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Pay Equity: What It Is And Why It’s Important
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Workforce Management

Pay Equity: What It Is And Why It’s Important

One-Minute Takeaway

  • Pay equity means equal pay for equal work.
  • Historically, workers with certain identities (like women, BIPOC, and LGBTQIA+ people) have been paid less than they deserve.
  • Pay equity best practices keep you compliant and improve company culture.

Simply put, pay equity means equal pay for equal work. Regardless of their gender, race, or other demographics, employees with the same duties should receive comparable compensation.

Pay equity isn’t just about ethics; it’s also a compliance issue. Since the 1960s, every U.S. state has strengthened its pay equity laws – some more than others. And these laws continue to change. It’s important for HR leaders to keep up with those changes to stay compliant.

What Laws Govern Pay Equity?

Both federal and state laws govern pay equity. Federally, the Equal Pay Act of 1963 require employers to pay men and women equally. Title VII, of the 1964 Civil Rights Act, also prevents “discrimination against employees based on race, color, religion, sex, or national origin” (U.S.  Equal Employment Opportunity Commission).

These laws are an important baseline, but they didn’t just erase inequality. For one thing, the Equal Pay Act only applies to workers in the same workplace (University of Minnesota).. If a company has biased hiring practices, it doesn’t matter that they would pay people the same amount for equal work. This problem is so widespread, some HR teams now use AI-based recruiting software to cut down on implicit bias.

Regulations vary widely on the state level. In California, for example, employers can’t discriminate based on actual or perceived race, religion, ancestry, disability, marital status, gender identity, gender expression, military or veteran status, and several other criteria.

In Missouri, the list of restrictions is much shorter, only including “race, color, religion, national origin, sex, ancestry, age (40 to 69), or disability” (The Pay Equity Project).

Causes of Pay Inequity

Pay inequity is a systemic problem. In some cases, employers just offer lower wages to certain candidates because “it’s just how they’ve always done it.” But it’s important to recognize why that’s true:

  • Historically, people from marginalized groups (like women, BIPOC, and LGBTQIA+ people) have had less access to education and financial resources. That can make it easier for employers to justify offering them lower wages.
  • For younger workers of these identities, it’s hard to find mentors who share their experience and can offer relevant career advice.
  • People who experience oppression – especially BIPOC people – have a harder time getting hired (Northwestern University). By the time they do accept a job, they might be more willing to take a low-ball offer.
  • Despite some state’s pay transparency laws, people just don’t talk about money (CNBC). A lot of people don’t know what a fair wage would be, even for their own work. As a result, they don’t negotiate with new employers or ask for what they’re worth.

Few employers, if any, set out to offer unfair wages. But because of these factors, it can be hard to recognize inequities. That’s why HR leaders need the right systems in place to interrupt implicit bias.

How to Implement Pay Equity

There are several ways HR can achieve pay equity. Some of these are legal requirements that keep your company compliant. Others are just best practices that improve company culture, engagement, and retention.

  1. Proper Reporting: By federal law, certain employers have to file EEO-1 reports with employee demographics. These reports help the government identify discrimination. EEO-1 deadlines are a little different every year, so HR leaders need to stay informed about the reporting process. In the meantime, make sure you’re tracking and recording employee information well in advance.
  2. Pay Transparency: Some state laws require companies to report how much they pay employees. Whether or not that’s true in your area, it could still help you achieve pay equity. Opening the lines of communication can also build trust with your team.
  3. Regular Salary Reviews: Conduct regular, company-wide salary reviews to analyze compensation data and identify disparities. Partnering with third-party experts can make these reviews even more objective.
  4. Implicit Bias Training: Implicit biases are opinions we don’t even know we have. With training, you and your team can learn to notice and interrupt your own assumptions.

These activities are a great place to start, but there’s always more to learn. Consider how pay equity works in your specific area and industry. You can also talk to a legal expert to set priorities for your company.

Tools to Achieve Pay Equity

Creating a fair, positive corporate culture is a lot of work. So is staying compliant. Both of those monumental tasks fall to HR. If you want to achieve them, you’re going to need the right tools. That’s why Paycor offers a robust suite of HR software, purpose-built for leaders. AI-powered recruiting software cuts down on implicit bias in hiring, and our powerful payroll tools let you track every employee’s wages. Paycor Analytics puts it all together, giving you valuable insights about the metrics and trends that matter most.

Connect with us to learn how Paycor can help you institute fair hiring practices, empowering everyone on your team to grow.

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