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Each year women around the world share a day of challenge.  That day is when women's pay equalizes with the pay their male counterparts received for the previous year.  In the United States the equal pay day has been during the month of April for several years.  It is currently estimated that women in the U.S. are paid (on an average) 78 cents to each dollar paid to males for doing the same work.

Pay Fair, Play Fair: Pay Equity Offers Employers Strategic Advantages

The business case for pay equity is compelling – and offers employers an opportunity to capture an advantage when recruiting and retaining top female talent

Pay equity awareness and accountability continue to escalate, creating a unique advantage for employers seeking to find, hire, retain and advance women employees:  building trust by proving they pay fairly. 

The business case for transparent and accountable fair pay practices is compelling:  

  • Pay fairness is a proxy for overall fairness in workplace culture
  • Compensation equity and transparency correlates with stronger financial performance
  • Employees – current and potential—have access to an ever-widening array of tools to independently verify and challenge pay practices and decisions
  • Regulatory accountability continues to escalate

 

“Employers have a chance to claim a competitive advantage when they build credibility and reputation through transparent and accountable pay practices and policies,” says EPW-USA President, Trish Knight. 

The EPW’s Business Case for Pay Equity spells out the specifics. For example, few employers actually train managers to correctly enact fair pay practices and then hold them accountable for the cumulative results of their compensation decisions. Ongoing research by Wilson-Taylor Associates, Inc., a Chicago firm that manages annual projects that measure and support the advancement of women, has found that 17% of public accounting firms and 15.4% of transportation industry employers train managers in fair pay decision making and track results.  “Relevant, practical training in how to actually apply fair-pay policies to real-life decisions – and measuring pay patterns quarterly – would give employers data they need to close internal pay gaps. Meanwhile, these best practices build trust with all employees and position employers to stay ahead of emerging regulations,” says Joanne Cleaver, president of Wilson-Taylor. 

The Business Case for Pay Equity: Strategic Advantage for Recruiting and Reputation

  • Pay transparency is ascendant. Through regulations and cultural shifts, employers increasingly are required to disclose more about pay disparities.  
  • Employers have an opportunity to gain a strategic advantage by proactively adopting progressive pay equity practices and by openly cultivating equitable compensation structures and cultures. 
  • By exceeding the legally required minimum, employers take the high ground, winning a competitive advantage in recruiting. Employees are increasingly savvy on issues of pay equity, and new programs are emerging to equip women with salary negotiation skills. 
  • Straightforward, clear and accountable pay practices build corporate reputation…and reputation increasingly translates to revenue and supports market valuations. 
  • Pay transparency and fairness is a key frame for equitable corporate culture, establishing a point of reference for current and potential employees, investors, policymakers, and other stakeholders. 

Pay Equity Practices Translate to Strategic Advantage

Employers can capture a strategic advantage with progressive pay policies and practices.  Wilson-Taylor Associates, Inc. manages annual projects that measure and support the advancement of women in the accounting and transportation industries.  Pay equity practices and efficacy are captured by WTA’s proprietary methodology.  

Employers that train managers to correctly enact fair pay practices when determining compensation:

  • Public accounting firms: 17%
  • Transportation industry: 15.4%

Employers that conduct internal pay equity audits on an ‘as needed’ basis – an inconsistent practice that results in inconsistent pay practices:

  • Public Accounting Firms: 43%
  • Transportation employers: 66% 

Wilson-Taylor has found that outlining pay decision factors and equity accountability does more than neutralize employee anxiety. These practices build trust because employees are understand the process, terminology, standards and measurements designed to ensure equitable pay. 

Evidence for the Business Case for Pay Equity 

  • Internal pay inequity correlates with lower firm valuation – and corrodes culture.  Academic research indicates that companies with disproportionately highly paid executives also return less to investors.  
  • Pay practices and policies frame “perceived fairness,” says Heidi K. Gardner, a professor of organizational behavior at Harvard Business School.  It’s not enough to claim to pay for performance; organizations must ‘show their work’ to win the trust of employees and stakeholders. And, managers must be trained to make equitable compensation decisions and held accountable for both decisions and patterns of pay decisions under their control. 
  • Women MBA graduates make an average of 7% less than male peers in the same graduating class – a gap that has widened from the 2% difference in 2002.  Women are increasingly pursuing careers where the pay is higher and the gap narrower – technology, consulting and entrepreneurship – and in consumer goods, where the pay is lower and the gap narrower, according to a December 2012 analysis by Bloomberg BusinessWeek. 
  • In October, the American Association of University Women — co-sponsor of the Mount St. Vincent program — offered a report called “Graduating to a Pay Gap,” in which it determined that in their first year out of college, women working full time earned just 82 percent of what their male peers did, on average. Again, women’s choices — college major, occupation, hours at work — could account for some of this. Even so, the A.A.U.W. determined that one-third of the gap remained unexplained.
  • Employees have an ever-expanding array of tools to assemble a case for pay inequity. Numerous salary benchmarking and workplace ranking websites, from Salary.com to Glassdoor.com to the job descriptions and skill sets available through LinkedIn profiles, equip employees with evidence for salary challenges and negotiations. Employers can no longer count on employee ignorance to insulate them from pay challenges. 
  • Women are becoming better equipped to advocate for pay equity. The Wage Project, www.wageproject.org, offers salary calcuators and a negotiation toolkit, and workshops to gain negotiating skills and confidence. Launched in partnership with  AAUW, the project is expected to be offered at over 300 campuses by mid-2013. Smith College now offers negotiation workshops as part of its leadership curriculum. The Negotiation Academy for Women has just opened as part of the The Heinz School of Public Policy and Management at Carnegie Mellon. 
  • Workplace culture explicitly affects women’s negotiating postures. Women are 9% more likely to negotiate their salaries when they have explicit permission to do so. And, when it is culturally acceptable to negotiate, more women apply for those jobs to begin with, resulting in a 45% narrowing of the gender gap in the applicant pool.  But, when applicants are not sure if it is acceptable to negotiate their salaries, men are 29% more likely to press ahead anyway with negotiations.  Source: National Bureau of Economic Review, 2012,  Leibbrant and List
  • The Dodd-Frank Bill requires publicly held companies to reveal key internal pay metrics.  Regulations are expected to be finalized in the next 18 months, forcing transparency. 
  • Though the Paycheck Fairness Act did not pass in June 2012, pay equity continues to be a priority for Obama administration regulators.  Both the Equal Employment Opportunity Commission and the Office of Federal Contractor Compliance Programs have announced new strategic plans that ratchet up employer accountability for equitable pay. 
  • National employers must face new pay equity regulations in various states. For instance, New Jersey is phasing in regulations required by its own Equal Pay Act, signed into law in September 2012. 
  • Pay equity and gender discrimination suits are costly and erode business reputation. Class-action suits erode reputation and put an employer on the defensive when recruiting top talent. 
  • Pay equity is aligned with corporate social responsibility.  Families depend on women’s earnings, so pay equity minimizes the number of families that must turn to government and charitable programs. In the long run, pay inequities undermine women’s lifelong economic self-sufficiency. According to a new study by the American Association of University Women, the average 7 percent pay gap saps $1.2 million from  the lifelong earnings of a woman college graduate.  Pay equity is one solution to the entitlement revenue gap that threatens to stifle economic growth.