It’s almost the second quarter of 2022. Many employers, large and small, are currently facing a tight labor market, unprecedented turnover, and workforce disruption due to the COVID-19 pandemic. To help combat these challenges, employers may find that focusing on better pay equity practices will not only ensure compliance—but also assist with diversity and inclusion efforts, recruiting talent, and retaining valued employees.
Pay Equity Today
In 1979, the average woman earned 62 cents for every dollar earned by their male counterpart. Forty years later, in 2019, the gender pay gap decreased significantly, with the average woman making 79 cents for every dollar made by a typical man. However, gains in closing the pay gap stalled in 2020 and 2021. According to Equal Pay Today, in 2021, the average woman earned 83 cents for every dollar earned by the average man. That number is even more pronounced for black women at 63 cents for every dollar compared to white men.
Pay equity is a hot topic today. March 8 was International Women’s Day, and March 15 was Equal Pay Day. The U.S. Women’s Soccer Team recently settled its 2016 lawsuit against the U.S. Soccer Federation for equal pay, resulting in $24 million owed in back wages. With such a tight labor market forcing employers to do everything they can to attract employees, women who return to the workforce may have more job choices and more leverage in pay negotiations.
The Gender Pay Gap
The COVID-19 pandemic and burnout disproportionately affected women and resulted in a 33-year low for women in the workforce. Millions of women left their jobs, at higher rates than men, due to significant layoffs in women-dominated professions and increased childcare responsibilities. Women lost out on opportunities to gain skills, earn pay raises, and seek promotions.
The Equal Pay Act of 1963 is a federal law requiring equal pay for equal work. Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA) are other federal laws that prohibit compensating employees differently based on their protected status, such as gender. The Washington Equal Pay and Opportunities Act of 2018 mandates equal compensation and career opportunities for similarly employed employees regardless of gender. Oregon’s Equal Pay Act of 2018 requires equal pay for equal work with comparable knowledge, skill, effort, responsibility, and working conditions. Currently, 42 states have pay equity laws.
Transparency is the latest trend in pay equity. On January 15, 2022, New York City employers joined nine other jurisdictions requiring pay scale publication with job postings. Washington’s Governor Jay Inslee is expected to amend the state’s pay equity law, requiring that employers disclose the wage scale or salary range in each job posting and describe the benefits and other compensation offered to the hired applicant. This amendment applies to employers with 15 or more employees and takes effect on January 1, 2023.
Pay Equity and a Diverse and Inclusive Workplace Go Hand-in-Hand
Pay equity and Diversity, Equity, and Inclusion (DEI) are not siloed employer strategies. Pay inequities across gender and racial lines are examples of institutionalized racism and sexism at work. Employers committed to compliant pay equity practices will attract women to their workforce and simultaneously promote meaningful DEI.
Geographic Location and Pay Equity
The COVID-19 pandemic accelerated the remote work trend, and for some employers, this now means allowing employees to work in other states. Pay equity laws, including in Washington and Oregon, allow employers to pay different pay for equal work based on regional differences in compensation. Common data used to establish compensation on geographic location consists of the cost of living and/or cost of labor. In May 2020, Facebook announced plans for 50% of its employees to work remotely and that the company would adjust their pay rate based on where they live. There are pros and cons to adopting location-based pay. Still, employers should be aware that adopting location-based pay within a compensation plan adds another level of complexity to pay equity and fairness.
Recommended Action for Employers
- Establish a compensation philosophy that bases compensation decisions on objective criteria such as years of experience, education, special skills, and location.
- Conduct a pay equity audit and consider doing so under attorney-client privilege. This audit should include changes in compensation due to the tight labor market; have inequities been created by paying higher salaries to fill high-priority positions?
- Consider transparency on salary ranges even if not legally required. Pay information is available on the internet, and employees can access it. Get ahead of misinformation by adopting a pay transparency philosophy.
Did You Know?
Members have access to the Pay Equity Keynote in mozzo, which provides more information on the laws specific to each state.
Or, if you’re considering addressing pay equity in your organization by conducting an audit or developing a formal compensation plan, Archbright can help. Our legal team can guide you in a pay equity audit under attorney-client privilege, and a senior compensation consultant can help create a compensation philosophy and strategy tailored to your organization.
Contact us at email@example.com to get started.