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The Importance of Pay Equity

pay equity audit

The History of Pay Equity

After the Equal Pay Act of 1963 (EPA) was introduced, employers were required from then on to not discriminate against employees by paying them less than equally qualified counterparts based on their sex. Title VII, ADEA, and the ADA also prohibit pay and workplace discrimination based on an individual’s “race, color, religion, sex, national origin, age, or disability,” per the official website.

These regulations only apply to businesses with 15 or more employees, however. Some smaller businesses are exempt from Title VII, ADA, and GNA. Similarly, ADEA only applies to businesses with 20 or more employees.

What is Pay Equity?

Pay equity refers to compensating employees of similar roles with similarly equivalent pay regardless of:

  • Race
  • Gender
  • Sexuality
  • Disability
  • Age
  • Or any other aspect of their identity

Pay equity considers other aspects, such as experience, education, and job performance rather than an employee’s identity to determine how much they should be compensated. Because of the multifaceted nature of pay equity, it is crucial to understand what it is, and how to properly implement it throughout your company to avoid legal trouble or employee dissatisfaction.

Why is Pay Equity Important?

Ensuring compliance with pay equity and anti-discrimination laws is crucial because your company can be sued and/or fined for not following the law.

Pay equity is also important because it:

  • Reduces employee turnover
  • Promotes a diverse workforce
  • Offers your company a competitive recruiting and retention advantage

A study performed by the American Association of University Women (AAUW) found that despite the Equal Pay Act, women still make 83 cents to every dollar earned by men, with women of color earning even less. Fostering a diverse and inclusive workplace is important for every business, and paying women less than men is illegal and hurts your bottom line. Employees will find work elsewhere if they are not compensated fairly, so knowing exactly why your employees are provided their current salary and benefits package is important for keeping your business running.

Perform a Pay Audit

Each year, more employee protection laws are passed to ensure compliance with pay equity. Annually performing a pay audit of all of your employees is a good way to ensure employees in equivalent roles don’t have a significant gap for no discernible reason. Additionally, consider why gaps between different employees’ pay exist. If it’s for legitimate reasons such as differences in experience or educational levels, then a pay gap is most likely valid. If there are no discernible factors for a pay gap, it may be discriminatory and should be adjusted accordingly.

Once your HR specialist has collected salary data for all employees, compare the salaries of those in similar roles, such as everyone with the title “Customer Service Representative” and “Customer Care Representative.” While comparing, be aware of any patterns in pay gaps: Are women in the same position as men paid less for no apparent reason? Ask this same question for an employee’s race, sexuality, age, etc. Document the reason each person’s salary is where it is— time with your company, skill level, education, job performance, and more. Take your time with this process, as the timeline for completion may vary by company.

Implementing Changes

If you’ve noticed a discriminatory pattern during your audit, it’s time to take steps to correct it through direct action and implementing a company policy.

A few things to consider:

  • Have leaders commit to creating a company culture that prioritizes pay equity
  • Regularly review all of your employees; compensation packages
  • Keep track of average compensation in the market and at your company
  • Assign starting salaries with this baseline number in mind
  • Be aware of implicit biases in your hiring teams that may lead to unequal pay

Correct the wage gaps that have been identified as unjust as needed. Do this by increasing the wages of those who are underpaid instead of lowering other wages to bridge any gaps. Continue to document and perform wage audits quarterly to ensure that everyone working for your company is paid fairly. Most importantly, be consistent and aware of any patterns that may come up. It’s a human resources expert’s job to be vigilant about issues like these through the implementation of HR analytics.

Cura HR Can Help You Navigate Pay Equity

Pay equity can be a complicated topic to navigate, and understandably so. That’s why Team Cura is happy to help businesses by providing benchmarking and sharing our knowledge about employment laws to keep your work environment safe and equal.

Compliance is ready-baked into everything we do. We consider it a given rather than a benefit of working with Cura HR. We’ll even take your business far beyond compliance and into new and creative ways of leveraging HR to make your business soar. We’d love to hear about your business and how we can ensure your company stays competitive and ethical by complying with equal pay laws.

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