Hospital leaders have a choice: Act now to resolve pay inequity in your organization, or wait for employees to create a shared spreadsheet that shows just how wide the pay gaps are under your watch. (You may only learn about the latter when it’s published in the newspaper.)
In her article for Harvard Business Review, former Fortune Global 50 executive and strategic adviser Amii Barnard-Bahn says employees are more likely to take matters into their own hands due to the lack of pay transparency and growing cynicism regarding the fairness of employer compensation structures. More than 1,200 Google employees compiled their salaries in an underground spreadsheet in 2017, which was then analyzed and published by the New York Times with the conclusion that the company paid men more than women at most job levels.
Even with the pressure of “Google Doc” activism, as Ms. Barnard-Bahn calls it, few companies are auditing their pay structures to identify and correct gaps.
“In two recent self-reported surveys, companies said that they were taking pay equity concerns seriously. However, a third survey that looked at the disclosures of the 922 largest public U.S. companies found that only 22 percent reported performing a salary audit between 2016 and 2020,” she writes in the article.
Below are the basic steps of pay equity audits, which compare the pay of employees doing “like for like” jobs, or those that require equal skill, effort and responsibility under similar conditions. These audits account for reasonable differentials — such as work experience, credentials and performance — and investigate the causes of any pay differences that cannot be justified.
1. Hire auditors. Ms. Barnard-Bahn recommends organizations employing 500 people or more hire an outside firm to complete the pay equity audit.
2. Make sure auditors have accurate employee data. Key pieces of data for each employee: length of service, job classification and demographic information, including gender, race and age. It is especially important for this audit to ensure data on job titles, job performance and the alignment of “like for like jobs” is clean and accurate. Inaccurate data is a poor excuse to delay an equity analysis, says Ms. Barnard-Bahn.
3. Complete an analysis that weeds out pay differentials based on legitimate factors. This leaves outliers based on gender, race and age.
4. Correct the pay gaps. “According to Korn Ferry’s 2019 study, most companies find that up to 5 percent of employees are eligible for an increase, and the average salary adjustment typically ranges from 4 to 6 percent,” writes Ms. Barnard-Bahn. “The total remediation cost to organizations adds up to 0.1 to 0.3 percent of their total salary budget.”
5. Identify the causes of salary gaps. These may include incorrect job classifications or a decentralized hiring authority that enables vast differences in starting salaries for the same jobs.
“Once causal awareness is raised, HR (with assistance from legal) should monitor the hiring, promotion and compensation processes on an ongoing basis,” according to Ms. Barnard-Bahn. “It’s natural for compensation programs to need a regular tuneup — pay gaps start to reemerge as organizations experience employee turnover, reorganizations, changes in job duties and subjective bias. It’s a best practice to conduct spot checks annually, with a deep dive every few years.”
“Companies are increasingly talking about inclusion and belonging as a desired cultural norm. As leaders, it’s a matter of integrity to be able to look your employees in the eye and give them your word that you value their work — and can prove it by paying them equitably,” says Ms. Barnard-Bahn.
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