Employers need to understand the causes behind pay disparities so they can root out bias in their pay structures and policies, according to HR and compensation leaders who testified at an April 29 House hearing, Closing the Racial and Gender Wealth Gap Through Compensation Equity.
The virtual hearing, held by the House Subcommittee on Diversity and Inclusion, focused on putting policies in place to ensure that pay for women and minorities is not tainted by overt or unconscious bias.
Pay disparities can arise from policies that don't treat employees equally but also from legitimate pay practices, testified Emily M. Dickens, J.D., chief of staff, head of government affairs and corporate secretary at the Society for Human Resource Management (SHRM). Other factors driving pay differentials include "the individual's ability to negotiate pay, an individual's time away from the workforce or other workplace dynamics," Dickens said.
For pay to effectively reward and motivate workers, "both the organization and employees must view it as being internally equitable, externally competitive, affordable and cost-effective [as well as] legal and defensible, understandable, and appropriate for the organization and for the workforce," Dickens said.
[Visit SHRM's resource page on Pay Equity.]
A Path Toward Equity
"To be fair and inclusive, employers must use consistent, transparent and actionable compensation practices every day," Dickens advised. Actions employers can take include:
- Reviewing the organization's compensation philosophy periodically and updating it based on current factors affecting the business.
- Communicating to all employees how individual pay decisions are determined.
- Providing hands-on training to supervisors and hiring managers to ensure they manage disciplined, objective pay practices.
- Conducting comprehensive pay equity reviews that encompass base pay, incentive pay, benefits and total compensation.
- Examining promotion decisions for evidence of pay bias (i.e., awarding promotions based on salary history rather than performance and fit with position).
- Closely monitoring the market to ensure that the organization's compensation philosophy supports the organization's mission and values while attracting and retaining talent.
"HR professionals have a pivotal role in advising on systemic compensation equity changes," Dickens said. The path toward equity "requires more directed education on the compensation process, increased engagement with compensation specialists and HR professionals, and an understanding of how to leverage one's talent through personal advocacy when armed with this information."
In response to a question from subcommittee chairwoman Joyce Beatty, D-Ohio, Dickens said the post-pandemic economic recovery provides "opportunities for people who have been out of the workforce, especially women, to re-enter the workforce at positions paying more than when they left," due to the increased demand for workers. Dickens also highlighted the need to provide upskilling and reskilling opportunities for women, minorities and underrepresented groups to prepare for these positions.
[Related SHRM article: How to Ensure Pay Equity for People of Color]
In other testimony, Andrew Chamberlain, chief economist and director of research at online hiring market Glassdoor, said a pathway toward better pay equity "both by gender and [by] race and ethnicity is improved pay transparency," while also being conscious of the need to protect employee privacy.
"Employers can take initiative within their own internal pay processes to study compensation data to ensure no gaps by race, gender or other protected categories exist, or open up, whether intentionally or not," he said.
According to Maya Raghu, director of workplace equality and senior counsel at the National Women's Law Center, "a culture of secrecy around pay is bad for business not only because it gives cover to discrimination and bias, but also because it leads to poorer performance, employee dissatisfaction and lower motivation, and mistrust of management."
Conversely, she noted, "increasing transparency by allowing employees to discuss compensation, and providing employees with information about pay scales and pay-setting practices, increases the likelihood that employees will believe they are paid fairly, which in turn promotes employee engagement and productivity."
[Related SHRM article: Black Workers Still Earn Less than Their White Counterparts]
Chamberlain endorsed policies that encourage employers to voluntarily offer more flexible work hours, more widespread child care support, and gender neutral parental leave policies, which "could help create gender neutral workforce opportunities and help reduce occupational barriers facing women."
He added, "Improving pay equity in the U.S. workforce is about fairness. But it is also about maximizing the potential productivity of the U.S. workforce while also strengthening employee engagement and productivity."
Raghu said a lack of support for workers with caregiving responsibilities "has contributed to women's unemployment and pay disparities. Women still shoulder the bulk of caregiving responsibilities, and Black women and Latinas are especially likely to be both breadwinners and caregivers for their families."
Dickens, in response to questions from the committee, said that women also "have been faced with caring for their parents and for their spouses. … We should be thinking [beyond] just the issues relating to those who are mothers" to address the needs of caregivers dealing with other responsibilities.
[Related SHRM article: COVID-19 Reveals the Value of Caregiving Benefits]
Dwana Franklin-Davis, CEO of the Reboot Representation Tech Coalition, which is working to double the number of Black, Latina and Native American women receiving computing degrees by 2025, urged companies to take a data-driven approach to overcome workplace discrimination and pay bias. Workforce analytic numbers on hiring, pay and promotions "help an organization know what their baseline is [so] they can be explicit and intentional about designing programs and policies to impact specific subgroups while making their environments more inclusive and more equitable," she said.
However, "it is not enough to collect and disaggregate the data," Franklin-Davis said. "We also must track it over time to hold organizations accountable."
She added, "Corporations must be inclusive through both diverse hiring methods and programs that support retention. Inclusive and equitable workplaces will lead to greater retention and contribute to the opportunity for pay equity."
[Related SHRM article: Pandemic Could Widen Gender Pay Gap]