Pay gaps, especially affecting women and people of color, continue to cause social tension and management frustration. Recent lawsuits against major firms like Google and Walmart highlight allegations of systematic underpayment. Some states, including California, Connecticut, Maryland, and Nevada, have implemented legislation requiring employers to disclose wage ranges for positions. Despite efforts, women are still underpaid compared to men, with estimates suggesting a gap of up to 20%.

How to Address These Unfavorable Situations

To address these issues, organizations commonly focus on employees earning significantly less than expected based on qualifications and responsibilities. They seek justification from supervisors for lower pay rates and may suggest raises. However, this approach isn’t practical. It doesn’t close pay gaps, address the root causes of pay inequity in salary structures, and can lead to salary compression. A better approach is structured pay equity analysis, called the system, which aims to change the way we approach the wage divide.

The System

The system refers to how companies decide how much money employees get paid. It involves considering things like qualifications, experience, and the type of work they do. Despite efforts to make pay fair for everyone, some groups, like women and people of color, often end up being paid less for the same work. Traditional fixes haven’t solved this problem very well. But a new approach, called structured pay equity analysis, looks at all the factors that affect pay to figure out where the issues are and how to fix them. It aims to make sure everyone gets paid fairly for the work they do.

Understanding Pay Equity Analysis

Pay equity analysis evaluates all aspects of an organization’s pay structure, including qualifications, experience, and job roles. It generates a model to compare each employee’s actual salary with their predicted salary based on this model, highlighting any discrepancies. If the analysis shows differences in pay based on demographic characteristics like age, race, or sex, it indicates a problematic pay gap. Such gaps may stem from systematic biases, exposing the organization to legal risks and negative publicity.

Why Focusing on Select Employees Won’t Fix Pay Gaps

Focusing solely on specific employees to fix pay gaps has several drawbacks:

·         It leads to salary compression for underpaid groups, reducing the difference between the highest and lowest-paid employees and undermining incentives.

·         It overlooks the root cause of the pay gap within the organization’s salary structure, failing to address systematic biases.

·         It may not completely close pay gaps and could potentially exacerbate them. Raising salaries for women earning below expected pay may not equalize pay between genders and could leave men underpaid. Additionally, if the women receiving raises are predominantly of a certain age or race, it could create pay gaps along these dimensions.

Focus on the Position of Pay Inequity

When companies implement the structured system approach, it becomes possible to address pay gaps because they’re able to understand which parts of their salary structure are causing the discrepancies. Once the issue is identified, they can address the inequity in those places.

In many cases, the presence of a pay gap can be attributed to a situation where relatively few women receive compensation that aligns with their performance. In contrast, a more significant number of women are slightly underpaid compared to what is expected of them. The issue of pay inequity may manifest more prominently in specific geographical locations, within certain job categories, or among particular managerial positions. Consequently, addressing pay disparities effectively requires a targeted approach that identifies and directly addresses the areas where the largest gaps exist. The structured approach systematically and somewhat mitigates pay gaps within organizations. This method acknowledges that not all differences in compensation are inherently unjust, particularly when individuals possess specialized skills or assume additional responsibilities. Instead of just equalizing salaries, this method delves into the reasons behind pay differences and addresses them where they’re most unfair. This ensures that all employees are fairly compensated for similar work, helping organizations achieve pay equity. This initiative is part of a larger push for transparent salary structures. It aims to reduce vulnerability to criticism and improve organizational performance by reasonably matching pay with employee contributions and career opportunities. You can contact us or visit our Facebook for more updates