Women are receiving more pay raises than men, but men are earning larger raises, according to a study.
Over the first three quarters of 2012, 7.4 per cent of women received raises, compared to 6.2 per cent of men. But looking at pay raises of five per cent or more, 60 per cent went to men and 38 per cent to women, found the Pay Raise Index by TribeHR which looked at data from 20,000 global employees, largely from the United States and Canada.
“On the one hand, that’s a great sign that as businesses we’ve made some great strides to try and alleviate a lot of that pay gap and wage gap that exists. But, at the same time, it was a little dismaying to realize there is still such a discrepancy, a ‘raise gap,’ per se,” said Joseph Fung, CEO of TribeHR, an HR software company based in Waterloo, Ont.
There could be many factors influencing this discrepancy, including the fact women may be less likely to negotiate pay raises. A recent study from the University of Chicago found women are more likely to negotiate a raise if a job posting explicitly indicates the salary is negotiable, but they are unlikely to do so otherwise.
“Men do prefer an environment where salary is more fluid… but women are going to find themselves more comfortable in an environment where there is more of an administrative pay system, where there is a pay scale and they know what to expect,” said Nicole Fortin, a professor of economics at the University of British Columbia in Vancouver and research fellow at the Canadian Institute for Advanced Research.
“But men are not going to take (the pay scale) as a given, they will try to go over it and negotiate nevertheless.”
However, there is conflicting research in this area and, in many cases, women do negotiate their raises, said John Platz, president of HR consulting firm and HR service provider Platz & Associates in Colborne, Ont.
“Certainly in the management ranks, I don’t think I’ve seen too many shrinking violets as far as women are concerned,” he said. “If they believe they have the credentials and performance, they do not hesitate to request an adjustment.”
But women in junior positions might be more reluctant to negotiate, especially if they are just starting out in their careers, said Platz.
Another explanation for the discrepancy may be bias among employers, said Fortin. An employer wants to give the minimum raise but, at the same time, avoid losing a valuable employee, so it will consider whether or not an employee is likely to jump ship if she doesn’t receive a raise, she said.
Gender differences seen in preferences
And studies have shown money is more important to men while flex-time is more important to women, said Fortin.
“This is the part we don’t see. At the negotiating table, we don’t see the importance given to these two factors — one would have to factor that in to raise the gender discrimination flag,” she said. “Maybe the woman wanted more flex-time and the guy wanted the pay but in the end, if people come and look at my data, I have to be careful.”
The Pay Raise Index also found that men are three times more likely to earn a salary increase in excess of 25 per cent. Some of these raises are likely associated with promotions, and women and men respond differently to these types of opportunities, said Fortin.
“More often than men, women have a double shift — they work at their job but they also work quite a bit at home,” she said. “They’re already working overtime so, for them, a promotion that would call for more responsibility and more time is a bit more difficult.”
Reducing the ‘raise gap’
There are many ways employers can attempt to reduce the “raise gap” at their organizations. For starters, while it’s easy for companies to look at the breakdown of raises department by department, they need to start looking at the data in other ways, said Fung.
“We’ll often not think to look at it from a perspective of seniority or by gender and this gives us a very clear signal to take a pause and double-check and just make sure we’re not inadvertently adopting discriminatory practices,” he said. “It’s something we need to add to our own checks and balances internally.”
Additionally, employers need to consider where and when very large raises are being given out and what criteria are being considered, said Fung.
“If those can be so heavily influenced by gender, perhaps it’s the seniority of the role or the characteristics of the individual there, we need to make sure we mitigate around that.”
Pay increases should not be dominated by social factors, they should be purely on a performance basis, said Fung. For example, if a company has a male-dominated sales force that is actively seeking pay increases due to its competitive nature, it could lead to more pay increases in that department compared to others, and cause a discrepancy, he said.
Employers should also make sure they have a solid pay-for-performance program in place, to ensure merit pay increases are given to those employees who are performing well — irrespective of gender, said Platz.
Proper training a must
Training managers to give equal treatment to men and women is “probably the most important thing,” said Fortin.
Managers should be instructed on some of the best practices around avoiding accidental discrimination in pay raises, said Fung.
“HR is there not necessarily to motivate or punish but to facilitate, to help managers be good managers,” he said. “It’s not so much about ensuring your managers allocate pay accordingly but ensuring managers are informed and educated so they can make the right decisions.”
All managers should also receive training on the minimum standards of pay equity across Canada, whether or not they fall under pay equity legislation in Quebec, Ontario or federally, said Platz.
If an employer is not treating men and women equally, it could face legal consequences, said Fortin.
“If I was a big firm, I would certainly have my HR office review raises and all that to make me impervious to possible lawsuits,” she said.
It’s also important for employers to offer fair raises to women because a large portion of the workforce is female and employers need to retain these workers, said Fortin.
“There used to be a time where women would swallow the lower pay raise and all of that but, as things become more open and people are more aware of salaries, it could have an impact on morale, of leaving the firm or suing the firm. So these are all very dire consequences,” she said. “And these are ample reasons to treat women well.”
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