Pay Equity: A New Requirement for HR

The laws regarding pay equity are changing. In seven jurisdictions, there are new laws on the books regarding pay equity, including California, New York City, Oregon, Puerto Rico, and Massachusetts. Each has new laws prohibiting employers from asking a candidate’s salary history. There are more than a dozen other pay equity laws under consideration, and it’s going to be a very key focus for lawmakers — and therefore HR and the world of work — in 2018.

Navigating change

Employers are going to have to address this issue, starting now — regardless of your company’s position, or whether you’ve created a policy to deal with pay equity or not. The winds of change are upon us and it’s critical to start revising your hiring practices now. Or you may wind up breaking the law.

It’s not just laws that factor in, however. You’ll also want to be on the forefront of this transformation as an employer. In terms of attracting the best talent, it’s no surprise that it’s a best practice to demonstrate a progressive, well-thought out approach to pay equity. To not be clear about supporting pay equity is to possibly convey a retrogressive stance on fair and equitable hiring. At a time when pay equity is on the radar and in the news, to not have a policy towards pay equity, law or not, could be the key factor in whether a superbly qualified candidate applies to your organization, or goes elsewhere.

But there are also statistics showing that pay equity drives more profitability — tied into the fact that a well and fairly compensated workforce is a more engaged and productive one, and a more diverse workforce is a more innovative and creative one. A study of nearly a thousand companies on their pay equity positions found that the 51 companies officially committed to gender pay equity as of this past spring generated a 12.5% return to investors. That’s opposed to the rest — who generated a return of only 10.2%. Is it possible that paying women fairly is good business? I dare say it is.

Jumping on the bandwagon

According to the U.S. Census of September 2017, U.S. women still make only 80.5 cents for every dollar that men make. Glassdoor’s salary study in the Spring of last year found that men earn 24.1% higher base pay than women on average. But many organizations are taking the initiative. Among those known for their leading stances on pay equity are Starbucks — whose own study of its male and female employees found they are paid within 99.7% of each other for doing similar work. Gap has been officially paying male and female employees equal pay for equal work since 2014, and was the first Fortune 500 company to do so. Costco and Nike are among companies who are stepping up to do internal studies of their workforce. Tech companies are trying to repair their reputations as part of Silicon-Valley-esque bro-culture by conducting pay equity studies of their own. Will they play a role in changing the tech workplace? Probably.

We’ll see more and more organizations taking long, hard looks at their own compensation structures — and trying to remedy equity within existing employees as well as new ones. The Glassdoor study found that one key remedy for the gender pay gap are employer policies that embrace salary transparency. Albany County just announced it’s giving some employees salary “bumps” to address pay equity — days after passing its own salary history ban. We may see companies evaluating retroactive rebalancing, adding additional work/life balance components to their benefits packages, and setting key targets for increasing diversity and inclusion — as they drive towards better and more equitable pay among all of them. But they can’t do it alone.

Outsourcing Equity

That’s where recruiting and hiring firms come in. When companies outsource their recruiting and hiring to other companies, those companies are also responsible for compliance under the law, if not more so. An outsourcing firm that doesn’t guide its client on issues of compliance may be held liable for that client’s breaking the law. So, it’s incumbent upon firms to really understand the legalities involved in these new pay equity laws. And the firms leading the way with this issue are already setting their own policies. HireRight, for instance, recently announced it was building capabilities into its own hiring and screening tools that enabled its clients to remove salary verification from its screening process. Here at TalentCulture, we just featured a #WorkTrends podcast with HireRight on this topic — and we’re going to dive even deeper with them in a webinar coming up.

The bottom line is that if we’re going to improve the workplace, it can’t be left to legislation. But if there is a wave of legislation happening — and far more to come — it’s vital to understand the laws and compliance. When we combine solid internal policy making on the part of well-meaning companies with legislation, and then we increase the effectiveness by having hiring and screening firms create effective tools for observing best practices, then we’re getting somewhere with pay equity. It’s good news, and it’s about time.

This article was sponsored by HireRight. All opinions are that of TalentCulture and Meghan M. Biro.

Interested in learning more about pay equity?  Join us for “Pay Equity Legislation: 5 Ways to Tackle the Year’s HR Must-Do” lead by Meghan M. Biro.


#WorkTrends Recap: Legislation of Pay Equity

According to the U.S. Census, the median annual pay for a woman who holds a full-time job is $40,742, but the median annual pay for a man who holds a full-time job is $51,212. This means that if an employer bases compensation on salary history, a woman may find herself chronically underpaid.

Laws in eight jurisdictions have been passed that prohibit employers from asking for salary history as part of the employee screening process. Many more states and cities are in the process of developing similar legislation. This is a step towards narrowing the earning gap between women and men.

HireRight philosophically believes that eliminating salary history is the right thing to do, regardless of legislation.

Today, we talked about the fact that sometimes a potential employee wants to disclose their salary history. It is important that organizations have a procedure for facilitating this conversation, and doubly important for outsourcers to have a strategy for dealing with this conversation so they don’t inadvertently make the company responsible for violating the law (and therefore being subject to fines).

Dawn Hirsch and Alonzo Martinez helped our audience understand that pay equity considerations are just one step towards making work more equitable for everyone (and for making the interview process better by focusing on what matters: the candidate’s qualifications for the job itself).

Here are a few key points Dawn and Alonzo shared:

  • Elimination of salary history questions is a best practice for an HR department
  • Pay equality legislation is gaining momentum nationwide
  • Compliance is the cornerstone of a good candidate experience
  • The Pay Equity Act will be more challenging for search firms than for companies themselves

Did you miss the show? You can listen to the #WorkTrends podcast on our BlogTalk Radio channel here:

You can also check out the highlights of the conversation from our Storify here:

Didn’t make it to this week’s #WorkTrends show? Don’t worry, you can tune in and participate in the podcast and chat with us every Wednesday from 1-2pm ET (10-11am PT). (Note: We’ll be taking November 22 off due to the Thanksgiving holiday.)

Remember, the TalentCulture #WorkTrends conversation continues every day across several social media channels. Stay up-to-date by following our #WorkTrends Twitter stream; pop into our LinkedIn group to interact with other members. Engage with us any time on our social networks, or stay current with trending World of Work topics on our website or through our weekly email newsletter.

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#WorkTrends Preview: Legislation of Pay Equity

As a provider of employment screening services, HireRight has worked for years to refine the process of accumulating the information employers need to make effective hiring decisions while still respecting the needs of candidates.

One area that affects the employee screening process directly is pay equity. According to the U.S. Census, the median annual pay for a woman who holds a full-time job year-round is $40,742, while the median annual pay for a man who holds a full-time, year-round job is $51,212. If an employer bases compensation on salary history, a woman may find herself chronically underpaid.

It’s safe to say 2018 will be a year characterized by change. HireRight, which has been a leader in the effort to remove salary history from screening tools, is perfectly positioned to help us figure it all out.

This #WorkTrends chat will give an overview of pay equity legislation and how it has the potential to help bring parity to our nation’s salary picture. We will touch on the information in the HireRight Pay Equity Legislation eBook and learn how pay equity changes affect the interview process too.

Join #WorkTrends host Meghan M. Biro and her guests, HireRight Chief Human Resources Officer Dawn Hirsch and Associate Counsel for Compliance Alonzo Martinez on Wednesday, November 15, 2017, at 1 pm ET as they discuss advances in pay equity and how laws are evolving in this area.

Legislation of Pay Equity

#WorkTrends Preview: Legislation of Pay EquityJoin Meghan and HireRight guests Dawn Hirsch and Alonzo Martinez on our LIVE online podcast Wednesday, November 15, 2017 at 1 pm ET | 10 am PT.

Immediately following the podcast, the team invites the TalentCulture community over to the #WorkTrends Twitter stream to continue the discussion. We encourage everyone with a Twitter account to participate as we gather for a live chat, focused on these related questions:

Q1: How will pay equity legislation lend itself to better hiring? #WorkTrends (Tweet this question

Q2: How will eliminating questions of salary history create a more diverse workplace? #WorkTrends (Tweet this question

Q3: What motivates employers to rely heavily on salary history information? #WorkTrends (Tweet this question

Don’t want to wait until next Wednesday to join the conversation? You don’t have to. I invite you to check out the #WorkTrends Twitter feed and our TalentCulture World of Work Community LinkedIn group. Share your questions, ideas and opinions with our awesome community.

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The Pay Business is the People Business

The Modern Comp Manifesto

Pay is not compa-ratios—it’s Karen from accounting, wondering how she will pay her skyrocketing rent—when she just got passed over for an expected raise.

Pay is not merit increases—it’s James from marketing, doing the happy dance–because he just got a raise and can finally enroll his kids in dance class.

Pay not job grades—it’s Amber from customer service’s shocked face—when she finds out how much Rachel (who just started) is making compared to her.

Too many compensation managers and compensation programs gloss over the fact that they exist to serve the business in attracting and retaining people. In this world of knowledge-driven work and innovation, where companies’ competitive advantage is primarily determined by who can win in making their organization a place where the best people want to be, a compensation program that works needs to embrace this idea.

When you stop to think about it, the pay business is really the people business. At PayScale we keep this notion central in all that we do to support companies in doing Modern Compensation. How do you keep people central in your pay plans? Keeping people front and center unpacks to three main notions: be fair, be transparent, and be modern.

Pay Scale Graphics

Be Fair: Pay them right

Pay Equity laws are on the rise, with California taking the lead in January 2016, and many states following suit. That said, pay equity and pay fairness aren’t the same thing. Fair isn’t necessarily equal. Pay equity means ensuring that you’re not discriminating in your pay practices, especially on the basis of gender. Paying fairly is a much broader concept, one that resonates especially well with the millennial generation. Fair pay differentiates pay based on factors like performance, skills, education, experience, and more.

  • Defend your pay decisions with data. One way to both ensure and demonstrate that you’re paying fairly is to base your pay on current and accurate market data. Showing market reports to employees enables productive conversations about the expectations of the role and room for professional development.
  • Comp can be a win/win, not a battle, between employee and employer. Employees and employers are in an ongoing relationship where they exchange value. Employers provide total rewards and employees exert effort. This is the “deal.” Both groups are always doing mental math to decide if the deal is still fair and still worth it.
  • Be intentional: pay inequity happens when you aren’t looking. Plan to audit your pay practices regularly. At the very least make sure you’re in bounds with the law. Then go beyond that to check for compression, appropriately rewarding those who deliver results, and those roles that contribute most to your organizational priorities.

Be Transparent: Tell them the truth

Perception of pay has a huge impact on employee satisfaction and intent to leave. That said, in a survey PayScale conducted of 71,000 people, we found that most people don’t actually know if they’re paid fairly. Of the people surveyed who were actually paid above market, 80% believed they were either below or at market. This is huge. In another survey of 550,000 respondents, we identified that 82 percent of people were ok with low pay if the rationale is explained to them. The why matters, and it’s up to employers to start sharing that why transparently with their employees.

  • It doesn’t have to be all or nothing. Transparency is actually a spectrum from employees knowing only their own pay, to sharing the comp strategy, to sharing pay ranges, to radical transparency at the other end. Organizations need to identify the level of transparency that works best for them, and push the envelope a bit. Employees will thank you.
  • Comp is a team sport. Most conversations about compensation happen between managers and employees, not between HR and employees. Comp discussions are carried out across the organization, and it’s up to HR to coach everyone to play well.
  • People leave over misinformation, not pay. Assuming that pay is fair, people are more likely to leave organizations when they don’t know what’s going on.

Be Modern: comp for today and tomorrow

A lot of you are doing comp like it’s 1999 (or 1969). Compared to other functions in most organizations, compensation management is behind. Marketing has gone from broadcast advertising with little measurement of impact to a sophisticated connection of programs to revenue using predictive technologies and automation; Finance has gone from a paper ledger to a 5 day close with smart application of technology. Much of the day to day work of compensation management is very much that same as it was two or three or four decades ago. The main constant in today’s workplace is change—and the pace is quickening. The economic landscape remains uncertain, technology alters the nature of work and talent, and our workforces themselves are continuing to evolve. Modern compensation taps the power of data and technology to motivate and engage the workforce we have and the workforce we will have.

  • Comp smarter not harder. Technology can help increase HR’s productivity. Beyond that, it improves HR’s ability to be a strategic partner. Not yet ready to embrace technology to build, track, and improve your comp plans? Your competition is.
  • Always-on and real-time. Our organizational priorities are always being revised, updated, and improved; always-on data makes it easier to price out that software engineer job with the newest skills. At the same time, employees get information about comp in a whole host of ways, and we don’t always get to decide when they’re going to knock on the door for a comp conversation; in this real-time situation, we need reliable data at our fingertips.
  • Comp that supports business strategy. Gone are the days of compensation plans that sit off to the side of the central focus of the organization. Modern compensation professionals must be more than just aware of organizational goals, they need to find ways to drive those goals to fruition by aligning compensation plans and getting creative about variable pay.

Don’t ignore your pay brand. How you pay, how you communicate about pay, and the sophistication you bring to matching pay to your business goals matter to how you are perceived in the market. Being fair, transparent, and modern will help your organization keep your best people, find new best people, and perpetuate an organizational culture that makes you an employer of choice. Once you’re a whole company of rock stars, there will be no stopping you.

If you’d like to join a whole community of professionals talking about Modern Compensation; come to Compference. Register today and use code TalentCulture for $200 off registration.
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