Understanding Gender Pay Gap And The Tools of Pay Transparency
This post was written by our Head of DE&I, Alysha Campbell.
Since the 1860s, the slogan “Equal pay for equal work” has been a phrase that has remained in our vocabulary and conversation to the present day. Every generation since, we have heard that women get paid around $0.80 to the dollar of what a male counterpart earns and that it will take years and generations for women to be par. So how did we get here, and why is it taking so long to fix this? Is the solution as easy as just paying women and men the same wage starting today, or is there more? How do experience and skills play into how much we earn, and what happens when women earn more than men? Does that make it better? Let’s dive deeper and understand the gender pay gap.
What is the gender pay gap, and how did it become a problem?
The gender pay gap is the average difference between the wage for men and women working in the same role or industry. The gender pay gap results from many factors, including race and ethnicity, disability, access to education, and age. As a result, different groups of women experience other gaps in pay compared to their male counterparts. The gender gap in pay has remained relatively unchanged. In 2020, women earned 84 percent of what men earned, according to a Pew Research Center analysis. Based on this estimate, it would take an extra 42 days of work for women to earn what men did in 2020.
Over the years, women have increased their job progress and are now seen in higher-paying roles previously dominated by men. These roles are growing in managerial positions; however, women continue to be overrepresented in lower-paying roles relative to others in the workforce, contributing to gender pay differences. One element of the pay gap that we don't spotlight enough is the factor of gender discrimination and its contribution to the problem. In a 2017 Pew Research Center survey, four-in-ten working women (42%) said they had experienced gender discrimination at work, compared with about two-in-ten men (22%). One of the most commonly reported forms of discrimination focused on earnings inequality. When we view the gender pay gap question through the lens of the topic of discrimination, we see that through the act of not being paid for the same work as a male counterpart, that in and of itself is a form of discrimination due to gender.
What Is pay transparency, and is it the solution?
Pay transparency is the approach employers take to communicate company compensation. Pay transparency policies include openness about compensation ranges within a company and publicly posting compensation ranges in your job descriptions. When companies decide to be transparent about compensation, it eliminates the problem of unequal pay. Through this practice, women would know very quickly if she is earning less than their male counterpart. This greatly affects the wages of women and equity deserving groups as they have been the segment of the market greatly affected by unequal wage policies. More and more organizations and sectors are seeing a push for pay transparency, and it’s the topic that does stir conversations amongst staff and leadership.
Risks
Many employers have concerns about pay transparency and its impact on internal workplace culture and future hiring. According to LinkedIn's Global Talent Trends 2019 report, 27 percent of HR and hiring professionals say their company currently shares salary ranges with employees or candidates, with 22 percent saying they're likely to start doing so within the next five years. But more than half (51 percent) do not disclose salaries or salary ranges.
So as we start to see and are continuing to hear in the news regarding laws and regulations on pay transparency, more organizations are beginning to take on this new practice, but the majority still don’t want to open Pandora's box on compensation. This in and of itself will begin to cause stirs within workplace cultures as employees start to notice which companies are creating more equitable practices and promoting fairness. In contrast, others choose not to, thereby continuing the presence of wage gaps.
How to approach and support pay transparency in your organization
It’s up to each employer to define pay transparency for their organization. This practice aims to give workers an understanding of why they’re paid what they are — and what they need to do to reach the next step on their salary band. According to Builtin, there are five steps to begin a pay transparency process.
Steps for better pay transparency
Determine where your company currently falls on the pay transparency spectrum and where you want to be. Survey managers to understand what employees want to know about their salaries.
Develop a pay philosophy that aligns with your talent strategy and culture. What do you value in new hires? Which behaviors do you want to incentivize?
Clearly define roles and responsibilities, and use market data to set salary ranges. This helps to eliminate bias and create a less subjective pay structure.
Conduct a payroll audit to identify and resolve salary discrepancies.
Train managers to have proactive salary conversations with employees.
As we continue to build teams across various cities around the globe, we need to realize the shift of change that is coming. The conversation of pay transparency and sharing compensation information is not going anywhere. Many cities, including big hubs like New York, are legislating organizations to share salary ranges in the job descriptions when recruiting new hires. As more organizations begin to fall in line, it will be clear how compensation is seen across the various industries, sectors, and companies, and your employees will notice. The most important element of this process is to begin the conversation. Use our HR leaders and hiring consultants to be your compass to help guide you and your organization to the right timing, practices, and policies for pay transparency. As with all change, communication is key. So ensuring once a decision has been decided on, create a sturgeon communications plan that allows all members of the organization to ask questions, learn more and be a part of the process.