Best practices for gender pay equity

Gender equity is an issue of incredible focus and debate for employers and lawmakers, particularly when it comes to compensation. Many companies have made gender pay equity a priority, but it’s important to realize and accept that gender equity is about more than equal pay for equal work.

Take Uber’s reported plans to increase the pay of more than 12,000 employees, and guarantee pay equity between genders and diverse groups. Uber’s plan will involve increasing non-tech employee wages to the median, while raising the median for tech workers and providing a salary boost to those meeting this new number.

The road to remedying the gender pay gap is not without its complications. Yes, at a given job and level of performance, education and experience, people should be given the same pay, but how to get there without being counterproductive can be tricky.

Before tackling pay equity, business leaders need to consider the potential challenges that are inherent at most organizations and difficult to overcome quickly:

Taking into account performance and experience: If men and women receive the same pay for a given position, it actually creates more inequity in the lack of performance differentiation and recognition of experience, and also takes away the incentive to stay in the role to increase earning potential.

Eliminating management bias: If each individual receives a designed pay scale over time for their role and is progressed along the scale with seniority and performance, the pay progression needs to be normalized across units or arbitrated to eliminate line management biases (this is how most non-unionized organizations operate, and yet pay inequity still exists).

Eliminating subjectivity: If men and women in a given job category are divided into cohorts by performance, and everyone in the cohort receives the same pay, the outcomes may be too subjective; with performance management, equity across units managed by different people (with different views of what a top performer looks like) is questionable.

As these scenarios illustrate, even as pay becomes normalized between genders, other problems arise, leading to inequity again down the road. This isn’t to say gender pay disparity is a never-ending cycle. Rather, the large pay gap between genders also exists because of norms and stereotypes ingrained in society.

For example, an underrepresentation of women in manager positions — particularly during the key childcare years — directly drives the overall gender wage gap, according to the 2016 report Visier Insights: Gender Equity that analyzed an aggregated database of more than 160,000 employees at over 30 large enterprises in the United States. This manager divide directly drives the widening of the average pay gap for men and women.

However, gender pay inequity isn’t just a compensation issue. It is also a product of these issues:

Occupational choices: Occupational choices do have an impact on the average earnings of women compared to men, with women often more likely to be employed in occupations that have a lower earning potential than others. For instance, in 2014, women made up 81 per cent of elementary and middle school teachers, 90 per cent of registered nurses, and 87 per cent of paralegals and legal assistants; compared to 20 per cent of software developers, 36.7 per cent of physicians and surgeons, and 33 per cent of lawyers, according to the United States Bureau of Labor Statistics.

Unfair assumptions: Simply encouraging women or — perhaps more importantly — girls to pursue traditionally male-dominated professions or positions alone is not the answer. Women still earn less than their male counterparts. And women who take up predominantly male occupations are still less likely to be promoted to manager positions, which have a higher wage potential. Research has shown that prejudices against women with regards to childbearing and caregiving responsibilities leads managers to hold them back from promotions, leading to less pay over time.

Underplayed performance: There is an outdated notion that when women assert themselves, they are considered difficult to work with, which causes female workers to tone down any self-promotion. In contrast, men generally have no such inhibitions and call out their accomplishments.

Given all these challenges, employers like Uber have a lot to solve before they can reasonably guarantee pay equity between female and male workers. A guarantee needs to be demonstrably delivered and, given these issues, proving equity becomes a management nightmare.

So, what can employers do to address gender pay?

Executives can begin by gaining a high-level understanding of the state of gender equity at their organizations. Some simple metrics to start with include metrics such as “female ratio” (looking at the percentage of total head count that are female) by department, role or location, and in hiring pipelines.

Next, executives should dig deeper to find out if pay and performance ratings are unbiased for men and women. Compa-ratio is a classic compensation calculation that indicates how close a person’s base pay is to the pay level midpoint for the role they perform. The best practice for ensuring pay equity is a well-designed, individual compensation plan that takes into consideration job difficulty, education and training requirements, experience and performance.

If women have a lower than average compa-ratio, then it is likely pay decisions are not being made equitably. Similarly, understanding the proportion of employees who receive each level of performance rating, and then comparing this to the proportion of each rating for female employees, will uncover if performance ratings are handed out in an unbiased manner.

To address the manager divide and increase the representation of women in manager roles, companies need to measure not only promotions by gender, but also the nature of the promotions — by role, department or location — and analyze if the percentage of women promoted to or holding manager positions is lower than the percentage of men promoted to or holding manager positions.

Lastly, executives need to take steps to correct gender inequity, starting with their processes for hiring and promotion. One idea is to implement the Rooney Rule — for every open manager position, consider “at least one woman and one underrepresented minority” in the slate of candidates.

Originally implemented by the National Football League (NFL) and named after Pittsburgh Steelers chair Dan Rooney, the Rooney Rule sought to increase the opportunities for minorities to hold NFL head coaching positions.

Executives can also consider blind screening of resumés (removing names or other gender identifiers from resumés) when selecting applicants for interviews.

It is important to note that even with these policies in place, society must be willing to give women a reasonable job experience credit for time spent raising children, and promote women to enter management ranks at the same rate as men.

Without these changes, the pay gap inside a given profession is likely to remain.