Pay Equity Is Achievable: But It Must Be Done The Right Way
Private sector organizations have as their primary mission serving those who have invested in them.?Providing capital to an organization is an act of faith and is typically driven by economic considerations.?Public sector organizations have a similar obligation to provide the tax-paying citizens a fair return by providing high quality services at a reasonable cost. Over the last decade there has been increased attention on not only whether an organization provides investors with a fair rate of return, but on a wider range of measures.?Considerations such as environmental impact have become more important for some investors and citizens, as has the organization’s impact on society.
Organizations must also brand themselves as an employer of choice, so they can attract and retain the talent they need.?One of the issues associated with an organization’s brand as an employer is how it treats its employees.?When seeking talent organizations find that their “street brand” will influence candidates when they evaluate what the organization has to offer. Illegal discrimination based on age, gender, race, religion and other prohibited characteristics of individuals creates legal as well as social liabilities.?It is therefore incumbent on each organization to not only produce economic results, but to do so in a legal and acceptable manner.
Unjustifiable discrimination also damages the brand of an organization – whether it is perceived or real.?A prior post addressed how pay equity is defined and measured. Since it is one of the most prominent issues in the public eye today it is incumbent on organizations to ensure they address it.?How they do that is the topic of this post.
What and how white male employees are paid relative to everyone else has been the subject of not only controversy but also legislation.?In the 1960s the Equal Pay Act and Title VII of the Civil Rights Act were enacted, in an attempt to ensure pay equity was a goal for all organizations. The Equal Pay Act outlawed discrimination based on individual characteristics when employees were performing equal work.?This approach to legislation encountered little resistance, since it is reasonable to accept that equally qualified people doing equal work should enjoy equivalent pay opportunity, assuming equal competence and performance. An attempt was made to expand legislation to apply to equity when employees were performing work of equal value, often labeled “comparable worth.”?This extension of the reach of the law was not accepted for many reasons. The most important reason was that different occupations are of different value to organizations and have different market values.??Having regulators impose a standard set of job values on organizations would be a unmitigated disaster. That has not stopped some states from trying.
This was made apparent to me when doing my Doctoral dissertation on the determinants of occupational worth. The variation is attributable to different occupations being more central to the primary mission and critical to firm performance. A hospital is focused on quality medical care, and not on how efficiently it keeps administrative records, so it will value medical personnel highly relative to others. And my work in virtually all the national laboratories made it clear that their Scientists and Engineers needed to be world class in order to achieve their mission, while administrative professionals needed to be competent.?This results in a high value being placed on scientific personnel in the labs.?
The national labs face two challenges when attempting to staff the technical occupations. One is the shortage of U.S. students graduating in STEM fields.?The second is the H1B visa cap that limits the number of foreigners who can be cleared to work in the country. This supply shortage is exacerbated by the increasing demand, attributable to the explosion of technological advances.?And to add to the challenge employers face there are still fewer females and minorities majoring in STEM fields than there are males, meaning that occupations will be dominated by one gender (although this seems to be changing, albeit slowly). The combination of the high market rates for scientists and the fact that most scientists are males leads to average pay being higher for males.?Yet this type of difference is correctly termed inequality, rather than inequity.
Certain occupations and managerial roles in the U.S. have historically been limited to white males in some organizations and some industries.?Research on basic intelligence shows no significant difference between the genders, which suggests limiting entrance to males must be attributable to other factors.?Bias is the worst of these causes. History plays a role here, and even though recent graduate business school and law school graduates are fairly well balanced across gender, it will take time to change the mix at executive levels and in other occupations that have been male bastions.?
Given the broad acceptance of pay equity as a principle there has been considerable frustration over the slow (in some people’s eyes) progress in closing the gap between males and females.?But since the economic downturn beginning in 2007 budgets for pay adjustments have ranged from 0 to 3%. Meager budgets make it virtually impossible to catch late entrants up with those who have been in roles for a longer time.?And a low starting rate makes catch up difficult. Even though females and minorities have finally been given fair access to some occupations they will typically start at the low end of the established pay range, especially if the organization progresses pay based solely on experience in the role.?There is a considerable amount of legislation being put on the books at the state level to prevent employers from basing start pay on the applicant’s current pay rate (or even asking for that information), which could help to allow qualified candidates to be hired at more appropriate rates. But in the public sector there still is widespread use of automatic time-based step rate pay plans and starting low has a long-term detrimental impact on progress.?The replacement of these time-based plans with merit pay plans in the public sector can help to remedy this built-in impediment.
领英推荐
It is possible to develop pay systems that do provide equal pay for equal value of contribution.?Higher levels of performance generally result in larger pay increases, at least when merit pay programs are used.?In addition, most organizations attempt to determine the relative internal value of the roles that employees fill, based on their centrality to the mission and contribution to results. Organizations also generally pay individuals at a level within their assigned range based on their level of competence in the role.?When all these components are in place and when they are administered effectively it removes many of the obstacles to achieving pay equity.
But illegal and unwarranted pay discrimination can exist even when systems are designed in a sound manner.?If bias causes a manager to rate the performance of males or whites higher than others who perform equally well the system cannot prevent the inequitable pay adjustments from occuring. ?Using workforce analytics, it is sometimes possible to detect this type of bias, but it is often difficult, due to small samples. And the weakness of many performance management systems can make it even more challenging to detect.?Finally, if the personal characteristics of candidates result in discrimination some will also be excluded from being hired or promoted. Sound program design is necessary but not sufficient… sound administration is also a necessity.
Unfair treatment due to personal characteristics is bad business.?It can impede the mobility of the best people into the right roles, which will negatively impact organizational performance.?It can erode the brand of the organization as an employer, increasing its potential for legal liability and keeping it from attracting and retaining the talent it needs to succeed. And it can damage the quality of life for people who deserve better.?Attempting to achieve pay equity will be a challenging process but the stakes are so high that failing to make the attempt is inexcusable. But it is critical that changing systems be done in a business-like fashion. Costs must be considered if the pay of some is to be increased. Regrettably some of the legislation at the state level includes a provision that no one’s pay can be reduced in pursuit of equity.?Why can’t someone who is overpaid be adjusted to a more appropriate level? One pay rate that is too high can result in a multitude of others feeling the pay relationships are inequitable, making it prohibitively expensive to achieve equity, since all other rates must be increased even if that is not justified. This impediment can actually work against achieving the desired result.
Yet, despite all the obstacles, pay equity must be a goal for all organizations.
#About the Author:?Robert Greene, is CEO at Reward $ystems, Inc., Consulting Principal at Pontifex and Faculty Member for DePaul University in their MSHR and MBA programs.
Greene?speaks and teaches globally?on human resource management. His consulting practice Reward $ystems is focused on helping organizations succeed through people.Greene has written 4 books, hundreds of publications and articles about human resource management throughout his career.
The Most Important Asset is a story about new graduates entering the human resources field, encountering and dealing with workforce management challenges and issues and developing their own professional competence through experience. Two books focus on performance and rewards management and can be used as a text in university courses dealing with these topics. ?"Strategic Talent Management: Creating The Right Workforce" deals with all aspects of workforce management.?
Visit:?https://robertjgreene.com?for more information.