SHRM Issues Policy Statement on Compensation Equity

Equal pay for equal work allows legitimate pay-setting factors

Stephen Miller, CEBS By Stephen Miller, CEBS April 11, 2018
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The Society for Human Resource Management (SHRM) "vigorously supports equal pay for equal work, with allowable pay differences based on factors not prohibited by law, and believes that any improper pay disparities should be promptly addressed," according to SHRM's new public policy issue statement on compensation equity, released on Equal Pay Day 2018. This year, April 10 is the date that symbolizes how far into a new year women must work to earn what men earned in the previous year.

"In our statement, we address the value proposition of work, beginning with the most basic truth: Pay decisions should be based on bona fide business factors and not on non-job-related characteristics," wrote SHRM President and CEO Johnny C. Taylor, Jr., SHRM-SCP, in a post on the SHRM Blog.

According to the most recent Bureau of Labor Statistics data, women who work full-time had median weekly earnings of $767, which is approximately 81.9 percent of the median weekly earnings of men who work full-time ($937).

However, when factors such as chosen occupation, hours worked, years of experience and education level are accounted for, a smaller variance in pay between men and women is reflected.

Pay Differentials and Comparable Worth

Congressional proposals such as the Paycheck Fairness Act would amend the Equal Pay Act by allowing employers to base employee pay differentials only on seniority, merit and production. In addition, some new and proposed state laws include a concept that appears close to "comparable worth," using a standard of "similarly situated," which requires that jobs with comparable skills and responsibilities or jobs of comparable worth to the employer should be paid the same.

SHRM's policy statement disagrees with these proposals. It explains that "employers should be held to the standard of equal pay for equal work and should not be required to equate different jobs using 'similarly situated' or 'comparable worth' standards.

"Employers should be able to consider bona fide business factors such as education, certifications, relevant experience, skills, seniority and geographic location in making pay decisions," Taylor wrote. "What employers can't do is pay people differently because of their sex, race, national origin or any other protected classification. This is prohibited by federal law, and it also makes no business sense."

Employers should be able to consider bona fide business factors.

Salary History and Transparency

Several states and municipalities have passed prohibitions on asking about a job candidate's salary history due to concerns that this practice may lead to basing the new employee's pay on his or her previous salary and may perpetuate a gender-based salary gap from one employer to another.

"SHRM asserts that salary history should not be a factor in setting compensation," the society's statement said. Instead, "compensation decisions should be based on the value of the position to the organization, competition in the market and other bona fide business factors."

"Some advocates have focused on prohibiting employers from asking candidates about their pay history," Taylor wrote. "Although SHRM agrees that salary history should not be a factor in setting pay, we do believe discussing and understanding a candidate's pay expectations are important. Employers should expect and welcome candidates' opinions about their pay."

[SHRM members-only toolkit: Managing Pay Equity]

Workplace Flexibility

"Employers should be encouraged to adopt flexible workplace policies designed to support employees in meeting their work and family obligations while maintaining certainty, predictability and stability for employers," according to the SHRM statement. "Flexibility, as a strategic business tool, can help all employees manage work and personal-life demands, thereby decreasing the prevalence of employees' compromise on salary in exchange for flexibility."

SHRM is a proponent of the Workflex in the 21st Century Act, which would give employers predictability by following a federal standard for paid leave and workflex as opposed to complying with a patchwork of state and local paid-leave laws.

"This bill's paid leave requirements are more generous than all state paid-leave laws," explained Lisa Horn, director of congressional affairs and workplace flexibility at SHRM. In exchange for a federal standard that supersedes state and local laws, "employees get guaranteed leave, and employers get predictability and equity across their workforce," she noted.

"We encourage employers to adopt flexible workplace policies to the extent it makes sense for their operational needs," Taylor wrote. "Flexibility, as a strategic business tool, can help employees and employers when designed and administered appropriately."

Public Policy Principles

Among other key principles that SHRM encourages policymakers to consider are:

  • Nondiscrimination in pay. Pay decisions should be made based on bona fide business factors and not based on non-job-related characteristics. Employers should be provided a reasonable good-faith period to address pay discrepancies.
  • Bona fide business factors. Employers should be able to consider bona fide business factors such as competencies, education, qualifications, certifications, relevant experience, skills, seniority, geographic location, performance, any collective bargaining agreements, and business and organizational requirements and needs in making employee compensation decisions.
  • Federal standard. Employers should be subject to a single standard for establishing pay equity, rather than having to navigate different standards at the federal, state and local levels.
  • Safe harbor for self-evaluations of pay. Employers should be provided with safe harbors to incentivize self-evaluations of pay and correction of improper disparities in compensation. Employers that use a federal safe harbor to address pay discrepancies and that share pay practices with their employees should be protected from liability under state, local and federal law.


Recent SHRM Articles:

Closing the Gender Pay Gap with Career Parity

Equal Pay Day Is Another Reminder to Review Pay Practices

Employers Can’t Use Prior Salary to Justify Gender Pay Disparity, 9th Circuit Rules

Why Pay Equity Keeps Getting More Complicated


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