According to a recent survey done by McKinsey and Co., companies that rank in the top quartile for gender and ethnic diversity are more likely to have financial returns above the national medians for their industry. So how can companies become more diverse? The first step is to build a reputation for treating everyone equally. This can be accomplished by conducting an EPOA (Equal Pay and Opportunity Audit).
An equal pay and opportunity audit has three main purposes:
- Identify any differences in pay, frequency of promotions, or allotment of assignments between genders or ethnic groups doing equal work
- Investigate the causes of disparities for such
- Eliminate instances of inequality that cannot be justified
Ruth Thomas, Co-Founder and Industry Principal at Curo compensation, outlined an audit process for pay equity that had 5 steps. This process can easily be expanded to include promotions and assignment opportunities as well.
Step 1 – Collecting Relevant Data
The information needed to conduct an audit is usually spread out across multiple HR systems, or even with a large portion of it in legacy format such as on spreadsheets. It would be optimal to bring all of this data together onto a platform where one can visualize compensation ranges, performance scores, job categories, and other people data in a holistic format.
Step 2 – Analysis of the Data
Once the data is unified, it is important to be able to visualize it through filtered metrics and analytics. The filtering will allow you to separate and present groups next to one another to see if inequities exist, while the metrics and analytics can show not only current problems, but if any are systemic and have existed and gotten worse over time. It would also be advisable to apply both internal and external benchmarks to see not only how groups compare within the company, but outside versus the industry as well.
Step 3 – Document Legitimate Reasons for Disparities
Just because two people are doing the same job doesn’t always guarantee equal compensation. It’s legally permissible for companies to take into account performance scores, seniority, and education or training levels when providing compensation or promotions. But it is very advisable for organizations to document these reasons and ensure they are applied legally. For example, the Massachusetts Equal Pay Act forbids reduction in seniority credit for leave due to pregnancy, family, or medical leave.
Step 4 – Review Disparities
The most common reasons for non-legitimate disparities in the treatment of employees is poor management guidance and poor communication. Even when documented policies exist, training and re-enforcement are rare within most organizations. According to a Software Advice survey done a few years ago, only 56 percent of the working adults confirmed they had received training on their company’s policies. Thus managers often default to what their manager did and what those around them do.
Step 5 – Take Action
Once you have all the facts and have identified the inequities that need to be corrected, document a fact based plan that will eliminate subjectivity. Implement pay ranges to be strictly followed that do not allow for disparities for equal work. The plan should include guidelines to be followed for all advancement and disciplinary activities to be conducted by managers. Finally and most importantly is to train and communicate policies often. As the great fighter Rocky Graziano once said, “Redundancy is the mother of memory.”
Whether you are required by law to perform EPOA’s or not, the process should be completed and positioned not as compliance, but one of good business sense. The best and brightest come in all forms in our great global society.