Pay Equity - the Must-Have Conversation for 2022's Growth Plans

A major challenge in today's hiring marketplace is actually one that is internal, not external. Aligning Finance's budget and Human Resource's human capital goals can be challenging. The pool of top talent is small and their demands are large. How do we get the stars to align? Pay Equity plays a major part in this conversation. Lets start with a reminder.

Massachusetts is ahead of the curve

With President Biden making Pay Equity a priority in his agenda, Massachusetts already has legislation passed on this topic per the 2018 Massachusetts Equal Pay Act (MEPA).

MEPA (full details can be found here) says that employers cannot discriminate against employees because of their gender when deciding and paying wages. Employers cannot pay workers a salary or wage less than what they pay employees of a different gender for comparable work.?The law defines “comparable work” as?work that requires substantially similar skill, effort, and responsibility, and is performed under similar working?conditions.

When can you have differences in pay?

MEPA permits differences in pay for comparable work only when based on:

1. a system that rewards seniority with the employer (time spent on leave due to a pregnancy-related condition and protected parental, family, and medical leave cannot affect?seniority);
2. a merit system;
3. a system which measures earnings by quantity or quality of production, sales, or revenue;
4. where a job is performed;
5. education, training, or experience that are reasonably related to the job; or
6. travel, if the travel is a regular and necessary condition of the job.

Importantly, MEPA makes clear that employees’ salary histories are not relevant or a defense to an employer's?liability. Employers do not need to intend to discriminate based on gender in order to be liable under the law.?

Pay Equity Audit - a "Get out of Jail Free" card?

A Pay Equity audit is a MUST for employers. If an employee were to ever sue over pay discrimination, showing proof that an audit has been conducted helps avoid major risk. Jen Pinkham joined me last week for a refresher below:

There are lots of resources on best practices to conduct a pay equity audit (good one can be found here - Pay Equity Audit How To). We will actually have a webinar coming later this month going through a "mock" Pay Equity audit with Jen that I will provide details on as we get closer. An interesting topic arose from our conversation:

Is Pay Equity the next major Business Disruption?

One would think that the Pay Equity problem we are referencing is the long-standing problem between Male-Female pay scales. That is absolutely a major part of the conversation as we are trying to close pay gaps; and while strides have been made, we are obvoiusly not where we would ultimately like to end up. The problem brewing is actually a different one.

"Recruits vs. Current Workforce" - We all know how challenging it is to hire top talent. When the recruit for a position you desparately need to fill says "Yes," but wants 25% more pay than standard scale with more flexible working arrangements, what do you do? Below shows wage increases across the different income earners in the US.

You need the talent. Can you afford the pay bump? Maybe? Many positions that are the most challenging to fill are represented above by the dark line where the bottom 50% of earners are getting the biggest pay bump.

BUT, what happens when your current staff in those same roles (potentially tenured employees) find out the "newbie" is making more money than them? Do you have 1 new employee coming in and 2 tenured employees potentially feeling underappreciated? Does the culture you have so deparately tried to maintain during COVID start to collapse? Could productivity could dip, or worse, could resignations be on the horizon just adding fuel to the recruiting shortage fire? This is the conversation that needs to happen with your business partners to make sure the decisions being made align with every part of your business.

What are the remedies?

With anything, it is not one size fits all. This can be a good way to start:

1. Conduct a Pay Equity Audit - this is of utmost importance if you haven't done so
2. Conduct a Pay Scale Benchmarking Audit - understand your local markets and if there is an opportunity to hire remotely for certain positions at different pay scales
3. Benchmark your benefits - new offerings, pricing, contribution structure, demographic analysis and competitive analysis in your market vertical

Much more to come on this topic in the upcoming weeks! As always, do not hesitate to reach out for assistance. These conversations are ongoing with our team at RogersGray and our client partners. They allow us to lean on our own market experience as a Best Place to Work and be creative and help align the goals of Finance and Human Resources teams across New England!

Pay Equity Webinar coming at 11am on 5/25 - mark your calendars!!!

Jeff Bastien - Partner & SVP Employee Benefits - [email protected]