Pay Equity Begins With Awareness

Today, April 2, 2019 is Equal Pay Day in the United States. Last year, it was on April 10. In 2017, it was April 4. Why does the date change each year? Well, Equal Pay Day is held every year on the day that women have to work until they earn the income that men earned in the prior calendar year. In other words, women had to work from January 1, 2018 until April 2, 2019 (today) to earn what men earned in the calendar year of 2018.

When Equal Pay Day moves to earlier in the year, it means the gender wage narrowed in the past year, and when it moves to later in the year it means the gap widened. Since we’re all responsible for nudging this day closer and closer to January 1, here’s a quick primer on pay equity and new Pay Equity metrics included in Namely’s HCM Benchmarking Package.

Wage gap metrics in HR come in two forms: unadjusted and adjusted. An unadjusted gender wage gap is the difference between median male pay and median female pay, without accounting for any legitimate pay-related factors. A median salary is the “middle-most salary” if you lined all salaries up from lowest to highest. To get your pay gap, you do that for men and then again for women, and the difference between the two medians is your pay gap. This unadjusted gap answers the question: what is the raw difference between what men and women are earning, regardless of whether or not they are performing equal work?

In contrast, the adjusted pay gap commonly considers factors like performance, job level, experience, etc. to identify if comparable employees (in terms of type and level of work performed) are paid similarly or not. For example, you might identify the pay gap separately for each level of your job tier system. The adjusted pay gap gives you a sense of whether you’re compensating fairly for comparable work.

These metrics are most useful when considered together. Do you have a large unadjusted gap that narrows or disappears when you adjust for job level? This likely means you lack balanced gender representation at different levels in the organization, so you might want to check that your promotion or executive hiring practices bring employees across both genders into leadership.

Do you have both adjusted and unadjusted wage gaps that concern you? Start by investigating which employees in each group are outliers (even within their own group), and consider plans and timelines to help bring them more in line with their own group and the broader company. Step by step, and alongside improved and standardized salary practices at the point of hire, you should see your wage gap begin to narrow.

Organizations with mature compensation practices will often conduct more robust statistical testing on their wage gaps to identify which gaps are “statistically-significant,” and thus need to be prioritized. If you’ve already begun basic pay equity analysis and are looking to take the next step, there are many legal and organizational professionals who can assist you in conducting more advanced analyses.

If you’re one of the many organizations that are just getting started, consider looking at Namely’s HCM Benchmarking Package, which includes a board-ready quarterly report that covers headcount, turnover, diversity, retention, and now pay equity metrics. The Pay Equity chapter of the report provides both unadjusted and adjusted pay gaps in your organization, as well as views of the pay gap by department and tenure. Better yet, the report covers not only gender gaps but diversity gaps as well, looking at the same set of metrics across majority ethnicity employees versus non-majority ethnicity employees. Better yet, our industry benchmarks help you see exactly where you stand relative to peer companies.

Please join Namely on Equal Pay Day 2019 to take the first step towards equal pay in your company!

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