A deep dive into pay equity

Communicating clearly about pay equity is nearly 13 times as important for employee retention and engagement as talking about “high levels of pay and benefits,” according to a report from The Josh Bersin Co., a human capital advisory firm.

Although equal pay for equal work may appear straightforward, most companies still struggle to meet the goal. About 71% of executives say pay equity is a critical component of their business and people strategy, yet 95% of companies are failing to achieve pay equity maturity, and only 14% have allocated budget and staff to address the challenge, according to the report.

“While most companies know they must increase pay during times of inflation, they do not understand the problems they create when people feel the system is unfair,” Josh Bersin, global industry analyst and CEO of The Josh Bersin Co., said in a statement.

“Most employees know that they are paid for performance, but when they perceive unfair practices (due to bias, racism, sexism, or simple politics), they lose confidence in the company and their sense of trust is damaged,” he said. “The result is more politics, turnover, and low levels of engagement.”

Bersin and colleagues examined 448 companies internationally to better understand pay equity and its effects. They found that pay equity touches all areas of the employee life cycle — including hiring, development, performance management, promotion, succession management, and leadership development. It also requires active communication and change management. 

Among the 5% of companies with effective pay equity policies, several outcomes were noticeable. They were 1.6 times more likely to meet or exceed financial targets, 2.1 times more likely to attract the talent they need, and 1.7 times more likely to innovate effectively.

However, the other 95% have recurring issues with pay equity and employee experience. These companies tend to overlook the issue until a legal, compliance or reputational risk arises, or they approach pay equity in a piecemeal way with sporadic projects, according to the report.

Importantly, the report found, only 21% of companies appear to listen to employee feedback around pay equity. In addition, only 15% are willing to communicate the required information to address the pay equity issue.

Beyond that, new technologies that can help identify pay inequities aren’t utilized well. About 15% of companies said they were actively using data and equity platforms to find problems.

“The problem goes beyond bias,” Bersin said. “Companies have to discuss what ‘equity’ really means and what criteria will be used for bonuses, rewards and raises.”

The U.S. has aimed for pay equity since the passage of the 1963 Equal Pay Act, which banned overt policies and practices that paid women and men different amounts for equal work. Since then, additional federal legislation has expanded the focus to encompass race, national origin and other protected groups. All 50 states have passed or enhanced their own policies as well, the report noted.

In recent years, more executives have focused on the issue of pay equity due to increasing legal pressures and major lawsuits, such as Google’s $118 million settlement, The Josh Bersin Co. noted. Companies such as Patagonia, Microsoft, and Adidas have shifted from a focus on performance-related pay and emphasized equity across organizational decision-making.

Other recent research has found that more organizations are addressing pay equity issues, including the racial pay gap between White and non-White workers.

A key component of that requires pay transparency, as well as making pay equity a core responsibility of compensation.

Pay equity audits can address a chief concern of diversity, equity and inclusion efforts. According to a 2021 Society for Human Resource Management report, they also may inspire trust within an organization.

But employers need to have the right mindset if they are going to attempt an audit, Robert O'Hara, member of the firm at Epstein Becker Green, said during a web event hosted by Deloitte Legal. Namely, stakeholders should commit to taking advantage of the information they receive as a result of the analysis.

"You have to go in with an eye that you're going to make adjustments as needed," O'Hara said. "If you're not prepared to do that, I would be reluctant to have you do a pay equity analysis, because now if you do it and you find you have problems, and you bury it, I don't think you're in a very good position from a legal perspective."

That does not necessarily mean employers must preemptively decide to make sweeping changes to their pay practices, or a complete overhaul, he continued, though such changes may be warranted if an audit reveals large, systemic issues at play.

In a step-by-step presentation, O'Hara discussed what a modern pay equity analysis looks like, highlighting four key components.

#1: Consider using legal privilege

O'Hara said it is highly recommended that employers conduct their audit under legal privilege, particularly if they have never done such an analysis before. This protects information from being subject to disclosure or discovery during legal proceedings.

"The reason for that is that you have complete control over the data and the analysis, and the outputs of that," he continued. "It's not something where you can go and say 'I'm going to do this,' and announce it to the world that you're going to do this, and then you get bad results and all of a sudden it goes to ground. You want to be very, very careful about how you do that."

Choosing this route also gives employers the flexibility to make adjustments, if necessary, on their own time. "The reason you want to be proactive here is so you know where the issues are," O'Hara said.

#2: Develop comparator groups

HR teams will spend much of their time at this stage of the process, O'Hara said, as they will want to ensure comparisons are accurate. Aside from an employee's title, employers also would do well to consider performance evaluations, length of service, experience, education and geography, among other factors.

One objective may be to determine whether an employee's title is actually reflective of the day-to-day duties they perform and responsibilities they hold.

"That's one of the things that you find out when you do this exam," O'Hara said. "You look at these things and say, 'Why is this person paid so much more than this [other] person or this group of people?' Well, they have a very different kind of job. Now it becomes apparent that you've got a different job. Now, maybe you can adjust their titling. That might be the issue as opposed to the comp itself."

#3: Conduct a statistical regression analysis

Employers may want to conduct a regression analysis using a dedicated software package, O'Hara said.

This can be done internally within the HR organization or even within the compensation organization, "provided they have the right kind of guidance to do it smartly," he continued. O'Hara's presentation specifically directed employers to conduct audits in connection with a statistician.

Counsel should be involved, too. "In the U.S., if you're doing it on your own in HR, finance or some place else and it's not being directed by counsel, you're not going to be able to protect that data from disclosure if you're sued or something like that," O'Hara said. "Make sure you have those types of protections in place."

#4: Follow through on the results

Once employers complete their analyses, they will need to determine whether the data tell them something that they do not already know, O'Hara said. A particularly important step is to determine whether any individual outliers for a given position exist, and the rationale behind those outliers.

Perhaps employers have hired "the only person in the known universe that can fix this problem," to borrow O'Hara's phrasing, and plan to pay that person accordingly. "That's a business decision — that's fine," O'Hara said. But if the employee takes the same job title and job description as existing members of the organization, it could skew the data as a result.

"Anytime that you demote, promote, hire or fire someone, that dataset changes," O'Hara said. "If you're in a big organization, and you hire 5,000, 10,000, 30,000 people a year, every one of those transactions has an impact on the data. In a smaller organization, those individual decisions loom actually larger from a statistical perspective."

Frequently, audits reveal that disparities exist because employers hire someone who is considered over the typical market for a given position, he continued. But others may be underpaid. "If you have a business rationale for it, a nondiscriminatory rationale for it, fine. But you want to know what you have before you're hit over the head with it."

Aside from starting wages, O'Hara said employers also may want to consider the impact of bonuses and other incentive structures. Another concern is channeling, a relatively new term for a practice by which an employer decides not to place certain types of people into certain roles on a discriminatory basis, such as because the person is of a particular gender.

Raising pay is not the only tool employers have at their disposal to fix disparities, either. O'Hara said job classification issues, for example, also can be taken into consideration

"The statistics won't lie to you," O'Hara said. "They'll tell you a diagnostic [of] what's going on, but they're not going to necessarily tell you what you have to do to fix it."

Pay transparency can reduce the gender gap during salary negotiations, though other factors such as aggressiveness and competitiveness also come into play, according to recent research.

For instance, women tend to rely on job websites for salary information, while men tend to depend on direct social comparison through professional networks of classmates or colleagues. Based on that social comparison, men also act more aggressively during negotiations and react when they feel their masculinity is threatened, the researchers wrote.

“Before this research, it never even occurred to me that men and women may differ in the kinds of information they use,” Dustin Sleesman, an associate professor of management at the University of Delaware and one of the study’s researchers, said in a statement.

“Negotiators, both men and women, should be very cognizant of the information they are seeking and really think about the psychological impact it may be having on them,” he said.

In a hypothetical job offer negotiation experiment, 950 participants — evenly split between men and women — applied for a product manager position. They conducted their own research about the role, learned the salary range and were given information about another employee’s qualifications and salary level.

The job seekers were divided into four groups: either they were told the other employee had fewer qualifications than them, the employee had more qualifications, the employee had about the same qualifications, or they didn’t receive any such information. Then the participants were asked to come up with a salary and rate how competitive they felt.

Overall, the control group that didn’t receive employee information had a wide range in salaries. Men asked for nearly $17,000 more than women on average. 

In contrast, participants in other groups who had salary information — for an employee who was either less qualified or similarly qualified — asked for more money than those in the control group. In addition, the gender gap nearly disappeared.

However, in the group with information about a more qualified employee, men asked for about $5,000 more than women. Although a smaller gap than in the control group, the difference was significant.

In general, the researchers found that the gender gaps in both groups were due to a greater sense of competitiveness among men. This can reduce the efficacy of salary transparency, the researchers noted.

At the same time, gender remains only one factor in salary negotiations and isn’t the main driver of differences, the researchers said. Although it’s tough to create a definitive solution for the gender pay gap, pay transparency, preparation and mindset can go a long way, they wrote.

“Some people still deny that gender even matters in negotiations,” Sleesman said. And while it apparently does, “it’s not the end all, be all.”

Pay transparency policies could reduce the racial pay gap as well. To address pay equity, employers should analyze their data, develop a process to address the inequities and communicate with employees, experts told HR Drive.

Pay equity is gaining momentum as pay transparency laws take effect across the country this year. Employers who stay ahead of the trend and voluntarily post salary ranges are more likely to attract and retain top talent, research shows.

More organizations are also addressing pay equity because they feel it’s the “right thing to do,” according to a recent survey, though transparency remains an issue. About a third of organizations tell employees that they’re doing a pay equity analysis, and a quarter share results with their employees.

The pay transparency laws popping up around the U.S. are creating a sense of momentum. California, Rhode Island and Washington recently mandated salary ranges in job posts, joining a growing list of other locales with similar, and in most cases recent, requirements.

The energy surrounding pay transparency makes the topic feel fresh, but advocates have been pushing fair pay practices for a long while. These advocates include Noreen Farrell, who currently serves as the executive director for Equal Rights Advocates, the organization that co-sponsored the California Fair Pay Act of 2015. 

In a recent conversation with HR Dive, Farrell reflected on the modern movement for fair pay and discussed how employers might best prepare for the laws spreading across the country.

This interview has been edited for length and clarity.

HR DIVE: Pay equity is having a moment. We're seeing the passage of more laws pushing pay transparency and promoting pay fairness, and we're seeing more workers, leaders, and companies devote attention and effort to the subject, too. Why now?

NOREEN FARRELL: Pay equity momentum is building across the country for a lot of exciting reasons. We’ve seen a powerful cultural shift driven by a younger generation of workers sharing salary information at work and online and expecting employer transparency when it comes to pay scales.  

According to a new survey of recent and upcoming US postsecondary and recent graduates, 85% reported they are “less likely to apply for a job if the company does not disclose the salary range in the job posting.” The law is out in front of this cultural shift with dozens of new state and city laws on the books requiring employer posting of salary scales in states and municipalities across the country — including a bill co-sponsored by Equal Rights Advocates. 

These cultural and legal shifts combined with the #MeToo movement’s demands for improved conditions for women, greater employer attention to racial justice, and pandemic workplace strain to center the importance of pay equity. 

Another important factor has been the growing power of employees in the workplace as employers scramble to attract and retain top talent. All of these forces have contributed to the attention and energy around pay equity we’re seeing now.

From your perspective, what has been the response to this moment? How has the business community, in particular, reacted to the attention devoted toward pay equity? 

Some smart employers have positioned themselves ahead of these trends, voluntarily posting salary ranges and abandoning reliance on prior salary. These fared better in the bid to attract and retain top talent during the “great resignation” period of mass employee job changes. Others are now being compelled to do so through new laws transforming pay equity requirements. 

The demand for corporate leaders to listen and do better has created an opportunity to push for more progressive workplace policies, norms, and culture. Progressive leaders and advocates must keep pushing, and get more leaders on board, so this moment can lead to real, lasting change for a stronger and more inclusive economy. 

Business leaders and HR professionals may think of pay equity from a compliance perspective first and foremost. Is there another perspective to consider? In other words, outside of compliance, why should leaders devote their attention to this issue?

Compliance is an important perspective, and we need HR professionals to be dedicated to compliance to put these policies to work. However, pay equity provides many more benefits not only to employers but to our economy overall.

First of all, committing to fair and equal pay can help employers attract and retain more competitive and diverse talent. Companies with diverse teams perform better financially. Being a leader in equal pay efforts can also boost employer brand affinity. 

On a broader scale, equal pay increases the spending power of women and people of color. The average woman loses over $400,000 over a 40-year career due to the wage gap. For Latinas, the gap loses them over a million dollars, and Black women lose about $964,000. Closing this gap would boost the economic security of women, families and communities of color. 

What factors create pay gaps within organizations? 

There are many factors that contribute to the pay gap, and many of these can be addressed directly by employers at their organizations. One major factor is simply ignoring or not measuring the problem. Organizations that are not analyzing salary discrepancies across all employees, and not dedicating the proper resources to address the discrepancies, are bound to have pay gaps. 

Another major factor is a lack of pay transparency. Pay secrecy keeps workers in the dark about pay disparities and prevents them from asking for the wages they deserve. Having access to this information is important because it not only makes workers aware of the data but also gives them a tool to negotiate for better pay. It’s also important that employees feel comfortable discussing their wages with each other. Rules or norms that prohibit discussion of compensation often create pay gaps.

Further, employers basing compensation on an employee’s earning history can perpetuate discriminatory compensation practices. Salary history may reflect discrimination by past employers, and there are other factors that can and should be used instead to determine compensation. 

Another factor that impacts women especially is pregnancy and caregiving responsibility discrimination. In fact, mothers across race and ethnicity experience a wage gap of approximately 58 cents compared to fathers. This is largely due to inadequate family and medical leave policies and a refusal to accommodate workers with caregiver responsibilities, which can result in mothers needing to quit their jobs or even being let go. 

Finally, pay gaps can come about because of occupational segregation. Women and people of color are overrepresented in lower-paying roles and industries because their work is not valued as highly. These kinds of roles are often subject to wage theft, which exacerbates the problem.

How can employers leverage the energy around pay equity to make progress?

Employers have a central role to play in closing the pay gap. They can and should visibly promote pay equity, regularly measure and analyze pay data by race, sex, and ethnicity, and prioritize closing gaps. They should evaluate their managers on pay equity practices. They should aim to lead in their industries by implementing progressive pay policies and sharing their lessons learned and best practices. 

Employers should make pay equity part of a broader commitment to employer policies demonstrating that diversity, equity, and inclusion are a priority. These include policies ensuring the hiring and promotion of underrepresented groups in the highest-paid jobs, job-protected paid leave, ending bias against mothers and caregivers and robust protection of reproductive healthcare access.

Experts say pay equity is gaining a foothold in corporate America — and that the effects for Black workers will have staying power long after Black History Month conversations end. 

Pay equity used to live in the legal realm of an organization, something pursued as the result of a claim or to prevent exposure to legal claims, said Charlie Franklin, co-founder and CEO of Compa, an offer management software provider. 

Now, that work is going “mainstream,” Franklin said. “In the new world, it’s just one of the core responsibilities of compensation to look at pay equity … Organizationally, this is a shift.”

“In my world, I see pay transparency as an umbrella trend within which pay equity fits. Pay equity, at least from a U.S. perspective, is really addressing core issues of gender wage gaps and looking for any biased practices, but the broader trend is a shift in the social contract where workers are expecting more objectivity and accountability in how they’re paid,” Franklin said. 

This trend could have particular significance for Black workers, given the persistence of a racial pay gap over the years.

Compa estimates that about half of the U.S. workforce is covered by some form of pay transparency law. The company launched a pay transparency map in January with information on current state and local laws and pending legislation, as well as what employers can and can’t do when it comes to disclosing salary data. 

To address pay equity in their company, leaders should take three main steps, he said: gather and analyze data, develop a process to address the inequities and communicate well with employees. 

Seventy percent of the organizations surveyed by WorldatWork and Fidelity Investments for a report said they took steps toward addressing pay equity in 2022. That’s an increase of 4% from 2021 and 1% from 2019. 

For leaders that haven’t started to address pay equity yet, the first step is acknowledging there’s a problem and addressing the biases in their companies, said Donnebra McClendon, global head of DEI at Ceridian, a human resources software provider.

“We know that our underrepresented minorities are completely underrepresented when it comes to pay,” McClendon said. “As much as we want to live in a bubble, we can't.”

Ceridian has less than a 1% disparity between men and women globally and between White and non-White employees in the U.S., according to its 2021 pay equity analysis. The company plans to release an updated study soon, it said. 

“Ultimately, it comes down to your company and the culture of your company. We made equity a core value of our organization a few years ago,” McClendon said.

Achieving pay equity takes time, she said. Even at Ceridian, which has been on the DEI path for a long time, there’s still work to be done. The company launched a leadership development program to address challenges underrepresented minority employees face, conduct DEI surveys and form partnerships with historically Black colleges and universities to recruit minority workers, among other things. 

“I think the challenge is oftentimes people are expecting changes to happen overnight,” McClendon said. “100%, I see there is ground being made. I do think there's still so much work to do. I’m hesitant in allowing people to get comfortable with the progress.” 

A huge part of the solution will be in educating both leaders and employees alike, she said. Employees need to understand total compensation, especially when it comes to interpreting salary ranges shared publicly.

“We have to be careful when we are publicizing information without sharing all of the story,” McClendon said. “I believe that pay transparency coupled with education is a good thing.”

Franklin said a company can run into problems if it tells the outside world more than it tells those inside it.

“That’s a quick way to build distrust,” he said. 

And companies that are transparent about pay and pay equity can benefit, Franklin said. Much like organizations used to tout free lunches and other office perks, there likely will be more competition on pay equity and how much information a company is willing to share, he said. 

“I think that will transform into a marketing piece,” Franklin said. 

Compensation will be among the top challenges for HR in 2023, according to a Q4 survey of nearly 5,000 people by compensation data, software and services firm Payscale. 

Fewer organizations plan to give base pay increases in 2023, with only 80% saying they planned to do so, compared to 92% last year, the Feb. 22 report found. However, the number of organizations that give formal pay raises twice annually has more than doubled; 86% will give out-of-cycle raises due to inflation, the rising cost of living and to prepare for pay transparency. More than half (56%) of respondents said their average base pay increase will be over 3%; about a quarter plan increases between 4% and 5%.

“We are on the other side of the ‘Great Resignation’ and employees are thinking twice before leaving their current jobs, but they still have higher expectations for the employee experience,” Lexi Clarke, Payscale’s VP of people, said in a media release accompanying the report. “Employees need to be deliberate about their company values, culture and how they reward employees if they want to remain competitive,” she said.

The report offers three takeaways for HR professionals, Amy Stewart, Payscale’s associate director of content and editorial, told HR Dive. First, despite the precarious economy, pay raises are looking higher again in 2023, compared to pre-COVID-19 years, although they are not likely to be as high as inflation, Stewart said.

Second, HR pros should place a greater priority on pay equity to help them prepare for pay transparency and make fair pay central to the employee experience, Stewart said. Pay equity, initially pursued to guard against legal claims, has gone “mainstream” and is now a core responsibility of compensation, experts have noted. Nearly two-thirds (63%) of the organizations that responded to the Payscale survey said pay equity is a planned or current initiative, with employers most commonly conducting pay equity audits to analyze for gaps due to gender; race, ethnicity or national origin; and age.

Third, “Pay transparency is the future,” Stewart said. The number of “organizations that say they are posting pay ranges in job ads has more than doubled since last year, although 19% of organizations are posting ranges without confidence in how they will be received by current employees,” she added.

Pay raises have been expected. In a survey released last November by global advisory firm WTW, U.S. employers said they plan to boost salaries 4.6% in 2023 due to concerns over inflation and the still-tight labor market. In February, Home Depot announced it would put $1 billion toward higher wages for front-line hourly associates, joining a number of retailers that have recently invested heavily in compensation.

But employer concerns about pay transparency are not unfounded. Pay transparency laws, which may help close pay gaps, can also lead to unintended consequences, research indicates. Close to 70% of U.S. adults who responded to a recent survey said they would likely demand the top of salary ranges posted, which could inadvertently take them out of the running if their experience doesn’t match the job’s requirements, a Resume Builder editor said in a write-up on the findings.

Also, while most of the respondents supported pay transparency laws, they said they feared it would be “problematic” to know their co-workers’ salaries.

Having a compensation strategy helps organizations manage these challenges so they can get pay right, Stewart said. However, to develop an effective strategy, “you first need to know your people strategy and labor market and how you compete for talent,” she explained.

It’s also important “to establish why and how compensation matters at your organization, including whether you are trying to attract and reward the ‘best of the best’ or develop a company known for its commitment to equity, upward mobility or whatever else might be central to your company values,” Stewart added.

She said an effective compensation strategy should include reliable data sources, a strong compensation philosophy, formalized pay structures, a total rewards program and “the commitment to continuously analyze your pay data in order to make initiatives like pay equity and pay transparency central to your people strategy.”

Organizations that have a dedicated compensation function are more likely to have an effective compensation strategy, Stewart indicated. Small to mid-sized businesses struggling with their revenue goals should still prioritize compensation as a key business function, she said.

This is because when data is everywhere and transparency is expected, compensation strategy becomes indispensable to talent strategy and people management, Stewart explained. “For some SMBs, the first step may be to elevate the importance of HR holistically, and getting pay right can be a driver to doing that,” she said.

Overall, HR can help their organizations make effective compensation decisions by staying on top of best practices, being able to conduct an internal pay analysis and by keeping up with what is going on in the external market, Stewart noted.

Within a company’s overall DEI strategy, equity may be the missing link, particularly in three main areas — compensation, advancement opportunities and educational requirements — according to the 2023 Equity in Hiring Research Report from HireVue.

Only half of employees responding to a survey said they felt supported in their career growth and that people from all educational backgrounds have equitable opportunities to advance their careers.

“It takes deliberate effort to recognize the unique resources that different employees need to access the same opportunities — and ultimately thrive within the organization,” the report authors wrote.

“This could be anything from implementing policies and procedures that promote fairness to providing resources and support to underrepresented groups,” they said. “In the end, an equitable workforce will allow everyone to reach their full potential.”

In the survey of 1,500 HR professionals and 6,000 employees, employees were less likely to say their organization values diversity, that they feel a sense of belonging in their organization or that they feel their unique background and identity are valued.

Many employees noted a lack of transparency and equity in compensation. In particular, 52% of employees said there were significant differences in pay for employees with the same job title, and 47% said they’ve been discouraged from applying for a role due to the lack of information around compensation. However, 84% of HR professionals said they’re transparent about pay to both employees and candidates.

Employers can improve fair compensation practices with skills assessments and skills-based hiring, according to the report. Although skills-based hiring won’t solve compensation equity issues, it can help eliminate some subjective barriers, the report authors wrote.

Upskilling and internal mobility options may help as well, they suggested. In the survey, about 55% of employees said they feel supported in their career growth, as compared with 88% of HR professionals who said employees from all backgrounds have equitable opportunities to advance their careers in their organization.

“Many employers feel that helping employees learn new skills or advance in their careers is an open door to better jobs elsewhere. Could they leave? Sure,” the report authors wrote. “But more likely, they will feel supported to grow within the walls of their organization,” they said, which can improve productivity and the bottom line.

In addition, assessments beyond traditional degrees can help with equity in educational requirements, according to the report. In the survey, about 78% of HR leaders believe their organization provides equal opportunity for people without degrees, yet 86% said educational achievement is still an important indicator for hiring decisions and only 14% have dropped degree requirements from job listings.

Beyond that, about 40% of employees say they’ve been discriminated against in the hiring process due to lack of higher education. “If employers want to increase equity in the labor market, skills-based hiring must be a critical part of their strategy,” the report authors wrote. “It helps recruiters make better decisions and gives candidates the opportunity to demonstrate the required skills.”

Employees from different backgrounds may also experience a gap in workplace culture, which can contribute to inequity in employee experience and self-development opportunities. To improve these measures and prompt board-level action on equity goals, experts say directors need better data and tools to define clear targets, metrics, reporting structures and integration with business outcomes.

More organizations are addressing pay equity issues, according to a survey by WorldatWork and Fidelity Investments. 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.

New state and local laws requiring pay disclosure are putting pressure on employers to be transparent about earnings. Some laws, like one in California, require employers to include pay ranges in all job postings. Others, like Rhode Island’s law, 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 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.