Dive Brief:

• More organizations are addressing pay equity issues, according to a survey by WorldatWork and Fidelity Investments, released Jan. 17. Nearly three-quarters (70%) of the 534 responding organizations reported taking action on pay equity in 2022, up 4% from 2021 and 1% since 2019.
• Organizations said they’re taking action mainly because “it’s the right thing to do, to build/maintain a culture of trust and to remove bias against protected classes,” the survey found. But they’re also increasingly concerned about the legal risk of pay inequity; since 2020, the proportion of organizations citing “mitigating legal risk” as very or extremely influential to their decision to pursue pay equity jumped to 71%.
• However, transparency is still an issue: Only a quarter of organizations share high-level results with their employees, and only a third let employees know they are doing a pay equity analysis, according to the survey.

Dive Insight:

New state and local laws requiring pay disclosure are putting pressure on employers to be transparent about earnings. Some laws, like the latest in California, which took effect Jan. 1, require employers to include pay ranges in all job postings. Others, like Rhode Island’s law, which also took effect Jan. 1, require employers to provide a pay range or pay rate to a job applicant or current employee upon request.

Employers leading the charge are rebranding themselves through pay transparency from the top down, the co-founder of a compensation management software firm previously told HR Dive. They’re doing this by implementing procedures to ensure pay parity, such as with measures that ensure workers are paid fairly for performing the same job, taking factors like geography and performance into account, she said.

These actions may also address another concern: Fewer than one-third of employees believe their pay is fair, according to a second-quarter 2022 Gartner survey of more than 3,500 workers. However, employee perceptions of pay equity aren’t necessarily rooted in compensation, a Gartner senior principal explained in a release. Instead, perceptions are driven by trust. If employees don’t trust their employer, they don’t believe their pay is fair or equitable, he said. And poor communication and transparency may be the reason, the report noted.

In developing their equal-pay-for-equal-work initiatives, employers may want to focus broadly, a UKG report published in September 2022 suggested. Many initiatives have been tailored to women, but the issue of pay disparity is much more complex than gender discrimination; rather, it’s an intersectional issue that cuts across race, color and sexual orientation, the report said. Although gender-based discrimination has been illegal for years, the pay gap widens when companies look intersectionally, such as at Black, transgender and immigrant women, Brian Reaves, UKG’s executive vice president and chief belonging, diversity and equity officer, explained.

Among the organizations that have a pay equity analysis in place, nearly all include base pay or are thinking of including it in the next year, the WorldatWork survey found. But if companies limited their analysis to base pay, “they could be leaving out important elements of total compensation,” Emily Cervino, head of Fidelity Stock Plan Services Industry Relationships and Thought Leadership, said in a release. “Including bonus payouts, equity grants and other kinds of compensation results in a more holistic analysis,” she pointed out.

Companies can hold themselves accountable for their pay policies by conducting regular pay audits, a labor and employment consultant said. But before attempting an audit, employers must have the right mindset — that they will make adjustments as needed, an attorney participating in a February 2022 webinar cautioned. Otherwise, they won’t be in a good position from a legal perspective.

A pay audit has four key components, he said. First, employers should conduct the audit under legal privilege so they have complete control over the data and the flexibility to make adjustments. Second, employers should develop comparator groups to ensure comparisons are accurate. Third, employers may also want to consider conducting a statistical regression analysis, and fourth, once the analysis is completed, employers should follow through on the results.