What it takes to be a fair workplace

Today’s employees, consumers, investors and legislators have reached a resounding consensus: diversity, equity and inclusion (DEI) in the workplace matters.

And not only is it important, it should be at the top of employers’ to-do lists in an increasingly competitive job market. Now more than ever, employers need to assess how they can best serve their employees and, therefore, their communities. Number one on the list? Pay equity – ensuring employees performing similar work are compensated fairly, regardless of gender, race/ethnicity or other protected class factors. In other words, equal pay for equal work.

“[E]fair and equitable compensation is a key driver of employee satisfaction,” said HR research analyst and author Josh Bersin in his HR Predictions for 2022 report.[I]If you want to win the talent wars in 2022, fair compensation may be one of your greatest techniques.

But pay equity is more than just a competitive tool in a hot labor market. It’s an opportunity to foster innovation, drive employee engagement, minimize turnover, maintain (or improve) brand reputation, and attract investors.

In fact, a study by recruitment site Indeed found that 81% of workers are more productive and engaged when they perceive themselves to be paid fairly. Additionally, this same report states that 75% of employees are more likely to apply for a job when the company is known for its pay transparency.

With so much to gain from making pay equity a priority, employers who speak out or treat it as an isolated case do so at their peril. Employers who fail to effectively address pay inequality risk public backlash and legal action, all at risk to their bottom line. This is especially true with more and more pay equity laws enacted in the United States and abroad.

No matter where your organization is on its pay equity journey, a diligent and forward-looking vision is essential. Fortunately, there are concrete steps employers can take to demonstrate a true commitment to fair compensation.

The Pay Equity Maturity Model

In my role spearheading pay equity auditing practices for Trusaic, a goal-driven technology company, I helped develop the Pay Equity Maturity Model to help employers understand where they are on pay equity. It is a three-tiered framework that allows organizations to assess their current salary practices, progress and long-term goals.

To get started, leaders should ask themselves some basic questions. Do you have policies or initiatives related to pay equity? If so, are they documented and are they measured? How do you involve your employees? Are you actively communicating progress to all of your stakeholders, including employees, investors, the public and/or your local community? Have you established your pay equity goals? How do you track your progress towards these goals? Is there accountability?

Your answers to these questions will be key to identifying where your organization fits in the model. As you assess your pay equity efforts and ultimately determine your position, let these questions guide your progress. With some regularity, revisit them and see if you’ve moved to the next level of the pattern.

Below, we outline the three tiers, discuss the key factors that set each tier apart, and identify how companies can move up the model to become a truly fair workplace.

Fundamental

The first stage of the model includes employers with a basic understanding of pay equity. These types of workplaces typically lack strong DEI policies or representation, have not established concrete pay equity or DEI measurement systems, and ultimately have low employee engagement.

Employers at this level typically find it difficult to comply with various local, state, and federal requirements related to equal pay because they either don’t have the resources to do so, or they just don’t do the job. pay equity a priority. As a result, these employers have gender and/or racial/ethnic pay disparities, whether they know it or not.

This year, two companies in particular demonstrated the risks of not making pay equity a priority.

The first is gaming company Riot Games, which recently settled a $100 million gender discrimination lawsuit that included allegations of unequal pay, discrimination, sexual harassment and retaliation with the Department of Justice. California Civil Rights.

In addition to a lump sum payment to affected workers, the settlement requires the company to establish a reserve to make wage adjustments and fund DEI programs, as well as to conduct routine pay equity audits to identify proactively potential gender and race/ethnicity cases. wage discrimination and remedy it once detected.

The second example is entertainment company Activision Blizzard, which has settled with the US Federal Equal Employment Opportunity Commission for similar claims. In addition to paying $18 million for sex discrimination and sexual harassment charges, the company must improve its pay equity policies and DEI practices, as well as hire an internal equal opportunity coordinator. of employment, among other actions.

These organizations’ agreements with various state and federal governments have required them to incorporate elements of the Pay Equity Maturity Model into their overall organizational strategy. Once these organizations have implemented the requested changes, they will exhibit the characteristics of Level Two of the Pay Equity Maturity Model: Programmatic.

How to get to the next level:

  • Establish an employee base salary measurement system.
  • Define your pay equity goals.
  • Continuously monitor your base salary to track progress toward these goals.
  • Communicate commitment and progress to relevant stakeholders.

Programmatic

Employers at the programmatic level of the model have ongoing fair compensation initiatives, measurement systems in place, and documented employment structures and compensation philosophy. They respect pay equity laws and strive to improve representation. They communicate goals, progress and achievements to different stakeholders.

Employers should note that the programmatic level, while significantly more advanced than the foundational level, is not necessarily a safe zone.

For example, despite proactive pay equity efforts, LinkedIn recently paid nearly $2 million in back wages to 700 female workers in its California-based engineering, marketing and product departments, who were paid less than their male counterparts. Although the company was able to demonstrate that it was making a conscious and proactive effort to foster fair compensation practices, the results of its internal analysis contrasted with an analysis by the Department of Labor. LinkedIn denies the discrimination claims, but has reached the multimillion-dollar settlement agreement. Since the settlement, LinkedIn has also signed the California Equal Pay Pledge, which, among other things, demonstrates a commitment to ensuring fair compensation practices for all of its workforce.

This situation highlights the importance of data quality when conducting pay equity audits. If you make compensation decisions based on faulty data, it can be costly and ultimately create more pay inequality issues. Working with pay equity experts can help ensure that reliable data feeds into your pay equity audits. Software also plays an important role as it enables ongoing pay equity monitoring and data validation.

So while completing a pay equity audit is essential to becoming a fair workplace, employers looking to achieve the highest level of the pay equity maturity model must take additional steps. .

How to get to the next level:

  • Validate data to ensure pay equity initiatives are accurate.
  • Regularly act on pay equity and representation outcomes to achieve fair pay.
  • Identify root causes and align initiatives to eliminate them.
  • Execute planned initiatives to address compensation issues, eliminate wage disparities, and improve representation, employee sentiment, promotion, hiring, and retention.
  • Meet or exceed pay equity/DEI standards/industry benchmarks.
  • Regularly communicate progress to stakeholders.
  • Tie leadership bonus pay to achieving DEI Global Standards.
  • Earn third-party certification demonstrating your accomplishments and commitment to fair compensation.

Strategic

Employers who have achieved this level have incorporated their pay equity objectives and initiatives into their corporate philosophy, and they work continuously to promote pay equity and DEI. They have reliable data, conduct regular pay equity audits and then take action to correct the root causes of pay disparities, if identified. In addition, at this stage of the model, employers solicit employee feedback and use it to guide their pay equity initiatives.

L’Oréal and GM are two examples of companies at the top of the model. GM has regularly implemented ESG and CSR reports, demonstrating workplace transparency and an ongoing commitment to maintaining pay equity. GM has publicly stated that there is no overall gender pay gap and reported in 2019 that women made up 55% of its board.

Last year, L’Oréal achieved EDGE certification, which means that their pay equity and DEI achievements have been reviewed and verified by an independent third-party auditor. Actions such as receiving third-party certification demonstrate to employees, investors, and other key stakeholders that the organization’s position on pay equity is documented and confirmed.

Pay equity is underway

Employers who are making pay equity a priority this year, and in the future, should consider where they are in the pay equity maturity model and what it will take to move to the next level. And, if you haven’t started on your pay equity journey, don’t wait any longer.

While the work environment is changing rapidly, one thing is clear: achieving a fair wage is an ongoing effort that requires a long-term commitment. Those who are eager to participate in the talent war will pursue it like any other business function. As the saying goes, what gets measured gets managed.

Leave a Reply