they also have lower Social Security and other retirement benefits. They also live longer than men. This becomes a public policy issue pretty quickly.
The idea of pay transparency is to help all employees with the information they need to increase their bargaining power and to make it harder for employers to pay women and people of color less than their other colleagues.
What options do HR departments have when employees say, “But Joe gets paid more than I do!”? While it’s not true all the time, I do believe there are some employees who don’t understand their pay and it ultimately hurts them because they also don’t know how to have discussions about their pay. Are there things that organizations can do to help employees better understand how total compensation works?
[Bussing] And important thing that organizations can do is to have a compensation strategy that helps leaders, managers, and employees understand how compensation fits into the organization’s finances, what factors affect compensation, and the impact of compensation decisions over time. For example, when a company lays off a bunch of people to polish its profit and loss statement (P&L) for reporting, they have to hire new people shortly afterwards to get the work done. This is very expensive and a bad way to treat people and do business.
At the same time, compensation often has very little to do with an employee’s work or performance and everything to do with the economy, investor skittishness, internal and external politics, and what’s going on in the market for the organization. None of this is in an employee’s control no matter how hard they work or what amazing work they do.
We need better financial literacy for everyone. This is so easy to say and difficult to do because there are so many barriers. One of the big ones is our cultural barrier against talking about money, which leads to financial literacy gaps for people in middle and lower economic classes. We need to improve financial education everywhere and that means talking about money.
The biggest, easiest thing organizations can do is be transparent about pay. That includes giving employees total compensation statements that set out the value of all forms of pay and benefits they receive, publishing pay ranges in job ads, and letting both internal and external candidates know the pay range at the beginning of the interview process.
Compensation is key to the relationship between employers and employees. People are not assets or resources to exploit. Honesty, transparency, integrity, and trust matter.
Last question. Some organizations might say that they’re facing financial challenges right now so they can’t deal with pay equity. What can HR pros say to address this statement?
[Bussing] Pay equity is a compliance issue that is always less expensive to solve than to not solve. Eventually, there will be a claim. That claim will grow into an investigation. And that investigation will end up with much bigger liabilities, penalties, agency orders, and legal fees.
Chances are the gaps are a few thousand dollars per affected employee. That’s what we’re seeing in the EEOC and class actions settlements. Sure. It adds up. But the legal fees, penalties, time, and resources needed to deal with a lawsuit make the pay equity damages look like petty cash.
Pay equity is a must do, not a nice to have. Instead of trying to get around it, get on board and take care of it. Then celebrate the commitment to fairness. Never waste a compliance opportunity to make a better workplace.
A huge thanks to Heather for taking time to share her knowledge with us. If you want to learn more about addressing pay equity, pick up a copy of “Get Pay Right: How to Achieve Pay Equity that Works”.
We all know that organizations are focused on a healthy bottom-line. That’s not new. The key to achieving that is having a compensation philosophy that’s equitable and competitive. It helps the organization attract and retain the best employees, which in turn, helps them generate the revenue they want and need to be successful.
Image captured by Sharlyn Lauby while exploring the streets of Seattle, WA
The post Organizations: Why Pay Equity Matters and What To Do About It appeared first on hr bartender.
