Building a Fair and Equitable Pay Program

Areas Covered:

• Why start a pay project now
• Planning and organizing your pay project
• Obtaining commitment to pay strategies
• Developing a strategic policy with practical procedures
• Defining job results and qualifications
• Evaluating job contributions
• Converting results, qualifications, and contributions into reliable job descriptions
• Evaluating the price of jobs in the marketplace
• Building the pay structure
• Managing job contributions, transferring results, qualifications, and contributions into reliable performance management oversight
• Maintaining your pay program

Who will Benefit:

• Human Resource Managers
• Human Resource Executives
• Vice Presidents of Administration
• CEOs
• COOs
• CFOs
• Chief People Officers
• Organizational Development Managers
• Senior Operations Managers
• Directors of Learning and Development
• Risk Management Specialists
• Business Owners
• Business Leaders
• Accounting Manager
• Payroll Manager
• HR Specialists

Topic Background:

Pay equity is a means of eliminating gender and race discrimination in the wage-setting system. Commonly referred to as steering, many women and people of color are still segregated into a small number of jobs such as clerical, service workers, nurses and teachers. These jobs have historically been undervalued and continue to be underpaid to a large extent because of the gender and race of the people who hold them. Pay equity means that the criteria employers use to set wages must be gender- and race-neutral.

Pay equity is a growing national movement building on the progress made in the 1980s, when twenty states made some adjustments of payrolls to correct for sex or race bias. Seven of these states successfully completed full implementation of a pay equity plan. Twenty-four states plus Washington, DC conducted studies to determine if gender was a wage determinant. Four states examined their compensation systems to correct race bias, as well.

In recent years, pay equity bills have been introduced in more than 25 state legislatures. On the federal level, two bills have been introduced since the mid-1990s, the Paycheck Fairness Act and the Fair Pay Act. The Paycheck Fairness Act, which would have amended the Equal Pay Act and the Civil Rights Act of 1964 to provide more effective remedies to workers who are not being paid equal wages for doing equal work, was passed by the House of Representatives in the 110th and 111th Congresses. Hearings on the bill were held March 11, 2010 in the Senate, but it was defeated by a 58-41 vote on Nov. 17, 2010. The Fair Pay Act of 2015 would expand the Equal Pay Act's protections against wage discrimination to workers in equivalent jobs with similar skills and responsibilities, even if the jobs are not identical, and is currently sitting in committee pending review.

On the corporate side, companies typically emphasize external equity in the design of their compensation structures. This focus on external equity enables a company to develop compensation structures and programs that are competitive with other companies in appropriate labor markets.

Perceptions of equity can also influence a company's ability to attract, retain, and motivate its employees. Employee perceptions of equity and inequity are equally important and should be carefully considered when a company sets compensation objectives. Employees who perceive equitable pay treatment may be more motivated to perform better or to support a company's goals. Individual employees, however, perceive equity in many different ways. Therefore, it is difficult to specify one definition of equity that is applicable to all situations.

Generally though, pay equity poses a conceptual and practical challenge: how to reconcile the company’s ability to pay (financial resources), desire to pay (image), and need to pay (labor market) with the employees’ perception of equity (fairness) and the government’s focus (legal audits). What’s clear though, is the importance of organizations to focus on and really think through strategies that work to correct even perceptions with issues of fairness within their own pay programs. Highlighting the reality that a company's approach to equity is as important as the actual pay programs it implements.