In its simplest definition, pay equity means that an employee’s race, gender, or disability does not influence their paycheck. Unfortunately, and perhaps unsurprisingly, inequitable pay is a problem across the nonprofit sector.
A recent study published in May 2021 found that women in executive positions at nonprofits earn 8.9% less than men — and that the gap widens even further when there is room for salary negotiations.
To understand how and why negotiations contribute to the pay gap, the researchers looked at other potential job opportunities available to each executive, the organization’s limitations in paying executives, female representation in leadership, and pay variability within its executive ranks.
Their conclusion was that competition and alternative employment options lead to greater gender pay gaps — and situations where male executives are more likely to capitalize.
So how does an employer ensure they are compensating all their employees fairly? Employers can start with a pay equity analysis. This process is a fundamental tool used to ensure that your organization pays its employees fairly and fosters a culture of economic equality. Here’s what you need to know to get started:
What is a pay equity analysis?
A pay equity analysis, also called an equal pay audit, allows employers to compare and assess pay rates for each of their employees with the goal of taking action to remove biases and correct inequitable wages. Importantly, it can also protect your organization from wage discrimination lawsuits if they arise in the future.
The audit process is invaluable for a couple of reasons: not only does it illuminate blind spots and highlight cases of unfair compensation, but it also prompts your organization to make sure that important data — like exactly what factors contribute to each employee’s pay rate — are available.
“Pay is going to be based on knowledge, skills and abilities, time, position, performance ratings, and so on,” says Christopher Chrisbens, Of Counsel at Jackson Lewis P.C., “One of the values of going through a pay equity analysis is the process itself of determining “do we have the data necessary, readily available to do a meaningful analysis?” and learning from going through the process itself.”
Conducting a pay equity analysis is more than just an issue of legal compliance: it’s an opportunity for HR to reconsider and reconstruct pay rates, which in turn will improve employee retention.
“The problem that some employers don’t pick up on is if you go out and hire somebody in a high demand position and pay them more than their similarly situated peers who are already performing that job, that creates issues of pay equity, and you may need to adjust upwards to fairly compensate those employees,” Chisbens says. “If an employee is making much less than somebody who just came in the door and who is similarly situated in terms of ability, they’re going to make a pay equity claim or leave.”
While small organizations might have a solid understanding of what employees are making relative to each other, equal pay audits are an opportunity for larger organizations to analyze wages all together and make appropriate changes.
If your organization is considering conducting an analysis, Chrisbens recommends seeking legal counsel for assistance navigating the process in a protected manner.
Pay equity analyses are a powerful tool to address and close the wage gap while promoting fair treatment and compensation of employees across your organization. They send a message to employees that your organization values their work and is committed to the goal of equitable pay for equal work.
“The first step in paying employees equitably is recognizing that this is an issue, and then making a plan to approach it,” Chrisbens says.
About the author
Lia Tabackman is a freelance journalist, copywriter, and social media strategist based in Richmond, Virginia. Her writing has appeared in the Washington Post, CBS 6 News, the Los Angeles Times, and Arlington Magazine, among others.