Pay Equity Compliance: It Works

Never miss one again compliance opportunity to create a better workplace. After all, it is compliance. It’s not like it’s optional. You have to do it. Labor law compliance is fundamentally about doing the work to create a workplace free from discrimination and harassment, where people are treated with dignity and paid fairly based on their work. This seems like a good thing.

Instead of treating compliance as a burdensome requirement that hinders business operations, use it as an opportunity. Having a workplace free of discrimination and harassment helps attract and retain the right people so you can deliver quality products and services to your customers. It’s much better than spending time with lawyers in depositions and courtrooms. And also a lot cheaper.

Start with pay equity

Start with pay equity, because it is easier than most other initiatives. Pay equity lies somewhere between quite simple, such as tracking overtime and calculating final pay, and very difficult, such as creating a workplace free of discrimination and harassment.

Pay equity is essentially math and statistics. The point is to find out whether people who do similar work are paid differently for that work and whether there is a statistical correlation between pay gaps and gender or race. When it comes to pay equity, you don’t have to convince anyone that they are doing something wrong and change beliefs they may not even know they have. You just need to do a pay balance audit so you can see and fix the problems. And you can tackle them with money, which is also easier than organizing and getting people to show up for unconscious biases course. (Although you may not be able to figure that out depending on the state you’re in.)

Pay equity isn’t just a good idea; it is the law

The fact that it is easier to identify and address gender and racial pay gaps than other forms of discrimination is part of the reason lawmakers are passing new pay equity laws. Nearly half of the states in the US have salary history and/or pay transparency laws on the books or pending, and even more are considering these laws every year.

Three states – California, Illinois and Massachusetts – require reporting of payroll data, along with jobs and demographics, and the EEOC plans to do so reviving payroll data reporting.

The other reason lawmakers are passing new pay equity laws is that we have not made any progress over the past thirty years toward eliminating wage equality. Even more optimistic timelines show that we won’t have full pay equality until 2088, and that’s based on the kind of progress we made in the 1960s, which isn’t happening today. In short, pay equity has been federal law for more than sixty years, and it doesn’t work. So it’s time to do something different.

Colorado, Oregon and Massachusetts have established safe havens. The idea is to encourage organizations to identify pay gaps and fix them, rather than simply punishing those who don’t. Safe Harbor laws exempt organizations from liability for pay disparities for a specified period of time if they regularly monitor pay equity, have a plan in place to address pay disparities, and are making progress on that plan.

We will see more safe harbor laws on pay equity. In the meantime, the right course of action is to pretend you have a safe haven and take steps to identify and address pay equity.

Tackling wage disparities

If you discover pay gaps based on gender or race – and you will because every organization has them – the only way to address them is to raise wages. It is illegal to reduce someone’s wages to achieve pay equity. This makes sense. First, the people who earn more are likely to make good money, and you want to keep them. Second, they should not bear the burden of employers’ pay gaps elsewhere; the employer must. Third, raising the wages of people who are underpaid because of their gender or race is the problem.

A budget is needed to increase salaries. This is the good news and the bad news. The bad news is that it’s always hard to get a budget. The good news is that getting money is still easier than changing people. The key is to know that when you audit pay equity, you know there will be issues that require some people to get raises. And if you give some people a raise but not others, the others will want a raise too. This can be addressed through communication and transparency about what is going on. But only if you manage it from the start.

This is what you need:

1. Leadership commitment. Conducting a pay equity audit means that leadership is committed to achieving pay equity, not just figuring out if there are problems. It also means prioritizing equal pay as a key compliance issue.
2. Budget. Pay equity analysis involves budgeting the time and resources to collect the data to conduct the analysis, possibly purchasing new software to organize the data, doing math and statistics, exploring options to address pay disparities, and people to give raises to those who should have them.
3. Communication. People are sensitive to reward for many reasons and in many different ways. Pay equity is part of a bigger story about pay philosophy, why people earn what they earn and how pay works in the organization. If the organization is clear about these issues, communication about equal pay should be fairly straightforward. If not, equal pay initiatives may reveal more complex issues, both practical and legal. Make sure you understand what you’re dealing with and how to deal with it before you start implementing payroll audit tools. Once you’re in the audit and remediation process, you need communication to help people understand what’s happening and why, and that it’s about building a fairer workplace for everyone.
4. Continuous monitoring. Ensure a regular rhythm for pay equity audits to avoid surprises and stay compliant. Quarterly is good unless there are significant changes such as layoffs, mergers, or substantial increases in headcount or voluntary turnover. (If your voluntary turnover is increasing, you probably have bigger problems than not having enough people to do the job.) Pay equity is dynamic and changes somewhat as someone comes or goes. Use your data and tools regularly to account for this.

The good news is that the problems you encounter won’t be that bad. That won’t be the case for everyone, and if you have some form of compensation structure and reasonable compensation margins, you will be able to close the gaps with a reasonable amount of money in a reasonable amount of time. The EEOCs notable pay equity lawsuits often this involved a few thousand dollars per affected employee to bring their annual salary in line.

Addressing pay equity in your organization is one of the best ways to reduce this riskGet a head start on compliance issues and create an organization where people are paid fairly. And that’s a good start toward creating a workplace free of discrimination and harassment (which are also both federal and state laws).