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Compensation Highlights: Gender Pay Equality — Isn’t It Time to Make Things Right?

gender pay equality

As one of our valued clients, we want you to know that gender pay equality remains elusive more than 50 years since passage of the Equal Pay Act, and nearly 10 years since the Lily Ledbetter Fair Pay Act became law. And despite widespread awareness of the “gender pay gap”, many companies continue to do little to resolve the inequity. This inaction could lead to regulatory audits and lawsuits that might financially devastate an organization. So, why do so many companies ignore gender pay equality with so much on the line? Let’s look at how serious the problem is and what can be done about it.

Regulatory Attempts to Bring About Gender Pay Equality

The Equal Pay Act was passed in 1963 and amended the Fair Labor Standards Act (FLSA) to prohibit pay differences between men and women for equal skill, effort and responsibilities performed under similar working conditions. It put a greater emphasis on job analysis, job documentation, and job evaluation. Enforced by the Equal Employment Opportunity Commission (EEOC), the Equal Pay Act’s only exceptions allowed for unequal payments are:

  • Seniority systems
  • Merit systems (not always true in my experience with Office of Federal Contract Compliance Programs [OFCCP] audits)
  • A system which measures earnings by quantity or quality of production
  • Any factor other than gender

Numerous updates to the FLSA have been made since its adoption, and the 2009 Lily Ledbetter Fair Pay Act extended the statute of limitations for lawsuits and subsequent compensation based on gender pay discrimination. Yet still the gaps remain.

How Bad is the Gender Pay Gap?

Reports issued in 2015 indicate the average woman’s unadjusted annual salary may be 78% to 82% of the amount earned by the average man in an otherwise equivalent job. Adjusting for various factors across the cultural, educational, and workplace spectrums, that gap may narrow to approximately 94 cents in earnings for a woman to every dollar earned by a man.

Indeed, the gender pay gap is widespread and pervasive. According to the most recent statistics (for 2009) available from the Bureau of Labor Statistics in their Women’s Earnings and Employment by Industry report, women’s median weekly earnings trailed men’s median weekly earnings in all 13 reporting industries. And of 108 occupations reported to the Bureau of Labor Statistics, women earned more on average than men in only 4:

  • Other life, physical, and social science technicians
  • Bakers
  • Teacher assistants
  • Dining room and cafeteria attendants and bartender helpers

In contrast, the widest gaps – as much as more than 2 to 1 – were in high-paying professional positions such as physicians and surgeons, financial experts, and “other business operations specialists.

Getting it Right, and Still Getting it Wrong

An example of those working to establish gender pay equality is Salesforce, whose female president and chief people officer, Cindy Robbins, has pledged $3 million from the organization this year to close the pay gap between male and female employees.  “Equal pay for equal work is an essential step in the path toward equality for all,” she says.

Sadly, such examples of progress are rare, while gender pay discrimination suits are more common. For instance, a female former senior business development officer for a Pennsylvania credit union is suing after discovering she was being paid $30,000 less than a male counterpart in the same position. Her discovery of how large the disparity was resulted from information inadvertently provided by her supervisor in response to her complaint that she was underpaid. The document provided showed a newly hired male business development officer was earning $90,000 annually, which was still 50% higher than her salary (which had only recently been raised in response to her complaint).

While still employed by the credit union, the woman filed suit, indicating that she and her male coworker had the same duties, responsibilities and goals, and that her lower pay violated the federal Equal Pay Act.  After a few more meetings on the pay topic, she was fired.

Factors to Consider

Should the male in the credit union example above have made $30,000 more a year than the female? That depends. When evaluating pay of all employees in the same job title, you must consider several things:

  • Previous relevant experience
  • Time in job
  • Performance in job

Previous relevant experience is very subjective. For example, is previous customer service experience relevant experience for a teller in a bank or credit union? That is an organizational decision to make.

Also, consider how long each employee has been in the job for your organization. And, most importantly, be sure to really know and understand the performance of each employee in the same job. Typically, the same job is the same job title, but it can also mean jobs with like skill, effort, and responsibilities per the Equal Pay Act.

While we do not often find gender pay differences in non-exempt or even entry level exempt jobs, we do find gender pay differences most frequently in high-level individual contributor roles, management, or top executive roles. Some of these differences may have been acceptable in the past when men had significantly more experience in the work place than women do. However, now 50+ years since the enactment of the Equal Pay Act, many women have just as much experience in the work place as men do.

Let’s look at another real-world example, involving two senior level Programmer/Analysts – one female, the other male. The female has 10 years’ experience in IT with the last 5 as a Programmer/Analyst. The male has 12 years’ experience in IT with the last 6 as a Programmer/Analyst. Both received an “Exceeds” rating on their most recent performance review. The female earns $100,000 a year while the male earns $150,000 a year. Is this equal pay? Probably not. A difference of $50,000 between the male and female where the male only has 2 more years’ experience in IT and 1 more year experience as a Programmer/Analyst should not warrant that large a difference. A $10,000 difference might be more in line with what would be considered acceptable during an audit by the EEOC or OFCCP. And while it’s true there are no guidelines on acceptable differences in pay, large gaps such as the this one would be noticed and called into question during an audit.

The Bottom Line:

So, how can your company avoid risk and ensure it is getting gender pay equality right?  Start with an audit of your pay between males and females in the workplace, comparing within job titles and looking for similar skills, effort, and responsibilities. Be sure to document previous related experience to the job they currently hold as well as how long they have been in their current job. Examine also the last two to three years of performance ratings. Look for large pay gaps that should be closed, and then design and implement a plan to close those pay gaps. After more than 50 years since the adoption of the Equal Pay Act, isn’t it time to stamp out gender pay discrimination once and for all?

If you don’t believe your company is in a good position to defend gender pay discrimination claims, we can help. Contact Total Rewards Solutions today at 317.589.8529.

Cassandra Faurote

About Total Reward Solutions:

Need an additional total rewards or compensation service from us? Total Reward Solutions is your trusted partner for compensation and benefit services. As you recall, Total Reward Solutions offers a broad range of compensation, benefits, performance management, and reward/recognition consulting services to help your organization attract top talent, motivate employees and retain top performers. We can partner with you on a project basis, on retainer, or as your total outsourced solutions provider for compensation services.

Call us today at 317.589.8529 to discuss how we can help your organization develop and implement competitive and effective compensation and total reward programs.