The possible consequences for failing to comply with the Equal Pay Act and related state and local legislation are becoming more and more costly.
If you are like most employers, you are behind in the effort to achieve pay equity within your organization. Many employers are starting to recognize that the movement to obtain equal pay for all workers is on track to become as recognized in the U.S. as the Time’s Up and #MeToo movements. Some larger companies are trying to take positive steps forward. However, for most employers, they are just trying to figure out their next moves.
For those employers who want to get ahead of the equal pay curve, now is the time to be bold, not timid. Here are three steps that you should be taking to ensure that your organization is being proactive, along with avoiding costly fines and some seriously bad PR.
Conduct a Pay Equity Analysis
Many companies have been hesitant to do this for fear of finding a problem and having that information used against them in lawsuits filed by disgruntled employees. Fight your fear and get this done for your organization. Regulatory agencies, such as the OFCCP and the Massachusetts Attorney General’s office, are encouraging employers to conduct their own self-audits to identify where they may be lacking in providing equal pay to their workers. This is viewed by these agencies as a proactive step in addressing equal pay issues.
Most employers are not equipped to conduct this analysis on their own, even if they have an experienced statistician on staff. Most employers need to seriously consider engaging a company experienced in pay data and analytics to conduct an audit of their current compensation structure. The analysis should tell you where your company’s exposure is with respect to lawsuits and federal or state penalties. The pay equity analysis should also tell you how to address problem areas, without creating more liability.
It is also important to remember that employers have four options they can claim under the Equal Pay Act to justify apparent pay disparities:
- A seniority-based pay system based on an employee’s tenure with an employer
- A merit-based pay system based on employee performance set by criteria established by the employer
- A pay system which measures earning by quantity or quality of production
- A pay differential based on a factor other than sex (In some states, like California, it is increasingly harder to rely on this defense.)
Overall, a comprehensive pay equity analysis is the best place to start to understand what your company is doing right, and where it can improve, before regulatory investigations and employee lawsuits require you to provide this information.
Remain Consistent When Making Pay Adjustments
If you find you need to make pay adjustments because unexplainable pay disparities exist between different groups, such as men and women, be consistent in the way you apply these pay adjustments and document the reasons for why you are making them. The Equal Pay Act does state, however, that employees cannot receive a pay cut in order to make up for a disparity in pay with other groups.
Devise a Plan for Communicating Pay Adjustments Across your Organization
When strategizing a plan for correcting pay disparities within your organization, appropriate internal and external parties should be notified. There shouldn’t be any surprises for stakeholders, executives or employees. Also consider how pay adjustments will be communicated to your workforce. Give careful consideration for how the message will be delivered to affected employees.
Pay equity affects everyone, both in private companies and in government. Many organizations, such as Starbucks, Apple, Salesforce, Intel, and Adobe are working to achieve equal pay. Adobe’s Executive Vice President Donna Morris stated in an interview with Fortune, “If you fundamentally believe that people are the most important asset to your company, why wouldn’t you seek to establish practices and programs, and have a principal that you should compensate fairly based on their contribution?”
Make sure your organization is a step ahead in the effort to provide equal pay for all employees. Be a leader in this effort and reap the rewards of a more enthusiastic workforce, positive PR and avoiding costly regulatory penalties. This is one effort where you don’t want to be standing on the sidelines for long.