How companies can close the gender pay gap

Today is Equal Pay Day, a day to raise awareness of pay inequities and the disparities between earnings for the same work. On average, a woman has to work all of the previous year through March 12th, today, to earn what their male counterparts earned in one calendar year. While the Equal Pay Day has slowly inched towards parity - it began on April 11th in 1996 - we still have a long way to go, especially for Black, Latinx, and Native American women who don’t see pay equity until July, October and November respectively.?

Though the gap has narrowed over time, women today still earn around 80 cents for every dollar earned by men. This disparity stems from a variety of factors, including occupational segregation, hiring and promotion biases, caregiving duties, and plain old-fashioned gender discrimination.??

The good news is that there are actionable steps companies can take to promote pay equality and implementing even a few of these policies can set companies on the path toward gender pay parity.

Conduct an internal pay audit.

We suggest analyzing compensation data across all roles and departments in your organization. This allows you to identify any unexplained gaps in pay between men and women performing comparable work. Break the data down by gender, but also other factors like tenure, education level, performance ratings, and manager. Make the appropriate pay adjustments and implement new processes to ensure fair compensation going forward. To eliminate and reduce implicit biases, establish pay transparency during hiring (see point #2).

Establish pay transparency.

By making salaries public knowledge, companies remove the secrecy that enables inequitable pay in the first place. Instead of relying on individual managers to set pay, HR can standardize compensation practices based on level, role and experience. Add salary ranges to job postings (and please steer away from exaggerated ranges such as $80-$220k), keeping in mind that this may be required in certain states. As of 2024, there are 10 states with mandatory pay transparency laws, with requirements based on company size and total compensation packages. Review this guide to state pay transparency laws .

Offer equal paid parental leave.

It’s estimated that working mothers hit pay parity in July, meaning they work up to 18 months to earn what their male counterparts earn in one calendar year. Working mothers continue to shoulder the weight of childcare responsibilities and many are forced to leave the workforce due to caregiving. Offering gender-neutral paid parental leave for all parents distributes childcare responsibilities equally, stabilizes household income and the earning potential of mothers, and reintegrates them into the labor market.

In the year following birth, new mothers who take paid parental leave are 54% more likely than those who take no paid leave to stay in the workforce. Moreover, every month of paid paternity leave is tied to a 7% increase in moms earnings. Access to paid leave for all parents reduces the risk of career gaps and interruptions, and equalizes the motherhood penalty many working mothers face. Studies show that gender neutral paid parental leave is good for the economy too. Oxford Economics estimates it will add 3,300,000 women to the U.S. labor market, increasing the national GDP by 1%.?

Promote healthy work-life integration and flexibility.

Women with caregiving responsibilities are 30% more likely to turnover when work from home policies are rescinded and unfortunately, only a third of employees describe their workplace culture as family-friendly. Employers can consider adding remote, hybrid and flex-week options for employees to accommodate caregivers. Companies can also audit their workplace culture and find ways to set healthy work-life boundaries: add caregiving and parenting duties to shared calendars (school pickup, daycare drop offs, pumping, parent-teacher conferences, etc.).

Implement unbiased performance reviews and hiring practices.

Due to implicit biases, women are often considered to be less committed to their work and careers, and are thought to be more volatile employees. These biases influence the rate at which women, and especially mothers and women of color, are evaluated, reviewed, and promoted to senior leadership. Companies can train managers on unconscious biases, require diverse interview panels, and especially use skills-based assessments for both candidates and internal promotions. By emphasizing skills over preference, companies can mitigate affinity biases making sure that candidates and employees are evaluated on the same criteria. As always, continue to audit these processes yearly and see what works and what needs refinement.

Set diversity goals.

Women are still significantly underrepresented in executive and board positions. This lack of representation influences everything from company culture to brand image, to diversity of thought in decision-making. Companies can aim for equal gender representation at all levels and be transparent with employees about your goals and progress. If progress stalls, re-evaluate your talent practices and double down on leadership development for women.

Equal Pay Day serves as an important reminder of the persistent gender pay gap that still exists in many workplaces. While closing this gap may seem daunting, there are tangible steps that companies can take to promote pay equity. The path to pay equity requires an ongoing commitment from company leadership. However, the long-term benefits for recruitment, retention and company culture make it a worthy investment.?

Equitable paid parental leave remains one of the most rewarding policies and programs companies can implement, directly boosting retention, tenure, recruitment, morale, and productivity.

You can explore the ROI of paid parental leave for your organization and learn how Parento, the only gender-neutral paid parental leave insurance , can support working parents.?