Back to all articles

Pay equity: Employers should be proactive in seeking new ways to fairly compensate employees, prevent bias

So much for breaking through the glass ceiling. Employers today, in some cases, are still paying men more than women with similar experience who perform similar duties, while many companies lack formal processes to prevent bias and inconsistencies in their hiring and pay decisions.

Despite efforts for more than 50 years to narrow the chasm between what men and women earn, the gender pay gap continues. Although the gender pay gap shrank between 1980 and 2000 as attitudes changed and large numbers of women entered the workforce, the gap has since largely stalled, according to the American Association of University Women (AAUW), which promotes equity and education for women and girls.

“Women working full time are still paid, on average, only 80 cents for every dollar paid to a man—a figure that has changed by less than a nickel during the 21st century,” according to a report by AAUW.

Worse yet, the pay gap is larger for women of color, American Indians, Alaskan native women and Latinas, who earn 26 percent less than white men, according to a report by a firm that tracks salary trends.

In addition, the pay gap makes it harder for women to pay off student debt and hurts them in retirement, affecting what they receive in Social Security and pension payments. In retirement, “[w]hite men over 65 have an average annual income of $44,200, while white women over 65 must get by on $23,100, black women on $21,900, and Latinas on $14,800,” according to AAUW.

Why is there still a pay gap?
Employers should be aware of the factors that contribute to the wage gap and that they may be inadvertently perpetuating the problem. “Employer practices—such as using prior salary history in setting current pay and prohibiting employees from discussing their wages—compound the problem,” AAUW says.

Family responsibilities, particularly motherhood, also can interrupt careers for women and impact their long-term earnings. Other factors contributing to the gender pay gap that employers should be aware of—and avoid—include biases related to race, disability and age.

Although women have made strides the past few decades by moving into jobs and occupations previously performed almost exclusively by men, research by the Institute for Women’s Policy Research (IWPR) indicates that, “irrespective of the level of qualification, jobs predominantly done by women pay less on average than jobs predominantly done by men” and that during the past two decades there has been very little further progress in the gender integration of work.

Efforts to reduce the wage gap began as early as during World War II, when many American women entered into jobs in place of men who had enlisted in the military. The National War Labor Board, for example, endorsed policies to provide equal pay in situations where women replaced men. In 1945, the Women’s Equal Pay Act was introduced in Congress, but it failed to pass.

The federal Equal Pay Act of 1963 (29 U.S.C. §206), signed by President John F. Kennedy in 1963, was intended to reduce the pay inequity between men and women in the workplace. The Act directs that employers must pay men and women the same when they are performing equal or “substantially equal” work. In order to bring a claim, an employee must demonstrate that he or she performs virtually the same work as someone of the opposite sex and receives less pay.

The Lilly Ledbetter Fair Pay Act, enacted by Congress on Jan. 29, 2009, bolstered worker protections against pay discrimination. The Act allows individuals who face pay discrimination to seek rectification under federal anti-discrimination laws. Differences in pay that occur because of sex violate the Equal Pay Act and/or Title VII of the Civil Rights Act of 1964, as amended. In addition, compensation differences based on race, color, religion, national origin, age, disability, genetic information, and/or retaliation also violate laws enforced by Equal Opportunity Employment Commission.

Meanwhile, a President Obama-era rule that would have required large companies to report pay by race and gender was halted under the Trump Administration before it took effect. The Trump Administration stated that some aspects of the plan to collect information lacked “practical utility,” were “unnecessarily burdensome” and did not adequately address privacy and confidentiality issues.

According to a recent survey of employers, 53 percent said they plan to make their pay decisions more transparent within the next three years. Other changes employers are making, according to the survey, include:

  • revising annual planning incentive plans;
  • increasing base pay;
  • increasing the use of technology in making pay decisions;
  • using a more future-focused way to manage performance;
  • adding recognition programs to reward workers; and
  • increasing the level of transparency around pay decisions.

At minimum, employers should have policies and procedures in place to ensure that they are complying with all state and federal wage laws, and that they are fairly compensating both men and women—as well as members of every protected class—to avoid potential wage lawsuits. A labor and employment law attorney can guide employers through drafting or updating their employee compensation plans and recruitment and promotion processes to include new ways of determining fair compensation.

Featured Attorney

Recent Articles

Contact us today to schedule your consultation.

Get Started