Proven Process to Ensure Pay Equity
- Are you prepared to answer difficult questions from employees on your team related to their pay?
- Do you honestly feel all employees who work at your organization are being paid competitively?
If the answer is “No” to either of the above questions, proactive steps need to be taken to ensure that you are not caught off-guard in a legal challenge or discriminatory claim. Employees want to feel they are being paid fairly for their work compared to market rates. Also, your organization needs to audit internal pay equity so there is no suspicion of preferential treatment. We may think that employees don’t talk about their pay with co-workers, however, it happens.
When one of your staff members comes to you and asks: “Why is John paid a higher salary than me?”, you need to be prepared with a response. A Human Resources compensation professional can provide you with information needed to answer those difficult questions. There could be a variety of reason’s why John is being paid higher. Possibly, he has worked in the industry for many, many years. This can explain some differential in pay. However, this reason may not be enough to justify a huge disparity if the work being performed is the same and the person bringing up the disparity is a stellar performer. Each situation of discrepancy in pay needs to be assessed individually. Without conducting a formal audit using the services of an experienced professional you may not get the answers and responses you need to be conclusive in your response to your team. The documentation provided in a thorough audit should support identified disparate pay issues. If there are impacted areas of disparate pay, a plan of action needs to be prepared in order to document you are making a good faith resolution to existing problems. If no disparity is present in your organization, you then have the audit documentation to confirm that situation as well.
The method to determine differentials in pay can be determined in a variety of ways. Most organizations look at specific jobs where the employees are doing exactly the same thing in order to compare base pay to external market and internal rates. There is a risk to assessing a broad group of jobs for comparison of pay because specific requirements may warrant higher compensation levels. Definitely, a review of pay for male versus female and people of color versus white employees who are doing the exact same job needs to be conducted. This should be a consistent process across your organization. Identification of outliers to the median rate of pay is necessary. Unless you can identify specific reasons for disparate pay, recommendation for adjustments are necessary. An external audit and point of view provides an objective analysis and recommendation before a governmental audit / claim is presented. The objective analysis will review the employees and pay without consideration for personality or company legacy factors.
Communication to employees of an equity audit can add a significant engagement. Most employees want to know that they are being paid fairly. Also, most employees may feel that their manager has not gone through the exercise to compare their salary to market rates of pay nor to the other members on the team. The more your employees know about how their own pay is determined, the more they are engaged to perform at a higher level – it’s a fact!
Why is it important to do an audit?
Any of your employees has the ability to file a discriminatory claim if they feel they are being paid unfairly compared to their peers within your company. You, as the manager or senior leader in the organization, are responsible to be prepared and address improper situations before they become an issue. If a discriminatory claim is filed with the EEOC (US Equal Employment Opportunity Commission*), all employer information related to employees in this particular job or group of jobs becomes part of governmental review. Typical documents requested will include job descriptions, performance reviews, history of merit increases for the named employee and related peers for starters. Additional documentation will be requested as the investigation continues. Damages that an employer may incur as part of this process are:
- Retro back pay to the impacted individual for up to three years
- Fines and interest related to the back-pay amount
- Distrust from other employees on how they are being paid, the risk of additional discriminatory claims to follow
- Public embarrassment if the information is exposed to media
Bottom line, it is imperative for you and your company to be pro-active in the salary review process. If you care to discuss further, feel free to contact Nicole Schmidt, Reward Strategies LLC at rewardstrategies@yahoo.net or check out their website www.hrrewardstrategies.net
*The Equal Employment Opportunity Commission (EEOC) was created by the Civil Rights Act of 1964 to enforce federal discrimination laws. The EEOC is often the first place an employee turns for legal recourse. An employee takes the initial step towards bringing a discrimination lawsuit against an employer by filing a charge with the EEOC or for state claims with the appropriate state agency.
