A company’s approach to internal pay equity is as important as the actual pay programs it implements. Many factors can impact internal pay equity such as internal increases remaining low while new hires demand salaries that exceed current tenured employees. Organizations should conduct periodic pay equity studies to keep on top of potential pay equity risks and ensure an understanding of the pay structure, as well as knowledge of and ability to explain pay differences among comparable employees.
When conducting your pay equity study, be aware of these five major federal laws that address equal pay:
1. The Equal Pay Act: equal pay for equal work among women and men.
2. Title VII of the Civil Rights Act prohibits discrimination on the basis of race, color, religion, sex or national origin in all employment terms and conditions, including pay
3. The Lilly Ledbetter Fair Pay Act clarifies that each paycheck containing discriminatory compensation is actionable under Title VII.
4. Executive Order 11246 prohibits federal contractors and subcontractors from discriminating in employment decisions, including compensation, on the basis of race, color, religion, sex or national origin, when contracts or subcontracts exceed $10,000.
5. The National Labor Relations Act (NLRA) protects the rights of most private-sector employees to join together, with or without a union, to improve their wages and working conditions.
Most companies keep a close eye on pay decisions, such as merit raises and starting pay and the processes that guide them. Unfortunately, tracking individual decisions might not be enough. The Ledbetter Act requires knowledge of past pay decisions that may have impacted a discrimination claim. Pay today equals the pay at hire plus all subsequent changes in pay. Comparing the current pay of employees who were dissimilar in the past means that more historical information may be needed to understand their pay differences.
Pay differences can be defended by differences in knowledge, skill, education, ability, effort or responsibility provided it is required to perform the job. Pay equity studies typically rely on the data that is available such as job title or grade, the length of time in a job, company seniority, performance ratings and increase percentages, geographic locations, education and prior job experience.
A pay equity study may involve the appropriate legal counsel, an experienced analyst as well as HR information systems and compensation specialists. Detailed analysis can point to employees who should be paid similarly but who are subject to large pay differences and will highlight additional factors that explain the difference or highlight inexplicable differences that merit adjustment. Conducting a well-designed and well-executed pay equity study using well-maintained and complete data is a good business practice that serves as an important tool in managing the risk associated with allegations of pay discrimination.
At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. WageWatch also offers accurate, up-to-date benefit surveys, salary surveys and pay practices data that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.