Experts say pay equity is gaining a foothold in corporate America — and that the effects for Black workers will have staying power long after Black History Month conversations end.
Pay equity used to live in the legal realm of an organization, something pursued as the result of a claim or to prevent exposure to legal claims, said Charlie Franklin, co-founder and CEO of Compa, an offer management software provider.
Now, that work is going “mainstream,” Franklin said. “In the new world, it’s just one of the core responsibilities of compensation to look at pay equity … Organizationally, this is a shift.”
“In my world, I see pay transparency as an umbrella trend within which pay equity fits. Pay equity, at least from a U.S. perspective, is really addressing core issues of gender wage gaps and looking for any biased practices, but the broader trend is a shift in the social contract where workers are expecting more objectivity and accountability in how they’re paid,” Franklin said.
This trend could have particular significance for Black workers, given the persistence of a racial pay gap over the years.
Compa estimates that about half of the U.S. workforce is covered by some form of pay transparency law. The company launched a pay transparency map in January with information on current state and local laws and pending legislation, as well as what employers can and can’t do when it comes to disclosing salary data.
To address pay equity in their company, leaders should take three main steps, he said: gather and analyze data, develop a process to address the inequities and communicate well with employees.
Seventy percent of the organizations surveyed by WorldatWork and Fidelity Investments for a report released Jan. 17 said they took steps toward addressing pay equity in 2022. That’s an increase of 4% from 2021 and 1% from 2019.
For leaders that haven’t started to address pay equity yet, the first step is acknowledging there’s a problem and addressing the biases in their companies, said Donnebra McClendon, global head of DEI at Ceridian, a human resources software provider.
“We know that our underrepresented minorities are completely underrepresented when it comes to pay,” McClendon said. “As much as we want to live in a bubble, we can’t.”
Ceridian has less than a 1% disparity between men and women globally and between White and non-White employees in the U.S., according to its 2021 pay equity analysis. The company plans to release an updated study soon, it said.
“Ultimately, it comes down to your company and the culture of your company. We made equity a core value of our organization a few years ago,” McClendon said.
Achieving pay equity takes time, she said. Even at Ceridian, which has been on the DEI path for a long time, there’s still work to be done. The company launched a leadership development program to address challenges underrepresented minority employees face, conduct DEI surveys and form partnerships with historically Black colleges and universities to recruit minority workers, among other things.
“I think the challenge is oftentimes people are expecting changes to happen overnight,” McClendon said. “100%, I see there is ground being made. I do think there’s still so much work to do. I’m hesitant in allowing people to get comfortable with the progress.”
A huge part of the solution will be in educating both leaders and employees alike, she said. Employees need to understand total compensation, especially when it comes to interpreting salary ranges shared publicly.
“We have to be careful when we are publicizing information without sharing all of the story,” McClendon said. “I believe that pay transparency coupled with education is a good thing.”
Franklin said a company can run into problems if it tells the outside world more than it tells those inside it.
“That’s a quick way to build distrust,” he said.
And companies that are transparent about pay and pay equity can benefit, Franklin said. Much like organizations used to tout free lunches and other office perks, there likely will be more competition on pay equity and how much information a company is willing to share, he said.
“I think that will transform into a marketing piece,” Franklin said.