How to Close the Pay Gap According to a CHRO and an HR Consultant

Praisidio, Inc
How to Close the Pay Gap According to a CHRO and an HR Consultant

It’s equal Pay Day today, but alarmingly, little progress has been made in eliminating the gender pay gap since the 1990s. Women now make 83 cents on the dollar compared to men, and women of color make only 63 cents on the dollar compared to white men. According to the UN, it’s going to take 257 years to close the global pay gap.

Our current strategies for eliminating pay inequality are clearly not working. While headway was made between the creation of The Equal Pay Act in 1963 and the late 1990s, the raw pay gap has largely stagnated for 20 years. We are desperately in need of new approaches that meaningfully and systematically reduce the gap.

We spoke with Dr. Liz Kofman-Burns of DEIB consultancy, Peoplism, and Shari Benson, CHRO at Cal Poly, to understand the impacts of pay inequality on organizations and to learn what tangible actions HR leaders can take to better tackle pay inequality.

Eliminating pay inequality begins with pay transparency

Knowing where to start with pay inequality is arguably the most important and confusing step. Pay inequality is entrenched for many reasons including race, underrepresentation in high-paying roles, overrepresentation in underpaid roles, and disproportionate caregiving responsibilities.

What can companies do right now to overcome these drivers of unequal pay? According to Kofman-Burns, pay equity begins with pay transparency:

"Start by being transparent about pay. Pay transparency alone isn't going to close the pay gap, but there is evidence to suggest that it can decrease pay inequity. Typically, it's HR and finance teams who have access to pay band information, while only 9% of employees know the pay band for the job level directly above theirs. When employees can easily know what other people are being paid for a role, they are more likely to be paid fairly. From an equity standpoint, laws that mandate pay transparency are a really positive thing.”

Like Kofman-Burns, Benson sees transparency as being of critical importance, but goes one step further and identifies data as the practical first step organizations need to take in solving pay inequality and maintaining equality going forward:

“Real-time data is very critical to ensure that an organization is not only achieving pay equity but also maintaining equity. It’s not just a one-stop exercise, it’s a continual process.”

Fair pay impacts productivity

Beyond the innate value of fair wages, pay equity can also have knock-on benefits for organizations. According to Kofman-Burns, the benefits of pay transparency also include an increase in productivity:

“Pay transparency makes blatant discrimination and unconscious bias harder. Not only that, but pay transparency increases productivity across the board because employees can see how the next level translates financially, so it's in your best interest as a company to make pay more transparent."

Career growth is also tied to pay equality

Something we see often at Praisidio is that pay gaps are a risk to both employee turnover and employee growth. For Kofman-Burns, this comes down to employees needing to understand their path to income advancement:

"If you survey employees and ask ‘do you feel like you’re compensated fairly?’, a lot of them are going to say 'no', because they don’t see a path to advancing to higher paying roles, and they don’t see people like them being hired for those roles. It’s really critical to not just look at pay equity within roles, but also who you’re hiring and promoting at different levels.”

Make pay equity your priority in 2023

With clear benefits to both employees and employers, there is no reason not to prioritize pay equality in your organization this year. If we all pull together, 2023 could be the first year in two decades where we make a meaningful dent in wage equality. If we don’t try, not only do women and women of color risk slipping further behind, but our organizations risk losing out on the true potential of half the talent pool.

About those interviewed

Dr. Liz Kofman-Burns is a Ph.D. Sociologist and co-founder of DEIB consultancy, Peoplism.

Shari Benson, SHRM-SCP, SPHR, CPSPTM, is CHRO, at Cal Poly.

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