Developing deeper insight into your pay practices
Using analytics and benchmarking data to ensure equitable pay and better identify potential pay gaps
For every $1.00 a woman earns, a man earns $1.28 on average.
– ADP Research Institute
In March this year, companies across the US were informed of the need to prepare for new US government reporting requirements known as the EEO-1. These requirements call for private employers with 100 or more employees (or those with 50 or more employees that have a federal government contract) to provide summary pay data and hours worked along with demographic details including gender, race and ethnicity.
New reporting requirements
These reporting requirements take effect March 2018, reflecting the Federal Government’s stand on greater corporate transparency. Research to date has revealed that while some employers are unaware of this new reporting requirement, others are not confident in their ability to meet the necessary compliance requirement.
What is at stake here? First, your organisation’s reputation among current and potential employees and second, how your compliance efforts will be judged.
A new opportunity to attract and retain the best talent
As organisations prepare for this new development, they may want to dig a little deeper to understand their pay practices better. Data and how it is managed will be critical to the whole process – what data is captured, how it is classified as well as how insight is derived.
Organisations may also want to ask themselves these questions:
- Do we keep track of salary trends for gender and race?
- How is this data being classified and tracked?
- How is compensation matching up with the different groups of employees across all our locations?
- Are all our employees with the same number of years of experience and results getting the same pay? Where do the differences lie?
- What is the industry average?
- Do we have the same percentage of female and minority employees in senior positions?
- Is their salary appropriate for our industry?
Organisations may find they face more questions than answers.
A considered response to today’s talent management challenges might be to consider pay equity as a new opportunity to attract and retain the best talent in today’s competitive landscape.
Perhaps, an employer pay equity self-audit may be a useful exercise. If you are interested in this, take a look at the 10-Step Guide for Self-Audit provided by the National Committee on Pay Equity. This was developed and derived from a 1996 document created by the US Department of Labour Women’s Bureau.
A considered response to today’s talent management challenges might be to consider pay equity as a new opportunity to attract and retain the best talent in today’s competitive landscape. In which case, tools and resources that could help you gain more insight and help you plan forward, such as Pay Equity Explorer, for example, will be beneficial.
In their quest to help organisations develop deeper insight into their pay practices and building on more than six decades of helping clients manage all forms of legislative and regulatory change, ADP® recently launched Pay Equity Explorer, powered by ADP® DataCloud.
This tool provides a combination of both analytics and benchmarking data to help employers develop a better understanding of potential pay gaps and identify the specific groups of employees for further analysis.
Pay equity is not simply a compliance issue
“Pay equity is not just a compliance issue, it is a critical business issue with a real impact on talent attraction and retention,” said Don Weinstein, chief strategy officer, ADP. “Most organisations have difficulty accessing the necessary information to even understand if they have an issue. Now, with our Pay Equity Explorer, organisations can dive deeper into their pay practices and identify areas for improvement they may not have known before.”
Identifying potential pay gaps
To better understand how we identify potential pay gaps, I spoke with Jennifer Cambern, Vice President of Product Management and Chief Product Owner for ADP.
Jennifer outlined three critical elements in better identifying potential pay gaps in jobs performed by people. First, the amount of data the organisation has.
Second, the taxonomy of jobs i.e. how jobs are being classified. You’d be amazed to see how differences in job titles and locations may present different results. It is, therefore, important that you have a multi-part taxonomy in place to ensure that you are examining the same job and that you are comparing like with like.
Third, the organisation’s ability to classify the data to help individuals make good decisions.
Where are these pay gaps?
In reality, they can originate in many areas. At present, Pay Equity Explorer is able to examine race, ethnicity and gender and in future releases, it may also include age and disability.
How these regulations are enforced may also lead to different challenges for various organisations. As Jennifer points out, New York and Massachusetts were both quite early in passing pay equity legislation – other states may be slower to step forward.
This disparity may pose challenges for large organisations with talent spread across different states or countries with differing legal requirements in place.
Employers need to be cognisant of the fact that there is, necessarily so, some aggregation of benchmarking data presented with the tool for confidentiality reasons.
In a recent launch, Jennifer mentioned that there was a benchmark done on compensation – both cash and equity – where the data drilled down to the level of neighbourhoods and metropolitan areas.
It showed, for example, that a truck driver in one location gets more pay than one in another. This, Jennifer believed was critical information that needed to be surfaced for clients which is why data is anonymised and aggregated.
Tools like this can help you figure out whether you are negotiating a good starting salary and help you notice where problems may exist. To do that, Jennifer suggests that a good first step would be to figure out what activities you should get into and what budget to allocate to that. Initially, you are looking to understand your exposure before you plan your next move.
True pay equity is more about levelling the playing field for all rather than about helping one particular group at the expense of another.
The benefit in a tool like this lies in the compensation benchmarks that are built. When the market rates are surfaced, you will be able to clearly see gender and minority gaps. This enables you to see whether you are paying appropriately and whether it is much lower than the market rate.
To get better “decision quality” benchmarking data is important because as organisations, we are seeking to not only ensure equitable pay but that our rates are market competitive. Therefore, any other ways in which we can get more data, for example, from the recruiting service i.e. the requisition process, may also be beneficial.
True pay equity is more about levelling the playing field for all rather than about helping one particular group at the expense of another. Ultimately, it is not only a fair practice but one that benefits the business as a whole in the long run.
Jennifer Cambern is the Vice President of Product Management and Chief Product Owner for ADP’s National Account Services. As Chief Product Owner, Jennifer directs a team of inspired product owners who deliver ADP’s Human Capital Management (HCM) vision in ADP products. Jennifer joined ADP in 2010 and holds a BS in Business Administration and an MBA from Georgia State University’s Robinson School of Business.
Pay Equity Explorer is a tool designed for the HR specialist which can among other things, help you identify potential pay gaps in jobs being performed by people in specific EEOC Protected Classes, examine and address potential pay equity gaps at the intersections of race, gender, location and job as well as delivery quality benchmarking data to help ensure pay is both equitable and market competitive. Visit Pay Equity Explorer to schedule a live product demo or for additional resources about EEOC regulations.
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Headline image extracted from Infographic courtesy ADP®.