Keith and Maura are work colleagues in similar roles. Keith negotiated confidently for his salary, citing his prior earnings as a starting point. Because Maura had a 1-year career break on her resume, the company offered her 8% less than it originally offered Keith. Afraid that her offer might be rescinded if she pushed too hard, Maura was not as assertive as Keith and agreed to the lower salary.
This is one example of the gender pay gap — a persistent and pervasive problem that affects women of all backgrounds, ages, and levels of education. On average, women workers make 83 cents for every dollar a man makes. But as they rise in the ranks, the pay gap increases. Female managers and supervisors earn 83 cents, directors 82 cents, and executives make 72 cents on the dollar. Women may enter the workplace at a lower wage, and then work disruptions like maternity and caregiving leave play a role.
The pay gap is not only unjust — it’s also bad for the economy, society, and a company’s performance. It reduces women’s income, wealth, and economic security, which in turn affects their health and well-being. It also limits women’s opportunities and potential, hampering their contribution to a company’s innovation and productivity. It’s important to note that diverse teams have been proven to make better decisions and to boost the bottom line — so it’s in an employer’s best interest to take action.
According to the World Economic Forum, it will take 169 years to close the global gender pay gap at the current rate of progress. But fortunately there are concrete steps corporate leaders can take now to avoid this disparity while also lowering the company’s legal risk. Let’s take a look.
Set new employees’ starting pay without regard to their prior pay. One of the factors that contributes to the gender pay gap is the history of discrimination and undervaluation of women’s work in the labor market. Women often start their careers with lower salaries than men, and this gap widens over time as they face fewer raises, bonuses, and promotions. To break this cycle, base your new hires’ pay on the value of the job, the skills and qualifications required, and the market rate, rather than on their previous or expected salary. And avoid asking candidates about their salary history or expectations, since this can lead to anchoring bias and perpetuate the problem.
Adjust your existing employees’ pay to match new employees’ pay for the same job. Setting fair and transparent pay for new employees is just part of the equation. You also need to address any existing inequities among your current staff. Regularly review and update your compensation practices to ensure all employees are paid equitably for the same or comparable work, and that there are no unjustified or discriminatory gaps based on gender or other factors. Communicate openly with your employees about how their pay is determined and how they can advance in their careers.
Establish an objective compensation policy. Lack of clear and consistent criteria for setting and adjusting pay can result in arbitrary and subjective decisions that favor some employees over others. So don’t leave it to the hiring manager’s discretion. Develop and implement a policy that defines the roles, responsibilities, and expectations for each job, the methods and sources for determining the level and pay range, and the procedures and criteria for granting raises, bonuses, and incentives. Train and monitor your hiring managers to ensure that they follow the policy and apply it fairly and consistently to all employees.
Reject affinity bias. Affinity bias is the common tendency to like, trust, and favor people who are similar to ourselves. It creates a homogenous culture in the workplace, where men are more likely to hire, mentor, and promote other men, and women are more likely to face barriers, challenges, and isolation. To overcome this, foster a diverse and inclusive culture in your organization, where people of all genders and backgrounds are valued, respected, and supported. Encourage and facilitate cross-gender collaboration, networking, and mentoring, and ensure that women have equal access to opportunities.
Make sure assignments and promotions are offered equitably. The type and quality of work assigned also contributes to the gender pay gap. Women often face a double bind: they are either assigned less challenging and visible tasks that limit their exposure and advancement, or they are assigned more demanding and stressful tasks that increase their workload and burnout. They are also less likely to receive credit and recognition for their contributions, and more likely to face backlash and criticism for their achievements. So make sure your employees are assigned and evaluated based on their skills, performance, and potential, rather than their gender or other demographics. Provide constructive feedback and recognition, and reward them for their results and impact.
Offer the same parental leave and caregiving benefits to all employees. Unequal distribution of unpaid work and care responsibilities between men and women is another contributing factor. Women often bear the primary or sole responsibility for taking care of children, elderly, or sick relatives, which affects their availability and flexibility at work. They also face more workplace bias for juggling their work and family roles, and penalties for taking time off or reducing their hours. To address this, provide equal and adequate parental leave and caregiving benefits to all your employees, regardless of their gender or marital status. Also create a supportive and flexible work environment, so your employees can meet both their personal and professional needs. Just as importantly, encourage and enable both women and men to share the work and care responsibilities, and to take full advantage of the benefits and flexibility available to them.
Conduct an annual pay equity audit and analysis. One of the most important steps toward closing the gender pay gap in your organization is to measure and monitor it regularly. Regularly collect and compare employee salary data and identify and explain any disparities based on gender or other factors. Also measure the impact and effectiveness of your policies and practices on pay equity, and address any weaknesses. Then communicate your results and the actions you have taken or will take to close the gaps.
Make your pay scale public. Another way to promote pay equity in your organization is to make your pay scale public and transparent. This means that you disclose and share salaries and pay-setting policies with your internal and external stakeholders. This can help you increase the trust and confidence of your employees, customers, investors, and partners, and demonstrate your commitment to pay equity. It can also help you attract and retain more diverse and talented employees, and enhance your reputation and competitiveness in the market.
Allow employees to talk about their wages. A common barrier to pay equity is the lack of information and awareness among employees about their own and others’ pay. Many employees do not know how much they are paid compared to their peers or counterparts, or whether they are paid fairly and equally for their work. Many employers also discourage or prohibit employees from discussing or disclosing their wages, either explicitly or implicitly, which creates a culture of secrecy and silence around pay. To address this, allow and encourage your employees to talk about their wages, and to seek and share information and feedback on their pay. You should also educate your employees about their rights and responsibilities regarding pay equity, and the resources and support systems available to them.
Encourage ERGs and other affinity groups to help determine pay policy. Employee Resource Groups (ERGs) and other affinity groups are voluntary and employee-led organizations that bring together workers who share a common identity, such as gender, race, disability, or LGBTQ+. These groups can play a vital role in advancing pay equity by providing a platform and voice for your employees to express their needs, concerns, and suggestions regarding pay and other issues. They can help you design and implement your pay policies and practices by providing input, feedback, and recommendations based on their perspectives and experiences. And they can help you communicate and engage with their members around these issues.
Realize that pay equity is not only about gender parity. Finally, recognize and acknowledge that pay equity is not only about gender parity, but also about intersectionality and inclusion. For some people, different forms of discrimination, such as sexism, racism, ableism, and homophobia, can overlap and interact to create unique and compounded disadvantages, so it’s important to make sure that all people are valued, respected, and supported in the workplace, regardless of their identity, background, or circumstance. To achieve pay equity, do address the gender pay gap — but also the racial pay gap, the disability pay gap, the LGBTQ+ pay gap, and any others that affect your employees. Handle all of it together, ensuring that your pay policies and practices are inclusive and responsive to your employees’ diverse and specific needs.
