Employers Eye Changing Pay Practices to Curtail Bias

Most employers give themselves high marks on fair pay practices; many employees don't agree

By Stephen Miller, CEBS Jun 26, 2018
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Growing pressure to ensure fair pay throughout the workplace is sparking changes to corporate America's employee compensation and performance management programs, new research shows.

"Getting compensation right is becoming increasingly important as employers look to drive higher levels of performance, attract and retain talent, and make fair pay decisions," said Sandra McLellan, North America practice leader for rewards at consultancy Willis Towers Watson.

The firm's 2018 Getting Compensation Right Survey was conducted in April 2018. A total of 374 U.S. employers, collectively employing more than 5.2 million workers, participated.

Fair Pay Issues

The survey results show that most U.S. employers give themselves high marks when it comes to having formal processes in place to prevent bias or inconsistency in their hiring and pay decisions. Nevertheless, 60 percent of U.S. employers are planning to take some action this year to prevent bias in hiring and pay decisions, for instance by:

  • Re-evaluating their recruitment and promotion processes (44 percent).
  • Conducting a gender pay or pay equity diagnostic (42 percent).
  • Increasing communication of policies and benefits that promote an inclusive culture (33 percent).

To promote an inclusive and diverse workforce, companies are also looking to other types of programs, such as:

  • Establishing or supporting internal networks for women and minorities (45 percent).
  • Improving flexible work arrangements (44 percent).

In addition, more than half of respondents (53 percent) are considering increasing the level of transparency around pay decisions.

"If you take two resumes and one has a woman's name and one has a man's name, the [latter] will get more callbacks and more interviews," Facebook COO Sheryl Sandberg said during her keynote address at the Society for Human Resource Management's (SHRM's) 2018 Annual Conference & Exposition. The same goes, she said, for resumes with "white-sounding" names and "black-sounding" names; the former get far more interviews.

SHRM supports equal pay for equal work and believes that any improper pay disparities should be promptly addressed, according to a SHRM policy statement.

"Employers contending with fair pay and gender gap issues should conduct a gender pay equity review, which can help them better understand whether they have fair pay issues, where they exist and their underlying causes," said Mark Reid, global leader, executive compensation, at Willis Towers Watson. "As more organizations define what fairness, inclusion and diversity mean to them, today's rewards leaders must understand how to tangibly impact this agenda through reward program design and delivery."

[SHRM members-only toolkit: Managing Pay Equity]

Addressing Unconsious Bias

A recent survey by PayScale, a compensation data and software firm, found that white men were much more likely to be given a raise after asking than were people of color and women, suggesting a level of unconscious bias that organizations need to address.

Responses to requests for a raise should be "transparent and rooted in data," said Lydia Frank, vice president at PayScale. Managers should "show how decisions about raises are driven by real-world compensation data."

PayScale surveyed more than 160,000 respondents regarding their history of asking for raises at their current employer for the firm's Raise Anatomy report.

People of color were significantly less likely than white men to have received a raise when they asked for one, the report found, and specifically:

  • Men of color were 25 percent less likely to have received a raise than a white man.
  • Women of color were 19 percent less likely to have received a raise than a white man.

"Given the size of our sample (over 160,000 people), this finding shows that there is a level of bias—whether it's conscious or not—that is seeping into salary increase decisions and performance assessments," the report stated.

To address bias in pay decisions, Frank advised employers to:

  • Conduct pay equity audits.
  • Train managers about unconscious bias.
  • Adopt policies to promote an inclusive culture.

Related SHRM Video:

Responding to Pay Raise Requests

Related SHRM Articles:

Employers Should Plan for Stronger Pay Equity Laws, SHRM Online Employment Law, June 2018

Conducting Gender Pay Audits in a Changing Landscape, HR Magazine, June 2018

Why Pay Equity Keeps Getting More Complicated, SHRM Online Compensation, March 2018

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