How would you feel if you learned that your coworker in the same role, with the same responsibilities, made significantly more than you? This is the issue of pay equity – ensuring equal pay for equal work, equitable compensation packages, and a fair workplace. Having pay equity is not only key to keeping your employees happy, but it’s also crucial for maintaining your business growth.
In this guide, you’ll learn all about pay equity, including what it is, how to spot it, the legal considerations, and how to move forward with your pay equity goals.
What is pay equity?
Although “pay equity” is often used for salary and hourly wages, it also covers full compensation and benefits, such as paid time off, stock options, and more. Pay equity ensures that employees get equal compensation for equal roles and responsibilities. It also allows you to identify and address deeper patterns that might be causing unfair pay differences.
Being aware of pay equity requirements helps you create solutions to fix any current inequities while also helping prevent them from occurring with new hires and promotions.
Why pay equity matters
Unfair patterns regarding employee pay have been around for a long time. This is likely due to inherent social biases that have existed in the workplace and culture for generations. For example, a recent study found that women are more likely to negotiate their salaries than men but still end up with less overall. This also appears in racial groups as well, with many racial groups often earning less than white coworkers in similar jobs.
But pay equity isn’t just about doing what’s right. It’s also smart business:
- Fair compensation builds trust and makes your business somewhere people want to work.
- When people feel they’re paid fairly, they work harder and care more about their jobs.
- Happy workers stay longer, saving you the cost and hassle of finding new employees.
What are the legal requirements for pay equity?
Ensuring that employees are compensated equitably isn’t just a good thing to do – it’s a legal issue crucial for keeping your team happy and your business healthy.
With this information, you can keep your business in compliance, identify areas for improvement in your compensation program, and then address any issues.
The three main federal laws to protect workers’ rights to fair pay are:
- The Equal Pay Act (1963) says you must pay men and women the same amount for equal work. Employers not following this law may have to pay back wages and potentially face fines or other legal challenges.
- Title VII of the Civil Rights Act (1964) makes it illegal to pay people differently based on race, color, religion, sex, or national origin, and violations can lead to fines and lawsuits.
- The Lilly Ledbetter Fair Pay Act (2009) gives workers more time to file pay discrimination claims. This means that if your business is found to violate the act, any past unfair pay decisions could be revealed in the future.
Most states have their own pay equity laws, too. These typically mirror the Equal Pay Act and, in some cases, could be even stricter than the federal laws, so it’s important to know the laws in your area.
How to achieve pay equity
From both a legal standpoint and for employee fairness and morale, it’s important to address inequities that may exist in your business. Sometimes, pay inequity may result from unintended circumstances. Many times, a job candidate is simply better at or more experienced with negotiating salary or other benefits.
Here’s how you can get on track to pay equity in your business:
1. Look at what you’re paying now
Gather information about job duties and pay, including how different roles compare and where unfair differences might occur. Then, review how much each of your employees makes and compare this with roles and responsibilities.
Result: This shows where pay inequities may have crept into your business.
2. Research other businesses
Spend time researching the hourly wages and salaries that other businesses in your industry and area pay for similar roles. Online salary surveys and job postings can:
- Find out typical pay ranges in your area.
- Compare your industry to others.
- Make sure your pay matches the market.
Result: This ensures your pay rates align with industry and geographic standards.
3. Set clear guidelines
Do this by setting clear pay ranges for each position or role, explaining how employees can earn raises and bonuses, and creating clear guidelines for this. Then, share this information with your employees, including anyone in a hiring or management role.
Result: This lets your entire team understand how their roles and contributions can lead to increases.
4. Be transparent and fair in your hiring practices
Include pay ranges in job postings and set pay based on the job’s value, not based on what candidates made at previous jobs.
Result: This will ensure that everyone offered a job at your business starts on equal footing with others in similar roles and responsibilities.
5. Stay current
By performing annual reviews, you can spot and address any inequities that may arise over time.
Result: This allows your business to address this issue proactively and demonstrates to your team that your goal is to reach fair and equitable compensation.
Pay equity is essential for good business
Committing to pay equity is more than a legal requirement: It sets the stage for a more loyal staff and a thriving business. While it’s complex, you don’t have to face it alone. If you need help, great human resource consultants, small business and labor attorneys, and performance-based organizations can help you.
And if you need financing to help you and your team achieve pay equity and succeed in your goals, Pursuit can help. We’re a leading small business lender serving businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington. We offer loans and a line of credit, and we’ve helped thousands of small business owners get the funding they need to build their teams and achieve their goals.
Contact us today to learn more.
