Pay Equity vs. Pay Equality: An HR Primer
We’ve all heard of the pay gap. Even more than 50 years after pay discrimination became illegal in the United States, a pay gap between men and women persists. Often cited is the statistic that women working full-time earn 82 cents for every dollar earned by men, according to recent research. The pay gap creates lifelong financial consequences for women. But understanding the pay gap, pay equity, and pay equality requires going into the nuances. In addition, increasing the adoption of state equal-pay laws brings new urgency to the topic. Here’s a primer for HR professionals.
Defining pay equity and pay equality
First things first: let’s define terms.
The pay gap refers to the persistent disparity in what women and men earn for equal work, even when all factors affecting compensation are controlled for. These can include education, seniority, role and responsibility, degrees, and certifications, among others.
Pay equity means employees are paid equally for equal work, regardless of race or gender. Put another way, it’s paying a female superhero the same as a male superhero for the comparable work of saving the world. Pay equity is legally enforceable through the Fair Pay Act and the Equal Pay Act.
Pay equality is not about comparable individuals and work but instead about a systemic approach to pay. Using our superhero example, pay equality is about changing our systems and culture so more women can become superheroes in the first place.
Why pay equity matters
There are clear reasons why pay equity matters, and they range from the legal level to the workplace. Though the Fair Pay Act may be nearly 50 years old, states are increasingly passing broader legislation about fair pay, going beyond gender to also incorporate race to close the pay gap faced by people of color. And nearly all these laws require greater transparency on policies covering pay. They also protect employees from consequences and retaliation when undertaking correction for pay disparities, or even when openly discussing pay with managers and colleagues.
While compliance with legislation matters, so does doing the right thing—for employees and for the bottom line. Ensuing pay equity can help employers attract the right employees, decrease turnover and boost engagement and loyalty. After all, it’s much more efficient and less costly to hold onto the talent you have rather than hiring and onboarding new employees.
Why pay equality matters
Pay equality also matters for high-level reasons. One reason mentioned above, the pay gap can have lifelong financial consequences for women. Lower earnings affect women’s financial health and stability during the working years; lower lifetime earnings can put women at risk during retirement, as they are eligible for less in Social Security and pension benefits. This is especially crucial to consider after the pandemic, which has reversed years of incremental gain for women in the workplace. Research by McKinsey & Co. revealed because of increased pressure and responsibilities during COVID-19, nearly 25% of women have exited or are considering exiting their careers—setting up another financial blow to lifetime earnings.
At an organizational level, efforts to establish and maintain pay equality can also positively affect culture. A culture of true inclusivity when it comes to pay can help your company stand out, attract and retain the best talent…to ultimately develop more superheroes.
What HR can do
What can HR professionals do? Here are three key steps to move toward greater pay equity and pay equality.
Conducting a pay audit yields essential information to identify potential pay disparities and uncover opportunities to improve equity and equality. As you review compensation and compensation policies, determine whether pay differences can be explained by legitimate and nondiscriminatory reasons—like education, seniority, job-specific experience, credentials, and more. If they can’t, you may have an opportunity to correct the disparity.
Document compensation policies and decisions
Too often, the reasons for pay differences may have been justified, but the departure of managers or the passage of time may make it difficult to recall why. And this gap can be damaging when an employee brings a fair-pay claim against an employer, perhaps years after the decision. Be sure to document reasons for pay disparities and ensure these documents are available at the department and institutional level.
Develop and review policies and controls
Addressing pay equity and pay equality effectively can require ongoing collaboration between managers, HR and legal. Develop policies and controls for salaries, merit increases, performance bonuses and incentives, and one-off increases and incentives. Establishing and reviewing these will help to simplify the process of setting, offering and reviewing compensation equitably and equally for your organization.
How is your organization addressing pay equity and pay equality? Where could you make progress? DallasHR is the third-largest SHRM affiliate chapter in the nation. With more than 2,000 engaged HR professionals, the Chapter has been Advancing the Value of HR since 1939 through innovative education, valuable networking events and providing opportunities to share best practices with others in the field of HR. The HRSouthwest Conference powered by DallasHR, is the official Texas SHRM conference and one of the largest regional HR events in the U.S. Visit us at Dallashr.org, hrsouthwest.com and follow us at #dallashr, #hrswc.