Pay equity can be a complex concept and defined in multiple ways. However, at its most basic level, pay equity means ensuring employees receive equal compensation for equal work and/or work of equal value, regardless of their gender, race, ethnicity, or other non-job related characteristics.
Here, we’ll explore some pay equity basics, including an overview of the legal history of equal pay, as well as the strategic advantages and challenges of implementing pay equity programs.
A Quick Review of Pay Equity Laws
The legal framework for pay equity in the United States has several layers dating back to the 1960s. The Equal Pay Act of 1963, for example, mandates equal pay for equal work regardless of gender, while Title VII of the Civil Rights Act of 1964 prohibits wage discrimination based on race, color, religion, sex, and national origin. Furthermore, the Lilly Ledbetter Fair Pay Act of 2009 allows women and other people being discriminated against to dispute pay disparities from any period of their career.
More recently, state and local laws in the United States have emerged to strengthen pay equity requirements further. For instance, many jurisdictions now ban employers from asking about salary history during hiring, as this practice can perpetuate historical pay disparities. And some states have also enacted stricter pay transparency laws requiring employers to disclose salary ranges in job postings.
Outside the United States, several important laws to consider include the United Kingdom’s Equality Act of 2010, the European Union's Equal Pay Directive, and Australia's Workplace Gender Equality Act of 2012. In general, laws outside the United States can have even stricter public reporting and enforcement mechanisms.
When employees believe they're being compensated fairly, they're more likely to engage fully in their work and remain committed to the company's mission.
The Strategic Advantages of Pay Equity
This said, in today's business landscape, pay equity isn't just a legal requirement—it's a strategic advantage. Organizations that prioritize fair compensation typically see higher employee satisfaction, improved retention rates, and an enhanced ability to attract top talent. Moreover, companies with strong pay equity practices often experience increased productivity and innovation, as employees feel valued and motivated to contribute their best work.
Pay equity also plays a crucial role in building trust and transparency within organizations. When employees believe they're being compensated fairly, they're more likely to engage fully in their work and remain committed to the company's mission. This trust extends to external stakeholders as well, with consumers and investors increasingly factoring environmental, social and governance (ESG) practices into decisions about which companies to support.
Pay Equity Challenges
Achieving pay equity isn't without its challenges. Organizations often struggle with legacy compensation systems that have allowed disparities to develop over time. Job evaluation can be complex, especially when comparing roles across different departments or locations. Historical salary negotiations and market-based pay practices may have inadvertently created pay gaps that are difficult to address all at once.
Data quality presents another significant hurdle. Companies frequently find that their compensation data is incomplete, inconsistent, or siloed across multiple systems, making it difficult to conduct a thorough pay equity analysis. Additionally, addressing identified pay gaps requires careful budgeting and planning to ensure corrections are sustainable and don't create new inequities in the process.
Even more challenging can be the need to change organizational culture and mindsets around compensation. This includes training managers to make equitable pay decisions, establishing clear criteria for starting salaries and raises, and creating transparency around pay practices while respecting privacy concerns.
Pave is Here to Help
Despite these challenges, addressing pay equity is essential for building sustainable and successful organizations. Companies that tackle this issue head-on demonstrate their commitment to fairness and inclusion, ultimately creating stronger, more resilient workplaces for all employees.
In order to address pay equity at any business, it’s crucial to have accurate, timely compensation data, and a robust compensation platform to support your strategy. With Pave, you can get it all in one easy-to-use platform. To learn more, request a demo today.
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