Erasing Compensation Biases

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There are more ways to consider pay equity than how it reduces the threat of litigation. Having a workforce that believes the company treats it fairly is conducive to increased retention, productivity and better overall morale. And, in the age of the Internet — which allows word to quickly spread in terms of how you pay — such a reputation helps lure top talent.

Here’s what you need to know about erasing compensation biases.

Figures Don’t Lie

It’s a stubborn, persistent number, but women in the U.S. still make just 80% of what males pull. That is up from 60% in 1970 but look at the snail’s-pace progress. According to an American Association of University Women report, the narrowing of the compensation chasm has slowed in the last 20 years. What’s more, a Pew Research Center study found that blacks made only 75% of what whites did and that earnings for black males since 2000 fell to 70 pennies on the dollar.

But check this out: A recent Peterson Institute for International Economics found that firms that had a minimum of 30% women in senior management had 15% more profits. This illustrates how a more diverse workforce can boost profitability.

The Cause

For the most part, unconscious bias is the pay-gap culprit. Sure, we’ve by now had many years of diversity training and programs. Still, continued stereotypical beliefs when hiring, promoting and setting pay have offset those. But there are ways to combat that.

  • Get the first salary right. If an employee is paid equitably off the bat, that could set the stage for the rest of their career. Doing the opposite only serves to perpetuate that first unfairness. The thing is that initial offers are usually tendered at a point when employers know the least about their job candidate, which makes such offers easier to be based on stereotypical viewpoints.

This is where internships can help, since such programs allow companies to get to know the individual, and their value, much better, which can affect pay. Internships also allow the intern to get to know the company better. After all, a good fit is beneficial to everyone.

  • Cease Questions About Pay History. If you’re hoping to narrow the gender pay gap, or even pay disparities among ethnicities, you want to eliminate questions about past salaries when hiring. Why? Because even well-meaning companies – if they set salaries according to a candidate’s last job — can continue discrimination from previous employment. In fact, several states have passed legislation barring the use of salary history in hiring.
  • Drop the Secrecy. Companies generally aren’t big on it, but they really should be about salary transparency. Why? So that they can turn up any glaring pay disparities, which could help identify prospective bias. On the other hand, pay secrecy makes it easier for employers to utilize whatever criteria when setting pay because what they decide is less likely to be questioned by others. This could come back to bite.
  • Aim for the Long Haul. Before patting yourself on the back for heightened pay transparency and pay equity audits, know that those can be mere band-aids when it comes to long-term solutions. What you also must do is go back and address biases that influence employee assignments and evaluations. This helps to prevent biases from re-emerging.

As you can see, erasing compensation biases is more than a notion. It takes long- and short-term actions and regular vigilance. The right time to tackle pay equity is today.

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