In April 2017, the UK implemented a new law requiring organizations with more than 250 employees to publish their gender pay gap data and share it with the government. Since implementing the law, a third (33 percent) of enterprise employees in the UK believe the gender pay gap at their company has decreased (compared to 14 percent in the U.S.).
While the EEOC (Equal Employment Opportunity Commission) has attempted to create similar standards in the U.S. by requiring companies with more than 100 employees to report pay data broken down by sex, race, and ethnicity, the EEOC may not continue this requirement under the current administration. This puts a major hold on data that could support closing gender- or race-related gaps, but it has inspired a major company to fully release its pay data.
Last month, Intel announced it would publicly release employee data this year broken down by gender and race. This is a huge step forward, as the EEOC keeps any pay data filings private unless a company voluntarily decides to disclose the information to the public. This decision will hopefully inspire other large organizations to begin doing the same, because we can’t achieve pay equity without embracing pay transparency.
While some companies may be hesitant to release this data for fear of backlash, Intel’s public-facing strategy, while admirable, is not the only way that companies can show their commitment to gender equality.
Let’s explore how companies can address pay gaps without fully public disclosure—the apprehension of which prevents many employers from taking any action —and avoid the consequences a lack of transparency will bring over time.
Understanding Your Pay Gap
One of the biggest challenges that companies face when looking at pay transparency is simply where to start. An important first step is measuring the gaps that exist within the organization. However, comparing just men versus women can create misconceptions about pay equity. Organizations should look to compare groups of employees with similar attributes outside of just age, experience level and gender, such as skill sets and overall job performance, against the larger scope of compensation for a more accurate representation of pay gaps.
Avoiding Bias in Compensation
U.S. workers are not confident in their employers’ pay equity; in fact, 48 percent believe men are paid more than women at their company. In an attempt to end pay discrimination based on a variety of factors (including gender, age, and race), 17 states have enacted laws to ban employers from requesting salary history information from prospective candidates. However, employers can internally reduce potential unconscious compensation bias by implementing technology to assist HR teams in making data-driven compensation decisions. By measuring trends and predicting employee performance metrics from a variety of statistics, while omitting factors such as age, race, and gender, employers can create a formula for compensation rather than letting emotions come into play. This is particularly important for the more than a third of employees who believe their pay is based on what their managers feel they deserve to make rather than their performance.
Alternatives to Full Public Disclosure
Total pay transparency has been a hot topic among HR professionals and industry leaders alike, but it’s an understandably frightening endeavor for many companies to face, as it means acknowledging any and all gaps to their employees and the public. However, there are less-drastic methods companies can adopt to implement various levels of transparency if they aren’t yet ready for complete public compensation disclosure. For example, committing to achieve pay equity and communicating actions that will promote equal pay are messages likely to be received favorably by employees. In addition, creating internal total rewards reports that show employees the full scope of their compensation (i.e., how their salary, benefits, and bonuses add up), and comparing them to industry benchmarks can provide employees with the peace of mind that they’re being paid fairly.
But regardless of the kind of disclosure, it’s the commitment to closing the gap and the communication around it that will provide value. Two-thirds of enterprise employees said they would be more willing to work at a company that discloses its gender pay gap figures, yet only half (32 percent) said they would be inclined to seek out a job that discloses a lower gender pay gap than their current employer, proving the greater emphasis on transparency and communication over immediate results.
Potential Hiring Repercussions from Lack of Disclosure
We’ve discussed why transparency around closing the gender pay gap is critical, but what may be more convincing to employers are the ramifications of a lack of transparency. Companies that do not disclose pay gap data or provide communication around a commitment to close the gap and create gender parity will suffer the consequences through lost employees and recruiting challenges. Employees are beginning to become less patient with employers’ lack of transparency, which can ultimately lead to a lack of trust in the company; 78% believe how a company treats its employees is one of the best indications of its level of trustworthiness, so creating a transparent environment is essential. In this particularly tight labor market, replacing employees is more difficult than ever, as well as a hit to the company’s bottom line—it costs roughly a third of an employee’s salary to replace them—providing even more motivation for employers to implement transparent and fair practices.
While creating a standard for measuring and reporting pay gaps may make C-Suite executives and HR teams nervous, it’s critical for the long-term success of the company in retaining and recruiting employees, as well as preparing for the pay-gap legislation that will inevitably come our way.
Tanya Jansen is co-founder at beqom.