Are the Equal Pay Initiatives What They Seem to Be? - American Society of Employers - Anthony Kaylin

Are the Equal Pay Initiatives What They Seem to Be?

equal pay

When the Equal Pay Act (EPA) was passed in 1963, it made it illegal for employers to pay women lower wages than men for equal work on jobs requiring the same skill, effort, and responsibility.  Over the years, these cases were far and few between and difficult to win.  As a result, the previous administration as well as a growing number of blue (Democratic controlled) states have passed more rigorous pay discrimination laws, pushing for pay transparency as a solution for the wage gap crisis.

But the logic of pay transparency is not a focus of equal pay but of traditional pay grade structure which unions favor.  In fact, if these states had their way, all employers would employ a stable pay structure, similar to what they do for their state workers, where everyone knows everyone’s pay because the scale is published and movement is all but guaranteed up the steps in each grade. 

Pay for performance would go to the wayside, making it difficult to motivate workers to improve productivity if they know that even being mediocre guarantees a raise and movement up the ladder.  In fact, the pay transparency movement is more about government pushing the unionizing of employers than it concerns itself with equal pay.  Should employers really worry about unions today?  Not too much – as unions in the private workforce have decreased dramatically.  But if these states can push union requirements onto private employers, unions eventually win.

There are two major areas where pay inequality comes into play directly: starting salaries and promotions.  With starting salaries, because of the talent shortage, managers are pushing HR to hire at higher salaries without comparing to current incumbents and qualifications.  Thus, there is a growing trend of salary compression.  When current employees find out, they start looking for a new job.  Two direct problems are created leading to salary budget issues.

The second area where pay inequality hits is promotions.  Generally, most employers have promotional guidelines with a jump of salary from one level to the next plus merit.  However, the jump of salary may not match even the lowest in title, and salary compression comes into play.  Further, there may be no written plan to get the promoted employee to the level equal to the current title equivalent; therefore, perpetuating the disparity.

A third issue that has been raised recently is the impact of performance reviews.  Most are not done correctly, are subjective in nature, and impact either merit or variable pay.  The government has raised concerns of whether performance reviews should be validated as assessment instruments, like tests, given their impact on the merit and variable pay evaluation process.

Further, the failure to pay appropriately impacts benefits as well.  Those hit by salary compression will lose out in monies in 401K plans and social security calculations.  Further, the more appropriate way to reward high performers, incentive or variable pay, will also be less for this population.

In addition, family leave (maternity and now paternity leaves) has been identified as a major cause of disparities.  If an employee takes any lengthy time off for maternity leave, she is penalized for that time off.  No raises or promotions or otherwise increases in salary (except for normal merit equalization upon return assuming an employer does that).  

Given the prevalence of leave laws from state to local jurisdictions, cost of daycare, and the need for flexibility, employers need to rethink work time and place, productivity, career pathing, and coaching and mentoring.  All these things would allow a woman who left on maternity leave to come back without loss of seniority, benefits, and raises.  For example, there is no reason a woman who was working full-time could not come back in a part-time basis and still be on the promotion track.

In the long-run, HR has to take the lead and reconfigure traditional approaches to careers and pay for performance.  These ideas have been long around and discussed, but technology today has disrupted the traditional mindset of what a career should look like.  It requires a lot of employee training, especially leaders in the organization.  In the end, HR should not be sidetracked by equal pay laws and transparency initiatives, but instead use these as levers to push management to better pricing controls and decisions to reduce disparities. 

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