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PAY EQUITY INSIGHTS

Posted Tuesday, January 23, 2024 12:00 pm by Hawaii Employers Council and
XpertHR

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In recent years, fair pay practices and pay transparency have been and continue
to be top of mind for employers and employees. Organizations are recognizing the
importance of pay equity and how pay decisions impact the ability to attract and
retain their workforce.

According to XpertHR’s 2023 Pay Equity and Transparency Study, 1,011 global HR
business leaders and employees were surveyed. One of the key findings revealed
that senior leaders believe pay equity still matters, but inequalities still
exist in the workforce.

Senior leaders are beginning to recognize they must design and implement fair
strategies to improve business outcomes. And now, with Act 203 in effect, Hawaii
businesses are even more pressed to address and own pay equity initiatives.

The following are possible actions that key leaders can begin considering:

Treat Pay Equity as a Business Imperative
Pay Equity Audits
Promoting pay equity as an organizational strategy starts with conducting a pay
equity audit. To get started, leadership will need to conduct a thorough job
evaluation of all roles. This involves reviewing job descriptions, performance
metrics, and salary information to identify disparities based on gender, race,
ethnicity, age, or other characteristics. After collecting and studying these
data, leaders should employ the services of an auditor (internal or external),
or utilize pay equity technology such as Gapsquare to conduct a regression
analysis. This analysis will identify pay differentials based on legitimate
factors such as role complexity and value as well as job holder experience,
education, and training.

Remediation
After the audit comes remediation which should begin with resolving pay equity
gaps. Though less consequential and smaller gaps make the list for resolution,
leaders should prioritize pay gaps that are mission-critical to the business.
For these latter pay gaps, if they are large, leaders may need to build a
business case for additional funding requisite to resolving gross inequities.
This is especially true when there is pressure to share results near-term. If
the budget is constrained, leaders may plan to raise affected employees'
salaries incrementally over a couple of years until it achieves the target
amount and parity is achieved. Also, unless driven by litigation, back pay is
typically not part of the equation.

As a next step in the remediation process, leadership must fix operational gaps
that led to the salary discrepancies in the first place. Operational resolutions
could include correcting job classifications, modifying job descriptions, and
rectifying incorrect salary records. Finally, leadership should regularly
monitor and tweak hiring and internal mobility processes for alignment with pay
equity targets. It is common for pay gaps to re-emerge as organizations
experience employee turnover, reorganizations, changes in job duties, and
personal bias. Spot-checking the compensation and rewards data annually and
conducting a deep dive review every couple of years should be part of an
organization's pay equity execution plan.

Ensure Managers Understand Pay Equity and Rally for It
Manager Education
XpertHR’s research shows that just 12 percent of employees say managers at their
organizations are very effective at facilitating conversations about pay. Worse
than that, almost a full quarter (22 percent) of employees say their managers
have no conversations at all with them about pay. Lack of managerial
understanding about the business importance of pay equity and getting past
managers' discomfort to talk about pay equity with their employees are two of
the greatest inhibitors of executing on a pay equity plan.

If managers are not aligned with pay equity being an organizational priority or
do not trust how pay adjustments for their team members are being planned, then
they will not generally follow through on supporting the process nor
communicating changes and the reasons for the changes to their employees. Lack
of communication between managers and employees erodes trust and exacerbates pay
equity issues.

Conditions for pay equity remediation and success are set when leaders prepare
managers with the context and insights for pay equity as a business strategy and
answer their questions and concerns. In turn, managers feel informed, ready to
have similar conversations with their direct reports, view pay equity as a
business priority, and take responsibility for effective execution.

Manager Accountability
After managers are grounded in the "what" and "why" of the organization's plan
to achieve pay equity, they should be held accountable for advancing progress.
Leaders hold managers accountable by requiring them to:

 * Define success metrics (e.g., team sentiment, employee engagement, turnover,
   etc.);
 * Set clear pay equity goals and expectations;
 * Hold regular check-ins with leadership and the C-suite to review progress;
 * Engage employees for their input on team and organizational progress;
 * Summarize employees' feedback for sharing with leadership; and
 * Define specific calls to action to advance metric results closer to target
   performance.

Leaders should reward those managers whose performance is advancing the
organization toward parity. By taking this data-driven (quantitative and
qualitative) approach to manager accountability, leaders are ensuring that
managers buy in to and are building an equitable workplace for all.

Measure Pay Equity Progress and Continuously Improve
Data-Driven Insights
The role of data and analytics is central to addressing inequity and moving
toward parity. Boards are expecting leaders to tackle equity issues at the
source, to find the root causes (whether in policies, operations, or behaviors)
and fix them. The best outcomes can be achieved by leaders leveraging technology
that analyzes data.

Pay equity technology drives efficiency, accuracy, validity, consistency, and
defensibility at the intersections of gender, race, age, disability, and other
factors. With such evidence-based information, leadership has assurance that
gaps are true representations of reality, that pay adjustments are processed
accurately, that pay decisions are fair for all, and that new pay inequity is
not introduced.

It comes down to this: as with any business strategy, leadership decisions
should not be based on a gut feeling but rather backed by data. Using data
breeds leadership confidence in pay decisions, drives evidence-based leadership
conversations around pay equity that reassures employees their managers are held
accountable, and serves as a check against bias.

Pay Transparency
In creating and sustaining fair compensation strategies, organizations remove
bias (conscious and unconscious) from the process. One proven way to eliminate
bias is to be more transparent about pay and pay ranges. XpertHR’s research
found that, on average, 75 percent of HR Leaders say that addressing pay
transparency at their organization is a priority, but only 42 percent of
employees agree. Leaders can show commitment to advancing fair pay practices by
being open with employees about pay and broadcasting salary ranges.

Investing time now into analyzing pay equity issues (rather than waiting) may
help to maintain business continuity, minimize employee complaints, increase a
company’s employee value proposition, and attract and retain top talent.
Encouraging leaders to view pay equity as a part of their business strategy,
employers can hopefully experience greater employee engagement, continuity and
stability.

If you have questions about Act 203, contact your HR consultant.

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