Achieving pay equity is a hot button topic, recently gaining much more traction as increased research and statistical analysis on the impact are released. Evidence indicates that the gender pay gap is closing, however if it continues to do so at its current rate, it could take decades to eliminate.
Although society has made significant progress to date, this has been achieved through relatively easy wins. For example, by eliminating conscious and systematic bias through the introduction of equal pay and anti-discrimination legislation.
Achieving pay equity is not just same pay for equal work. Pay equity is when employees are rewarded based on their contribution to the success of the organisation not their attributes.
How gender affects employment outcomes
Research shows that as a population, women earn less than men. This gap in earnings, or female to male earnings ratio, is relatively consistent over a woman’s working life up to the point when women reach child bearing age. At this point the female to male earnings ratio takes a sharp downward dive, and women’s pay levels continue to remain lower than men’s.
Similarly, the female to male ratio at senior leadership levels within organisations shows a negative bias towards women with men still occupying the vast majority of these positions.
Much research has been conducted into understanding this phenomenon and many factors affecting the gap have been more clearly defined and addressed but there is still a large amount of work to do.
Factors affecting employment and therefore the gender pay gap include where women work (which occupations and at which levels in the organisation, taking time out to raise children, levels of education and experience and “unobservable” factors such as direct and indirect discrimination.
How we might address it
Strategic Pay have identified the following areas as examples where employers can make positive changes to begin the journey towards achieving equitable pay practices in NZ.
Offer More Generous parental leave protections
Under current legislation, parents (predominantly women) are significantly disadvantaged whilst out of the workforce due to raising children. Although the law provides job protection for a period of 12 months, not all parents are eligible due to the nature of the work that they undertake. If NZ really wants to provide an equal opportunity workforce then the opportunities must be protected along with the minimums. Parents, (whether women or men) need to be afforded protection whilst on parental leave that retains eligibility for both salary review and promotion opportunities that they would otherwise have had if they had not taken leave.
In lieu of the legislation changing, employers can implement their own more generous protections for employees taking parental leave by including all staff on leave in the annual performance and salary review process and retaining existing career development plans.
Recognise Women as Leaders and Invest in their Development
Strategic Pay believe recognising potential and developing people irrespective of gender for positions of leadership is key to effecting change in this area. Organisations need to understand the value of diversity in the workplace, especially at the senior level. It is important that senior executive teams are genuinely representative of this diversity. It is not uncommon for organisations to ‘fill a quota’ when it comes to women on boards of directors or women as part of senior executive teams. Typically these women are chosen for their ‘male’ skills or are trained for the role to exhibit those ‘male’ skills. This only reinforces current traditional value sets and does not represent or result in genuine diversity.
Successful organisations are able to look through the gender of the candidate and appoint based on ‘organisational fit’ where the individual’s skills, talents, and goals align closely with those of the organisation and more specifically, the role being filled irrespective of the gender of the candidate. To do this organisations need to understand what is required for their organisation to be successful.
Build your HR toolkit
Accountability understanding is the precursor to a robust organisation structure and leads to coherent position descriptions and good performance management design.
In order for organisations to recruit the right candidate for the role, they first must understand what the organisation needs from the role in order to be successful. Good job design is critical. Organisations need to identify the key accountabilities across the organisation in such a way that there are no redundant or conflicting assignments, optimising the organisation’s use of resources (human or otherwise).
At Strategic Pay, this is what we call Accountability Mapping. We have designed an accountability mapping software tool that is available online by subscription. This powerful tool enables organisations to self-manage this process with ease and gain insight into how the business needs to operate in order to be successful.
Work Value Assessment
In order for organisations to make the ‘right offer’ in terms of pay to attract the right candidate, they must establish a method of comparing the role to market to determine an appropriate level of pay for the role.
Traditionally, HR have referenced market data from salary surveys when looking to gain an understanding of what jobs ‘should be paid’. Whilst this approach appears to be objective, it can potentially reinforce existing bias.
“If you do what you’ve always done, you’ll get what you’ve always got”.
The two main approaches typically used when comparing to market, are job family and job size. I.e. what similar roles in the same occupation are paid or what a role with similar skills, responsibilities and responsibility is paid. How might these approaches affect the gender pay gap?
Job matching is one approach used when comparing to market in order to determine job value. Evidence indicates that certain female dominated occupations are paid lower than their ‘equivalent’ male counterparts. Most notably are those jobs in the caring professions e.g. care workers. Using existing sources of market data based on job families is likely to reinforce any existing bias.
Many organisations use job evaluation to determine the size of a role then use this score as the basis upon which they compare to market in an effort to compare like with like. Strategic Pay strongly recommend using job evaluation as it is a neutral tool in the kit for tackling pay inequity. At Strategic Pay we use a multifactorial job evaluation methodology that recognises and accounts for the key aspects of value that a role contributes to the organisation.
Whilst an analysis of our database suggests that organisations which use a multifactorial job evaluation methodology (SP10®) have a reduced gender pay gap, this alone is not enough to combat the multiple sources of bias when it comes to comparing jobs to market and in the application of market rates to what individuals are paid.
Strategic Pay recommends that organisations, in combination with conducting a work value assessment, use an approach that identifies and measures the effort an employee puts in (utility), as well as their productivity (efficacy). Understanding what the efforts required (utility) and the outputs (efficacy) of the role are, enable an organisation to better measure the ‘value’ that the role contributes to the organisation. This then allows for the development of a robust and ‘fair’ performance management system.
Designing a ‘fair and equitable’ performance management system that can accurately assess the contribution of an employee across all aspects of the role, not just those easily measured by financial outputs or accountabilities, is key to accurately understanding the ‘worth’ of each employee in a gender neutral way. Although any source of subjectivity can be an invitation to bias, a well-developed performance management system based on what the organisation needs its people to be doing in order to be successful (accountability mapping) can go a long way to mitigating any bias that may otherwise appear.
Further, it is good practice to undertake peer review of any outcomes where measurement of an employee allows for subjectivity to ensure that individuals are not being disadvantaged because of their gender, age, race, religion or other potential sources of bias.
Understanding your internal workforce is an essential first step to achieving pay equity. Workforce metrics provide valuable information to enable you to identify and tackle sources of inherent bias within the organisation.
When developing your dashboard of key internal metrics we recommend the inclusion of a gender based metric.
Pay Equity Audits
In order to monitor potential pay equity issues within your workforce we recommend that organisations conduct annual pay equity audits.
Understand what your organisation’s remuneration policy is and how you currently stack up compared to it organisationally. Identify the outliers and understand why they exist. Determine what, if anything, you as an organisation need to do to rectify areas of concern. Capturing workforce metrics enables an organisation to put a line in the sand and to measure the results of any future initiatives.
Strategic Pay have developed a gender analysis tool that enables organisations to gain graphic insight into the gender distribution across the entire organisation.
What you should have in your HR Toolkit:
Achieving pay equity is not just same pay for equal work. Pay equity is when employees are rewarded based on their contribution not their attributes.
Organisations that design organisational and reward structures that align individuals with an organisation’s overall goals, use a multifactorial job evaluation work value assessment approach, implement a robust performance management system combined with peer review, and develop a comprehensive dashboard of key internal workforce metrics to monitor the impact, will be poised to identify and effectively address some of the underlying causes of pay inequity.
How we can help
The team at Strategic Pay are remuneration experts with a wealth of experience and a passion for developing solutions that work for you. If you have any questions or queries or wish to seek more guidance, please contact us.