What can companies do to lessen the pay gap?

According to the most recent U.S. Census, a woman who works full time is paid on average just 84% of the typical man’s pay, Black women are paid 67% of every dollar paid to white men and Latinas are paid 57% of every dollar paid to white men. The National Committee on Pay Equity (NCPE) was founded in 1979 to address pay inequities among women and men in the workforce and in 1996 established the first Equal Pay Day to raise awareness about the gender wage gap, this year celebrated on March 14, 2023.?

The pay gap has decreased a bit since the Committee was formed but women still earn less than men for doing the same job. There are many things that a company can do to help narrow this pay gap inside of their own organization including implementing pay transparency practices, building more inclusive leave policies, and reshaping their recruiting process to name a few. Take a look below at the 6 things companies can do to lessen the pay gap.?

1. Increase your Pay Transparency?

In order to know for sure if you are being paid fairly you need to gather data on how much your peers are making and what the market rate is for the job you are doing. There is a ton of benchmarking software out there like Pave, PayScale and Salary.com Until now, it has been up to the employer to decide how transparent they want to be around employee pay but many states are now implementing pay transparency laws where companies will have to list the salary ranges in their job descriptions, however the enforcement and criteria for a “pay range” is still limited. I’m sure you’ve seen the Netflix example where the range is posted at $150,000-$900,000 for the role.?

All that being said, according to the National Bureau of Economic Research if companies were to disclose their pay bands and adopt pay transparency practices it would affect the overall gap reduction by 25% to 40%. Not only that but having more transparent pay practices is a great way to build up trust between employees and your company. The more realistic you can get with your pay ranges, the better it is for narrowing the pay gap and increasing the chances of having a more diverse workforce.

2. Conduct a pay equity audit and fix discrepancies

There are many reasons why your company may have a gender pay gap. It can be hard to overcome unconscious bias in hiring practices and in salary negotiation conversations, especially if your company has experienced rapid growth or growth at any cost where recruiting best practices were an afterthought and salary negotiation talks were more like the Wild West.

A great place companies can start is to conduct a compensation audit. This is where companies can look at employees in the same or similar roles and determine if the men and women are being compensated equitably. From there, employers can take steps to increase the salaries of the employees who are making less than their peers. By keeping this process continuous companies will foster a productive environment where employees feel like they are paid fairly (and a happy employee is a productive employee).????

3. Increase paid family and medical leave?

During COVID, millions of women left the workforce to care for their children or sick family members. Most being the lowest earning spouse, women in a two income household were the ones that stepped in to supervise home schooling and oversee elder care simply because it was the cheaper and potentially the more manageable option. Most companies' parental leave policies are weighted to give women more time off than their male counterparts, signaling that it is the woman’s responsibility to care for children while men are only seen as augmented support getting a week or two off to bond and take care of their new child.?

Expanding paid parental leave for men and allowing more flexibility for both women and men would allow more women to remain in the workforce and not experience the sharp drop in earnings and professional growth that happens after the birth of their first child. Equalizing family leave regardless of gender would give parents more choice in the decision making process, helping open up new opportunities to share more of the caregiving responsibilities equally.?

4. Establish or expand employees’ access to child care

Child care costs have been on the rise and in some cases the cost of child care outpaces the increases in wages which makes it unobtainable for many working households, especially those in lower paying jobs. In some instances it doesn’t make financial sense for a parent (most of the time women who are making less than their partners) to stay in the workforce when the child care costs exceed their full time salaries.??

Companies can offer child care assistance to decrease the cost burden and increase the probability of retaining working mothers. Some examples of this are the Dow Jones providing onsite daycare for their employees who come into the office. The DJ also offers a return to work program for anyone who has been out of the workforce for two years because of any life events. Companies can also add to their benefits package a Dependent Care FSA (Flexible Spending Account), much like a standard FSA but focused on child care expenses. New York Life, Fidelity, and Intuit all have Dependent Care FSAs and they offer backup child care and flexible working options for their staff.?

5. Stop basing salary history as a starting point for an offer?

In many states it is now illegal to ask a candidate what they were making in their last role. Massachusetts has an Equal Pay Act that went into effect on July 1, 2018 that prohibits employers from asking applicants about their salary history, unless they voluntarily disclose their pay. In many cases companies want to gather this information to determine the lowest offer that a candidate would accept. However we know that basing an offer around a candidate’s previous salary disproportionately affects women who are already making less than their male counterparts. Companies who continue this practice are only perpetuating the cycle of pay inequalities.??

Instead companies should provide clear salary ranges for each position and establish compensation bands and levels for each role within their organization. Having a clear compensation strategy helps applicants and employees understand the different levels and salary opportunities that the company can offer. When the applicant already knows the salary range at the beginning of the interview process, it makes for a seamless conversation? when they make it to the offer stage.?????

6. Improve work life balance?

According to a study by Lancet Public Health, women spend more time on average on household responsibilities than men. In fact, they found that women spend on average 4.5 hours per day on household chores and caring for children while men spend an average of 2.8 on the same or similar tasks. Because women are taking on more additional responsibilities outside of the workplace, they have reported lower scores when asked about their work-life balance. Feeling burnt out or overwhelmed can lead to more women leaving hire paying more demanding roles for more flexible or part time opportunities or leaving the workforce altogether.?

Lessening the pay gap will keep more women in the workforce thus increasing the chances of companies to have a more diverse workforce resulting in a higher probability of being more productive and more profitable. The cost of getting to pay equality may seem a bit high now but will pay out long term dividends not only for companies but for all of us as humans.