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Pay Inequities – Finding the Root Cause

EverythingHR Staff | 04/02/2021 | Affirmative Action Plan, Blog, Featured

Pay inequities are a reality.  There are precious few organizations that do not have an anomaly somewhere; yet, if asked, few business leaders would acknowledge this or, more likely, even be aware of it.

Why is this?

Most likely because they are (hopefully) very rarely in any way intentional.  They can worm their way into a pay structure through very unexpected and unnoticed manners and can often be traced to the recruiting process.

For a detailed discussion of the root causes of pay disparities, please continue to our blog.

 

Getting to the Root Cause of Your Pay Gap

Often, when we talk about pay equity, the discussion is focused on determining whether there are disparities in pay based on gender, race, or ethnicity and making pay adjustments to correct any unexplained differences. Rarely do we discuss the true drivers behind the identified disparities. Unexplained pay disparities do not occur in a vacuum. Achieving pay equity necessitates a close look at the full range of HR practices, including recruiting, hiring, promotion, terminations, and compensation practices.

Leverage Employee Data to Identify Trends

Federal contractors are required to collect and retain gender and race data to prepare annual affirmative action plans (AAPs). AAPs allow contractors to review a snapshot of their workforce along race and gender lines. Nonfederal contractor employers are not required to collect this data, but many do so voluntarily. A review of their workforce data, job groups, and goals analyses, in combination, quickly reveals whether certain negative trends exist. For example, women or minorities are concentrated in certain departments or levels within the company, which can limit their promotion and compensation potential.

Assess Success of Your Recruiting Efforts

Title VII of the Civil Rights Act of 1964 as amended, Executive Order 11246, and similar state and local antidiscrimination laws prohibit employers from taking applicants’ gender, race, and ethnicity into account during the hiring process. While employers are prohibited from making employment decisions based on race, ethnicity, or gender that intentionally favor one group over another, there are no limits when it comes to recruiting. Employers should assess the success of recruiting efforts at least annually and drop the sources that do not yield a diverse qualified talent pool and replace them with new sources of applicants.

This is a time for employers to think outside the box and get creative. Consider implementing longer-term efforts to add diversity, such as apprenticeships or internships for students from diverse local high schools.

Review Hiring and Promotion Processes

Assuming effective recruiting strategies and absent discrimination, the pool of those selected should closely mirror the applicant pool. If that is not the case, it is critical that employers take a closer look at each stage in their selection processes to determine where diverse candidates are exiting the process and why. For example, is the gap occurring at the résumé review stage for entry-level positions that attract a high volume of applicants? Are the recruiters’ screening questions blocking diverse candidates? Is the employer losing applicants at the interview stage? Are there steps in the selection process that are not necessary because they assess qualifications already considered elsewhere in the process?

Possible corrective actions include the following:

  • Standardize procedures at each stage in the hiring and promotion processes as much as possible—résumé review, interview processes, and ultimate selection criteria.
  • Ensure recruiters have clear guidance on screening questions.
  • With respect to initial hiring decisions, consider implementing a blind résumé review at the initial stage.
  • To the extent possible, conduct panel interviews with a diverse slate of interviewers.
  • Identify high-potential candidates for promotion, and implement mentoring or other developmental programs to position them for success.
  • Train everyone involved in the selection process on the employer’s nondiscrimination obligations and implicit bias.
  • At least annually, conduct a privileged analysis of the company’s hiring and promotion decisions to determine whether there are disparities based on race, gender, or ethnicity.

Performance Evaluations

Performance evaluation processes are somewhat subjective by necessity. However, there are strategies for minimizing subjectivity and bias at all levels:

  • One size does not fit all when it comes to performance evaluations. Performance criteria should be tailored to the type and level of position.
  • Transparency around performance criteria and expectations is critical. Ensure all employees at all levels are aware of the standards against which they will be measured and how to exceed expectations.
  • Performance evaluations should be reviewed to ensure consistency across similar positions and supervisors.
  • Train managers on how to conduct an effective, consistent, and unbiased evaluation.
  • Consider conducting a privileged assessment of the performance evaluation processes to determine whether there are disparities based on gender, race, or ethnicity.

Conduct Exit Interviews

Knowing why employees are choosing to leave the company is critical information. Most employees are reluctant to share the true reasons for leaving for fear of retaliation should they need to use their former manager as a reference later. Be transparent to exiting employees about the process—who sees the information, why it is being collected, and a commitment to keep the employee’s identity confidential to the extent possible. Consider allowing employees to submit information anonymously.

Takeaway

Getting to the root cause of any pay gaps is far more efficient than making the same pay adjustments year after year. Periodic and comprehensive audits of personnel processes will move employers closer to closing the pay gap, strengthen their overall equal employment opportunity program, and promote diversity, equity, and inclusion.

Article courtesy of content partner BLR.  Author Consuela A. Pinto is a shareholder with FortneyScott in Washington, D.C. She advises clients on the full range of equal employment opportunity laws, with a particular focus on compliance with workplace laws and regulations, federal government investigations, pattern and practice systemic claims, and compliance with federal contractors’ affirmative action and nondiscrimination obligations.