A service center manager at Citicorp, the principal flautist at the Boston Symphony and fourteen partners at major New York law firm Chadbourne & Parke. These are just a few of the women who have sued their employers over pay inequity. While pay discrimination based on gender has long been illegal in many major markets, pay gaps remain — and Gartner research shows only one in seven employees believe their organization is making a credible effort to close them.
Download guide: Addressing Pay Equity
The credibility issue is well-founded: only 28% of organizations are confident that they have closed pay gaps between employees performing similar work (role-to-role pay gaps). As the pressure for pay equity rises, HR leaders are key drivers of a comprehensive, orchestrated response. To succeed, it’s important for organizations to know what they can control and how to target their efforts for comprehensive and sustained progress on pay equity.
“ Role-to-role gaps are clearly something compensation leaders can and should address”
Here are five things most companies don’t realize about the pay-equity issue.
No. 1: There’s more than one type of pay gap
While ‘pay equity’ is used as a catch-all term, there are actually two types of pay gaps. One is the group-to-group pay difference, which stems from environmental factors other than gender or race. Examples are long-term systemic workforce trends such as the concentration of women in certain lower-paying occupations and industries, and the cumulative effect motherhood can have on careers.
A role-to-role gender pay gap — like male nurses earning more than female nurses — can be targeted through compensation practices. “HR can’t directly and immediately control environmental factors, although they can collaborate more broadly to influence them,” says Gartner HR advisory leader Anna M Krasniewska. “Role-to-role gaps are clearly something compensation leaders can and should address.”
No. 2: Compensation can’t fix everything, but is responsible for a very real part
By 2027, almost 60% of the U.S. labor force will be comprised of women and racial and ethnic minorities. By that time, women will make up almost 50% of the EU labor force. As workforces become more diverse, organizations become increasingly vulnerable to pay inequities.
Our research shows the average organization’s gender pay equity gap is 27% — that means the average pay for male employees is 27% higher than for women. That’s even more than the 20% that is generally reported. However, that number doesn’t reflect only pay discrimination: 9% is attributable to choice of occupation; 6% to organizational factors like size, industry, or geography; and 5% to human capital factors like differences in education and experience.
The remaining gap — 7.4% — can be directly ascribed to gender. This is the role-to-role gap, which HR leaders can resolve with rewards structures. “HR owns this gap and has an obligation to close it before it becomes a serious problem for the organization,” says Krasniewska.