Pay Equity

A Level
at Work
Playing Field
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The Real-World
Impact of Gender
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Pay Gaps
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Pay Equity at Work

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Pay Equity
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Management
Practices
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 Pay Equity
Editorial
at Work
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 table of contents

4 39 74
Letters to the Editor Rewarding Reads WorldatWork Journal
Being Transparent About Pay Pay Fairness: Insights from
8 Transparency Rewards Leaders
Workspan Feature By Maria Colacurcio By Dow Scott, Ph.D., and Tom
A Level Playing Field: McMullen
Could Blocking Questions 40
on Salary History Lead to a Workspan Feature 89
Pay-Equity Win? Workspan Daily
False Positive, False Negative:
Beyond the Surface of Gender How to Create a Culture
13 Pay Equity of Fair Pay
Future Look By Narine Karakhanyan and Josh By Nancy Romanyshyn and Rich Luss
Final Stop for Women’s Schaeffer
Advancement Is the C-Suite 92
By Brett Christie
45 Workspan Feature
Future Look Spot Awards in the Spotlight:
14 Mind the Gap: Seeking How Unconscious Bias Sets the
Workspan Feature Far-Reaching Solutions to Stage for Pay Inequity
The Real-World Impact of Pay Equity By Gabby Burlacu, Ph.D. , and Lauren
By Brett Christie M. Bidwell, Ph.D.
Gender Pay Gaps
By Tamara Phillips
46 97
19 WorldatWork Journal Workspan Daily
Portugal Passes Law Designed
Future Look Pay Equity Management
Practices: A Survey of C-Suite to Close Gender Pay Gap
Adjusting the Pay Equity
and Rewards Leaders By Brett Christie
Conversation
By Tom McMullen
By Brett Christie
98
20 62 WorldatWork Journal

WorldatWork Journal Workspan Daily Gender-Based

Five Ways Organizations Can Pay Equity Differences
The Gender Pay Gap Today and Upward Occupational
By John G. Kilgour, Ph.D.
Address the Gender Pay Gap
By Stephanie N. Rotondo Mobility Through the Lens of
Comparable Worth
64 By Robert C. Hughes Jr.
Workspan Feature
Deep Dive: Looking 113
Workspan Daily
Beneath the Surface of the
Gender Pay Gap Ignore Pay Transparency at
$ By John H. Davis, Ph.D., CCP Your Own Peril
$ By Sharon Podstupk
71
116
$

Workspan Daily
Workspan Feature
Pay Equity Update:
Legislative Landscape The Push to Advance
$

Pay Parity
Pay Equity at Work

By Glizcel Ditto
By Melissa Means

$ 120
$

Research in Brief
$ Perceptions of Pay Fairness
$ Affected by Communication
$
$

$
$

2 $
$
 M E S SAG E F R O M S C OT T CAWO O D,
P R E S I D E N T & C E O , W O R L DAT W O R K

Dear Colleague,

Reports of gender pay gaps at some of the most high-profile companies in the
world have shined a spotlight on a complex issue and have impacted almost
every industry. There’s been a rising incidence of lawsuits targeting major
employers and some of the highest-profile cases are companies we all know and
love. Everyone agrees that pay equity for women and minorities is important,
but how to achieve it is not well understood. It’s just not as straightforward as it
seems. Why? Because it’s not just salary we’re talking about. Pay equity includes
total compensation, everything from salary to promotions, merit increases,
benefits, access to the CEO, representation on the leadership team, etc. Each
organization has its own formula for fair and equitable compensation.
Adding fuel to the fire today is the increasing use of social media channels
where employees and prospects post about interviews, pay rates, etc., thereby
exposing to the outside world these internal disparities. We need to think about
HR processes that lead to pay gaps and look for ways to fix them. Here are
5 steps to take:
1. Don’t shy away from the issue of pay equity. Embrace its importance and
build processes around the issue rather than waiting for federal or state
laws to dictate what you need to do.

2. Analyze and understand current plans that are in place. If a woman or

minority is disadvantaged from the start of employment, that’s a problem
that will grow exponentially.

3. Constantly look at and monitor the process, review it and test it.

4. Assess gaps from these measurements and make changes accordingly.

5. Institute transparency between employees and leadership so that you’re

setting the narrative and telling your own story rather than allowing social
sharing to drive it and derail it.
An equitable workplace is owned by the leadership of each organization and
carried out by managers and how they advocate for their people. The entire
employee lifecycle has to be constantly managed against equity issues. The
bottom line: they must be paid fairly and consistently without discrimination.
People want to know how to succeed within an organization and that starts with
understanding how compensation programs are designed and administered. The
result for companies: a boost in reputation, the ability to recruit the best talent
and positioning employees to maximize their contributions to the organization.

Sincerely,
Pay Equity at Work

Scott Cawood | Ed.D., CCP, CBP, GRP, CSCP, WLCP

President & CEO
scott.cawood@worldatwork.org

3
 letters
to the editor
Gender Pay Gaps Is a ‘Big Deal’
I love the Tamara Phillips article on
page 14 (“The Real-World Impact of Gender
Pay Gaps”). In fact, in my compensation
consulting in my organization, I highlight
the numbers a lot with my calculations and
recommend managers beef up their offers/
adjustments for women when they come
to me. I think it’s a big deal, coming from a
single mother household and having a wife
and a daughter, the most crucial thing I’m
working on is letting them know how much
of an equal human being they are to boys
and men in the world.
I did have one small highlight in the
article: Toward the end, when Tamara
talks about “Using Tools to Identify Bias –
Compensation,” the third bullet point states
“Calculate pay increase using absolute
values instead of percentages that can
exacerbate previous bias.”
I was just wondering about that because,
from my experience, percentages used for
increases work best to avoid bias. When
The article “Deep Dive” by John Davis on
page 64 is one of your best ever. The 80%
gender pay gap has for far too long been
misused by special interest groups without
a good, scientific critique. I was thrilled to
see someone objectively break it down and
explain the concept of “Simpson’s Paradox.”
It definitely reveals how many companies
are doing the right thing with fairly narrow
gaps, but whose efforts go for naught in
the court of public opinion when their data
is inappropriately combined with other
Pay Equity at Work
companies to produce a far worse gap. I
have long struggled to succinctly make this
same argument at conferences and other
forums. I will now always be sure to have
your article handy.
— Andreas (Andy) Spurlock, Senior HR Analyst, City
of Las Vegas
4
we give a 2% increase across the board,
managers aren’t looking at which one
of their employees are receiving what.
However, when we offer a budgeted dollar
amount for them to distribute for increases,
they generally look at those they’d like to
give more/less to and that’s where the bias
plays in because a male manager would
likely give more money to a male staff
employee similar to them “unconsciously,”
however, make the “conscious” reason/
basis of high performance, skillset, etc.
Other than that, I learned a lot from your
article and implementing some other calcu-
lation tools into my decision support system
that I use to make pay recommendations.
Thank you,
George Mensah
Senior Compensation Analyst
Rosetta Stone Inc.
Shedding Light on a Controversial Issue
I just want to shoot John Davis a quick note
to say thanks for writing the article “Deep
Dive.” He brought forth and shed light on a
controversial issue in an objective way. I’ve
frequently made the same arguments. The
challenge is to get folks to dig into the info
versus taking reports at face value. As a
practitioner I’ve always worked to ensure
that my own house was in order and teach
my team to apply our programs consistently
and equally regardless of gender. This
approach has generally ensured that pay
is equitable across all demographic and
protected groups.
— Ryan Buhrke, CCP, GRP, Compensation Manager,
SUPERVALU Inc.

The Cardinal Sin of Crossing Data
What Ms. Means fails to mention in her
Workspan article (“The Push to Advance Pay
Parity,” on page 116) is that one of the pieces
most relevant to a gender pay comparison
or general analysis is occupational service
time. Two employees may both be three-year
accountants at the same company; but,
what if one of the two had 15 other years
of accounting work at a prior firm? Even the
most sophisticated of talent management
software systems will not store and track
this kind of information where it can quickly
be pulled up and summarized. (I spoke at
a recent conference on this and asked for
a show of hands of who had this capability
and not a single hand was raised.) And even
if it was attempted, would it be updated
if the person moved out of Accounting
and into Human Resources? Would their
“occupational service time” experience be
reset to “zero”?
When we have lawsuits alleging one
woman vs. one man pay discrimination,
we can easily get their cumulative occu-
pational service time by looking at each
employment file. However, what if you
have 5,000 employees and have to report
this information?
Look at All Pay Gaps, Not Just Gaps for
Protected Groups
My comment is that although organizations
are indeed unlikely to track experience
from previous employers (which if they
did could help to justify gender pay differ-
ences), what is more common is that job
titles for workers with vast differences of
experience are likely to reflect that. Thus,
they won’t be compared together when they
do have appropriate job titles. For example,
in Andreas Spurlock’s letter to the editor,
there are two accountants with three years
of service at a company. One accountant,
though, has 15 previous years of experience.
letters
to the editor
This would be an onerous requirement on
any organization.
And what happens in its place by
national advocacy groups is no better and
makes most of their published results
meaningless. They believe that more data
points must mean better data and they
begin dropping these other important
factors. They then commit the cardinal
sin of crossing data over different levels
of work or entire organizations. Example:
One man and one woman in Silicon Valley
make $100,000. Four women and one
man make $80,000 in Oklahoma City for
a different firm but doing the same job.
In each company women are being paid
fully equal to men. There are the same
number of women as men at each firm, or
more. Average all the data together across
these two firms, however, and the pay
ratio is 93.33%.
The combination of incomplete data being
used and then the misuse of said data is
what likely caused the current adminis-
tration to feel that the onerous reporting
requirements were not worth it.
— Andreas (Andy) Spurlock, Senior HR Analyst, City
of Las Vegas
There is a danger of comparing these and
inferring a gender pay gap. I agree with
that, but it could be avoided if the accoun-
tant with 15 more years of experience was
a senior accountant and the accountant
with only three years was a junior or staff
accountant. I think it is common to have
title differences and that this can go a long
Pay Equity at Work
way to preventing the “the cardinal sin of
crossing data.” I would like to add that as
we examine pay gap issues, it would be a
great idea to look at all pay gaps, not just
gaps for protected groups.
— Gail Langendorf, CCP, Product Manager, Oracle
(Canberra, Australia)
5
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t ter s u lts
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Be tterooYd, right?
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ake the first step, and make CCP® Certified Compensation Professional®
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 at Work

COULD BLOCKING QUESTIONS ON SALARY

January 2018
Pay |Equity

HISTORY LEAD TO A PAY-EQUITY WIN?

BY WORLDATWORK STAFF

822
 | January 2018

239
Pay Equity at Work
 W
W
ith little action happening at the federal
level on pay-equity legislation, the issue is
following the same path as other popular
labor issues like minimum wage and paid
sick leave: State and local governments are deciding to take action.
But as more state and local municipalities prohibit questions
about job candidates’ salary history, multistate employers are
being left in a compliance lurch.
Proponents of the bans advocate that eliminating salary
history from the job-negotiation process protects women who
have a history of past wage discrimination, also known as the
“carried-over effect.” If a starting salary is based on a can-
didate’s previous salary history at an employer where wage
discrimination may have occurred, the discrimination carries
over to the new salary and is perpetuated over time.
On the other hand, opponents argue that knowing salary his-
tory is important for efficiency and in determining how to make
the most competitive offer to a candidate.
Is there a right or wrong answer in this debate? The answer,
inevitably, is that it’s complicated, and it likely depends on the
long-term effect — which won’t be known until research is con-
ducted to analyze the gender pay gap after these laws have been
in effect for some time. For total rewards professionals eager to
stay in compliance with the law, it’s important to know whether
these bans will impede your work, and think about where the pro-
fession should stand on this increasingly debated issue.
Origin Story
Massachusetts was the first state to pass a
law prohibiting employers from asking job
candidates about salary history, including com-
pensation and benefits information. The state
law received bipartisan support and was signed
into law by Republican Gov. Charlie Baker on
at Work
Aug. 1, 2016, and goes into effect on July 1, 2018.
The effort has been seen by many as a blue-
January 2018
print for how other states and cities can combat
Pay |Equity
gender pay discrimination.
The Massachusetts law permits candidates to
voluntarily disclose their salary history if they
choose, and employers can verify this information
once an offer of employment is made to the pro-
spective employee.
1024
Since the Bay State passed its ban,
many others have followed suit: At pub-
lication, California, Delaware, New York,
Oregon and Puerto Rico have passed
similar laws. Oregon’s law was the first
to be enforced, having taken effect on
Oct. 6, 2017. However, employers can’t
be sued under the law until Jan. 1, 2019.
Delaware’s ban took effect on Dec. 14,
2017, and the remainder are going into
effect this year.
At the city level, New York City, Philadelphia,
Pittsburgh and San Francisco have passed
ordinances that make it illegal for employ-
ers to ask candidates about salary history,
although some of these bans are limited
to city employees. The city of Philadelphia’s
ordinance already has been challenged in
court, and it is unclear when or if it will
be enforced.
Enter the Fray
Not surprisingly, employer groups aren’t
keen on the new bans. In California, a
coalition of business groups led by the
California Chamber of Commerce sent
a letter to members of the state Senate
urging senators to oppose AB 168, the legis-
lation, now law, prohibiting employers from
asking about salary history.
It’s important to know
whether these bans will
impede your work, and think
about where the profession
should stand on this
increasingly debated issue.
 The letter argues that “salary data
can be utilized as a reference regarding
whether the employee’s expectations
of compensation far exceed what the
employer can realistically offer. Requiring
both the applicant and employer to waste
time on the interview process which, for
highly compensated employees, could be
lengthy, to then ultimately learn at the
end of the process that the employee
would never consider taking the compen-
sation offered is unnecessary.”
Other arguments against these bans
include:
• Employers in competitive industries
use salary and total rewards as a com-
petitive advantage and want to offer
top talent an enticing rewards pack-
age. Not knowing a candidate’s rewards
history and preferences hampers an
employer’s ability to offer a competi-
tive rewards package.
• State and federal laws already prohibit
gender-wage discrimination. These
bans aren’t necessary, and there’s no
evidence they will reduce the gap.
Pay Expectations and Salary
Ranges: A Good Move?
Many of the state and local laws pro-
hibit employers from asking potential
candidates about salary history, but do
permit questions about salary expecta-
tions or requirements. Along with erasing
concerns about past salary disparities,
asking about salary expectations allows
candidates to control their own nego-
tiating position. It also puts them in a
position of needing to know their own
worth and the demands of the market.
Does this sufficiently counter the busi-
ness argument that not having salary
history information creates undue burdens
WorldatWork’s Pay Equity Statement
WorldatWork released its pay equity position statement in 2016.
Many laws
The goals were to outline where the association and the profes-
sion stand on the issue of pay equity, and the role compensation
experts should play in the ongoing debate about how the federal
prohibit
government should enforce pay-equity standards. Approved by the
association’s board of directors in February 2016, the statement is
regularly reviewed and updated.
employers from
At the time, the consensus among WorldatWork compensation
experts was that the association should oppose public policies that
prohibit employers from asking candidates about relevant total
asking about
rewards history:
WorldatWork believes employers should have access to all rele-
salary history,
vant employment information when determining compensation
for an individual during the hiring process. It is not the intent of
our profession to continue past pay inequities when hiring new
but permit
employees. Compensation should be tied to the specific job and
market forces that dictate the rate of pay for that job. In order to
make a compelling offer of employment to candidates, Worldat-
questions
Work opposes policies that prohibit employers from requesting a
job candidate’s total rewards history during their consideration
and interview process.
about salary
Does this statement reflect where the profession stands today? As
more states and cities implement laws prohibiting the use of salary
history, will this practice evolve? A recent WorldatWork survey on
expectations.
pay equity practices found that 15% of organizations are no longer
asking about job applicants’ salary history. The association will
continue to survey its members to see if this data point increases
over time as more local laws go into effect.
Pay Equity at Work
| January 2018
2511
 It’s also worth considering whether it’s a smart strategy to change
your hiring practices entirely and completely stop asking candidates
about salary history regardless of where you do business.
and inefficiencies in the negotiation process? What happens
when a candidate makes it all the way through the interview pro-
cess only to find a $30,000 disparity in terms of expectations and
actual salary range?
The interview process needs to include some way to determine
whether the employer and the prospective employee are in the
same ballpark in terms of salary. Who should disclose first? The
employer revealing the salary range for the position, or the can-
didate expressing his or her desired salary expectations?
This push and pull may be addressed in more recently passed
state laws. For example, California’s newly passed law requires
employers to provide applicants with the pay scale for the
position. The law doesn’t define pay scale, but the language
does indicate that the legislature expects employers to provide
prospective employees with some pay information if it is rea-
sonably requested.
Playing by the Rules
at Work
Organizations operating in the jurisdictions that have passed
bans prohibiting employers from relying on or asking questions
January 2018
about salary history need to ensure they update their hiring prac-
Pay |Equity
tices and educate hiring managers. Because laws differ between
states and cities, organizations need to determine how they best
want to approach compliance. Will it work for your organization
to have different hiring practices in different locations?
It’s also worth considering whether it’s a smart strategy to
change your hiring practices entirely and completely stop
1226
asking candidates about salary history
regardless of where you do business.
This will save employers from having to
ensure that their practices are in check
with each local law.
Employment applications may need to
be updated, and hiring managers need to
be educated on how to:
• Approach salary negotiations
• Ask about salary expectations
• Respond to pay-scale questions from
job applicants.
When pricing jobs, it’s important to
rely on market data and salary surveys.
This data can help both employers and
employees in determining an equitable
range for a given position, and it removes
any consideration of past earnings.
Fine-tune your compensation strategy.
Communicate and educate employees
so everyone understands how your pay
guidelines work and enhance your overall
business goals.
Melissa Sharp Murdock is the director of external
affairs in WorldatWork’s Washington, D.C., office. She
can be reached at melissa.murdock@worldatwork.org.
 future
look

Final Stop for Women’s

Advancement Is the
C-Suite
Closing the gender pay gap is the topic of the day when it
comes to women’s advancement in the workplace. Increased
representation in the C-Suite, however, is the next frontier.
Men hold 93% of the CEO positions in United States compa-
nies, according to research from Heidrick & Struggles. That
percentage increases to 95% when examined across a sample
size of 13 European countries. Research from ISS Analytics
painted a similar picture, finding that the percentage of female
directors is 24% in the U.S.
There have been some positive advances in this regard. In the
European Union, some countries have legislation mandating
more women on boards, and California recently did the same,
requiring at least one female on each board of directors. But it
remains a work in progress.
“Increasing women’s representation in the C-suite is not a
quick fix,” said Tracy Bosch, associate client partner at Korn
Ferry. “The hurdles in advancing women are multi-dimensional,
laced with unconscious bias and very hard to unravel.”
angling to solve the problem. The study
found that 36% of respondents offered
women’s advancement initiatives in their
benefits, which was up from 27% in 2017.
It’s still the early days for this final
stage of women’s advancement in the
workplace, but with the right initiatives
and advocacy, the future workplace
should have equality across the board.
“Improving women’s representation in
the C-suite needs to be a priority at the
board level for us to see real progress,”
Bosch said. “Motivation for boards to
take that seriously is increasing with
pressure from investors, customers,
employees and legislation.”
Brett Christie is a staff writer at WorldatWork.

Bosch is based in Canada, which has an even lower

percentage of female CEOs (3%) and directors (22%) than the
U.S. She said the issue is cultural and systemic, which is why it
will take time.
“The reality is that the path to the top was built by men,
for men,” Bosch said. “No one is disadvantaging women on
Pay Equity at Work

purpose, but the path to the top is based on expectations,

norms and traditions that favor male leaders.”
ISS Analytics’ data supports this hypothesis, as it found
that female executives appear less often at roles with profit-
and-loss that often serve as stepping stones to the CEO role,
such as COO, head of sales or CEOs of business units and
subsidiary groups.
WorldatWork’s 2018 Total Rewards Programs & Practices
survey found that an increasing amount of organizations are
13
 Impact
The Real-World
of Gender Pay Gaps
BY TAMARA PHILLIPS, SAP SUCCESSFACTORS
May 2019at Work
Pay |Equity

1446
47
| May 2019

15
Pay Equity at Work
 ender pay equity is essential for economies and
societies to flourish. Unfortunately, recent find-
ings from the World Economic Forum show that
the global pay gap between men and women will
take 202 years to close due to the vastness of
the gap and the slow pace of change.
What’s more, even though the gap has narrowed
slightly, the number of women in the professional
workplace has fallen and pay equity has stalled.
Globally, women are paid on average 63% less
than their male counterparts for similar roles.
Given that women comprise about half of the
world’s working potential, the more women earn,
the more fully they can participate in the econ-
omy. Clearly, the full economic participation of
women is better for the communities in which
they live — and beyond.
Whom Does the Issue Affect?
Achieving gender pay equity in the workplace
is a critical issue not just for human resources,
but for all of us. Closing the gender wage gap
matters for a broad range of stakeholders and
makes a difference not just to the bottom line,
but to our society as a whole.
Employees
According to a survey conducted by Randstand
US, 80% of women say they would switch to an
employer they felt had greater gender equality,
49% would leave their job if they learned male
colleagues in the same position were paid more
and 42% have experienced discrimination at work.
Over three-quarters of men and women (78%)
say that a workplace where people are treated
equally, regardless of gender, sexual orientation,
age, race, or religion, is important to them.
Organizations
May 2019at Work
The gender wage gap affects an organization’s
performance, workplace culture and bottom line.
Companies that close pay gaps now will pay less
Pay |Equity
than those who wait to take action, as the average
cost to correct gaps increases by $439,000 each
year. Organizations that formally prioritize gender
pay equity tend to have superior performance.
Those organizations are 54% more likely to beat
industry average employee turnover benchmarks
1648
and are 46% more likely to have higher year-over-
year Glassdoor ratings.
Investors
In short, gender pay equity contributes to the
bottom line. When employees feel they’re being
rewarded fairly, they are more engaged and
motivated — which results in higher retention
rates, an improved ability to attract top talent,
improved customer orientation, employee sat-
isfaction and better decision-making. Recent
research also reflects that companies who prior-
itize pay equity are more likely to have financial
returns above their national industry medians.
How Pervasive Is This Problem?
Each year, the Organization for Economic
Cooperation and Development (OECD) produces
an annual report on jobs and employment in 34
participating countries. While the gender wage
gap has lessened over time in some countries,
it is expanding in others. The gap is the widest
in South Korea, with a 34.6% gap between what
men and women earn. Women in countries such
as Italy and Denmark fare better, with only a 5.6%
and 5.7% gap, respectively. However, countries
such as France (9.9%), the United Kingdom (16.8%)
and the United States (18.2%) still have a lot of
ground to cover to reduce the wage gap.
Why Is This So Challenging to Solve?
To address the gender wage gap, we must
understand its causes. A report by the
Economic Policy Institute points to the complex
factors that contribute to gender inequality. It
stresses that occupational differences between
women and men are themselves affected by
gender bias. Serious attempts to understand
the gender wage gap should examine where
TEXTURE © ISTOCK/UNKAS_PHOTO
our economy provides unequal opportunities
for women at every point of their education,
training and career choices. (See “Key Factors
Contributing to the Gender Wage Gap.”)
A Best-Practice Approach
to Gender Pay Equity
For many organizations, equality, diversity
and inclusion are at the heart of their people

strategy because they understand how
those workforce attributes contribute to their
financial performance.
Transparent policies and data, along with
intelligent technologies, can help employees,
leaders and organizations as a whole make
better decisions. Organizations are looking to
do more than just meet increasing regulatory
requirements. Here are some steps that can
help improve pay equity in your organization:
Improve Transparency
• Provide reporting on workforce composition
and gender wage gap performance.
• Publish salaries and calculations to facilitate
objective salary conversations.
De-Emphasize Salary History
• Prohibit questions pertaining to salary history
in interviews.
• Provide a pay range for roles when asked by
prospects and interviewees.
• Establish and publicly disclose pay equity practices.
Analyze Pay Equity
• Perform annually when merit increases are
under consideration.
• Quantify the business value of the contribu-
tion workers make.
Assign Promotion Parity Targets
• Assess opportunities and criteria for promo-
tions to help ensure equity.
• Specify who is responsible for equitable pay and
identify how that individual or department will
be evaluated.
Flag Promotion Decisions
• Maintain communication with managers
regarding promotion readiness of employees
and the feedback employees are receiving.
• Create an actionable plan for identifying and
addressing potential issues for employees
not considered.
Set Targets and Deadlines
• Frame problems and planned solutions pub-
licly using empirical metrics.
Impact
The Real-World
• Facilitate open discussions among managers
to drive goal setting and accountability.
Make It Visible
• Showcase an understanding of the problem
globally and incentivize positive behaviors.
• Bring attention to global pay equity issues
inside and outside the company.
Key Factors Contributing
to the Gender Wage Gap
Participation in the Labor Market
According to the U.S. Bureau of Labor
Statistics, women made up 56% of the labor
market in 2016.
Occupational Segregation
More than 60% of the lowest-paying jobs
are held by women, with 25% of women
employed in the science, technology, engi-
neering and math (STEM) industries.
Impact of Race and Ethnicity
The gender wage gap, when compared to
white men, is 53% for Hispanic women and
61% for black women.
Education
Women earn a majority of all undergrad-
uate and graduate degrees. However,
increased bias and stigmas come with
increased specialization.
Career and Life Stage
Women are more likely to experience career
interruptions or reduced hours to care for
family; women spend 2.5 times more time
on unpaid household or care work.
Unconscious Bias
Pay Equity at Work
Women in the same industry receive lower
starting salary offers than men nearly two-
thirds of the time.
| May 2019
Employer Negotiations
Women are less likely than men to negoti-
ate salary for a variety of reasons, including
fear of backlash, lack of confidence and
lack of knowledge of how the negotiating
process works.
17
49
 Impact
The Real-World
Technology alone cannot holistically address
unconscious bias. However, it can serve as a
catalyst for change when accompanied by a
shift in mindset, policies and culture.
Unconscious Bias in Compensation
Recent research shows that we have up to
188 biases running through our brains at any
given time. These inherent cognitive biases can
have a significant unconscious impact on our
thoughts, actions and decision making.
Our struggle with bias basically comes down
to how our brains work. According to the
Huffington Post, it “happens automatically, is
outside of our control and is triggered by our
brain making quick judgments and assess-
ments of people and situations based on our
background, cultural environment and
personal experiences.”
Bias doesn’t make us bad people — it’s just an
unconscious part of the human experience. But
we do need to be aware of where and when it
shows up to mitigate any negative consequences
in compensation and talent management.
Using Tools to Identify Bias
Technology alone cannot holistically address
the issue. However, it can serve as a cata-
lyst for change when accompanied by a shift
in mind-set, policies and culture. Intelligent
solutions can provide the impartiality and
transparency needed to help close the wage
gap. Examples of ways in which technology can
May 2019at Work
help to mitigate unconscious bias throughout
the talent management lifecycle include:
Pay |Equity
Recruiting
• Conduct gender-bias language scans with job
analyzer tools to identify and recommend
word replacements in job descriptions and
attract a gender-balanced applicant pool.
• Use technology such as machine learning to
1850
analyze salary data and provide an objective
recommendation for new-hire salaries.
Compensation
• Use compensation-ratio overviews to highlight
inequities in pay.
• Determine pay on company averages, not former
salaries, and link pay to performance. Pay should
be set based on independent compensation
benchmarks gathered from a diverse population
of employees.
• Calculate pay increases using absolute values
instead of percentages that can exacerbate
previous bias.
Performance Management
• Surface patterns of potentially biased decision-
making with alerts for triggers, such as a per-
formance reduction after a leave of absence
or for employees continually overlooked
for a promotion.
• Adopt photoless calibration, which hides
employee photos, and a gender summary view to
highlight possible bias in performance ratings.
Intelligent technologies and solutions provide
decision-makers and HR professionals with the
capabilities and transparency they need to iden-
tify and reduce unconscious bias throughout the
employee journey — from recruitment through
development and succession. As a result, they can
enable decisions that address the issue of gender
pay equity and cultivate and celebrate a diverse
and inclusive workforce.
Tamara Phillips is the global marketing director for the Busi-
ness Beyond Bias initiative at SAP SuccessFactors.

Adjusting the Pay Equity
Conversation
Pay equity isn’t a topic that is going by the wayside. Instead,
it’s only gaining steam. And as more legislation aimed at
decreasing the gender pay gap is enacted in the United
States, Canada and the United Kingdom, the more the conver-
sation heats up.
Therefore, it’s important that proper statistics are applied to
the discussion as it rages on into the future. Specifically, when
it comes to organizations disclosing their pay gaps, said Linda
Chen of Mercer’s Workforce Strategy and Analytics Group.
When organizations are requested to release raw pay gap
numbers — the difference in average pay for women versus
the average pay for men — it doesn’t adequately encap-
sulate the issue.
“It masks a lot of the reasons for why there is a big differ-
ence from a raw perspective and does not take into account
very important factors that do impact pay,” Chen said. “As an
example, if you have a very senior employee compared to a
very junior employee, their pay is likely to be very different.
And from a raw statistic perspective, you would not be able to
account for differences in seniority.”
It leads to the next evolution of the pay equity conversation,
which is really an issue of representation, Chen said. A key
reason there is pay disparity between men and women is that
men hold more senior-level roles. It’s a matter that organiza-
tions should address, Chen said, but the raw pay gap figures
don’t accomplish this.
Chen advocates for organizations releasing adjusted pay
gaps, or as she refers to it as the “all-else-equal pay gap,”
because it normalizes all the important factors that drive
pay differences.
“It accounts for things such as seniority or the level that
you’re in, it’ll account for geographic differences, it’ll account
for differences in roles,” Chen said. “What it does not take
into account is your gender, your race or ethnicity, because
those are not legitimate reasons why people should be
paid differently.”
As more organizations are responding to concerns of pay
equity, there’s been a shift in how they are approaching the
future
look
matter. Chen said she’s seen companies
tackle the issue less from a risk-mit-
igation perspective and more as a
strategic initiative.
Part of that strategic initiative involves
an honest assessment of female
representation in leadership positions
throughout the company. If fixed, it
should in turn solve pay incongruencies,
but it’s not going to happen over-
night, she said.
“I think where a lot of organizations
are now headed is that other side of the
coin around representation. Because it’s
one thing to fix pay equity, it’s a different
thing to fix your representational issues,”
Chen said. “That lies in the equity in
promotion, retention and hiring. Those
are more mid-to-long-term efforts. You
can’t just throw a bunch of money at
it and have it fix itself in a sustainable
manner. So it does take longer-term
strategies, programs, efforts and have
the diligence around checking for equity
in all of these other ways. I think organi-
zations are often looking to their data to
analyze these other factors as well.”
Brett Christie is a staff writer at WorldatWork.
Pay Equity at Work
19
20
Pay Equity at Work
The Gender Pay
Gap Today

This study provides a historical overview of the gender pay gap

in the United States. It examines and analyzes pay data for men
and women, labor force composition and efforts to promote pay
equity throughout the past five decades. Based on that data, the
author concludes that while women face many equity issues in
the workplace, a gender pay gap is no longer one of them.

John G. Kilgour, Ph.D.,

California State University,
East Bay
Pay Equity at Work

21
 The Gender Pay Gap Today
“T
here are lies, damn lies
and statistics.”
This often-quoted line popularized by
Mark Twain applies to the lengthy and
ongoing debate over the gender-based pay
gap. Take the recent position of 2016 pres-
idential candidate Hillary Clinton to the
effect that women earn 76 cents for every
dollar a man makes (Alter 2016). That was
a misleading exaggeration based on (some-
what dated) annual data that compares
women’s pay with that of men with no
allowance for hours worked per week,
weeks worked per year or any other factor
that would warrant a difference in pay.
As indicated in Table 1, in 1960 women
earned 60.7% of what men earned on an
annual basis, and the pay gap was 39.3%. In
1970, after the passage of the Equal Pay Act
of 1963 (EPA), Civil Rights Act of 1964 and
Executive Order 11246, it was 59.4%, and
Pay Equity at Work
in 1980 it was 60.2%. Then things began to
change. By 2016, it was 80.5% according to
the U.S. Census Bureau, and 81.1% according
to the U.S. Bureau of Labor Statistics (BLS).
What accounts for this improvement? Is the
glass half full or half empty? Is there still a
gender-based pay gap?
22
This article draws upon and extends an
earlier effort (Kilgour 2014) focusing on
historical data that point to the gender
pay gap being closed. But there are other
gender-pay equity issues that need to be
addressed and would be excellent topics for
further research.
PAY DISCRIMINATION
It is generally agreed that differences in
compensation attributable to differences in
skill, effort, responsibility, education, hours
worked in a week and weeks worked in
a year are not pay discrimination. Rather,
they are necessary for the functioning of a
market economy.
Residual differences in pay not attributable
to identifiable objective factors tradition-
ally have been assumed to be based on
discrimination, prejudice or misogyny. Once,
social attitudes about women’s worth in the
job market strongly supported the opinion
that women’s work was not worth as much
as men’s. This was often reinforced by
assumptions and laws that women needed
protection. Many states limited how much
weight women could be required to lift
on the job and/or restricted the number of
hours they could work in a week. While
these state laws might have passed with
 TABLE 1  Women's Earnings as a Percentage of Men's Earnings, Selected Years, 1960-2016

Census Bureau Data Bureau of Labor Statistics Data

Women's Pay as Women's Pay as

Year Pay Gap* Pay Gap*
a % of Men's a % of Men's

1960 60.7 39.3 NA NA

1970 59.4 40.6 NA NA

1980 60.2 39.8 64.2 35.8

1990 71.6 28.4 71.9 28.1

2000 73.7 26.3 76.9 23.1

2010 76.9 23.1 81.2 18.8

2015 79.6 20.4 81.1 18.9

2016 80.5 19.5 81.9 18.1

*Calculated by author.

Source: U.S. Department of Commerce. Census Bureau. Table P-40. U.S. Department of Labor. Bureau of Labor Statistics. Highlights of
women's earnings in 2016. August 2017. Report 1069. Table 12. Retrieved from www.census.gov and www.bls.gov respectively.

the best intentions, they tended to justify differences in pay that became unac-
ceptable by the late 1960s. They were repealed or allowed to die. By 1980, and
certainly by 2000, attitudes about women’s work and women’s pay had changed.
Today, one must wonder: If women can do a job as well as (or better than)
men, why would a rational employer in a competitive product market discrim-
inate in favor of men and against women? Why would it hire and promote
less-productive men when it could hire and promote more-productive women for
the same (or lower) pay? If it did, and continued in such behavior, it would result
in higher costs, lower output or poorer quality of product (or service). Eventually,
the business would fail. In addition, since the 1960s there have been laws that
make such behavior problematic and potentially very expensive.

FEDERAL ACTION AGAINST PAY DISCRIMINATION

The Equal Pay Act of 1963
The Equal Pay Act (Pub. L. No. 88-38; EPA) amended the Fair Labor Standards
Act of 1938 (Pub. L. No. 75-718; FLSA). It requires equal pay for doing substan-
Pay Equity at Work

tially the same work for the same employer. Specifically, jobs requiring
substantially equal skill, effort and responsibility, and performed under the same
or similar conditions, should be paid the same.
The EPA contains several employer defenses that would justify differences in
pay between men and women:
❙❙ A bona fide seniority or merit system
❙❙ Quantity and quality of product

23
 The Gender Pay Gap Today

❙❙ Different locations
❙❙ Professional development and ability tests
❙❙ Any factor other than gender.
These employer defenses significantly limit the impact of the EPA.
All forms of compensation are covered by the EPA, including salary, over-
time pay, stock compensation, profit sharing and bonus plans and benefits.
However, the debate usually focuses on money wages, as they are more
easily measured and compared, and data are readily available.
The EPA was originally enforced by the Wage and Hour Division (WHD)
of the U.S. Department of Labor (DOL). In 1978, enforcement of the EPA
was transferred from the DOL to the U.S. Equal Employment Opportunity
Commission (EEOC) and the U.S. Department of Justice (DOJ). This was
appropriate, as addressing discrimination is the primary function of the
EEOC. In addition, many pay-discrimination charges are intertwined with
other forms of discrimination.

The Civil Rights Act of 1964

The Civil Rights Act (Pub. L. No. 88-354; CRA), as substantially amended
in 1972, is much broader and stronger than the EPA. It prohibits discrimi-
nation based on race, color, religion, national origin or sex in a wide range
of areas including education, housing and employment. Title VII of the CRA
deals with employment matters including recruitment, selection, promotion
and compensation.
The CRA contains an important qualification with regard to pay: The
Bennett Amendment, which became section 703(h) of the act, limited the
CRA to the provisions of the EPA including the employer defenses.

Executive Order 11246

Federal executive orders (EO) are issued by the president to the executive
branch of government ordering it to do something or stop doing something.
As of 2017, 20,822 EOs had been issued. Many dealt with housekeeping
matters of importance to a single government agency or a small number of
people. Some are of considerable importance, such as EO 11246, which was
issued by President Lyndon Johnson in 1965.
Pay Equity at Work

EO 11246 requires federal contractors with 50 or more employees and

grant recipients in the private and public sectors to take affirmative action
(origin of the term) to reduce and eliminate workplace discrimination.
Given that almost all business organizations with 50 or more employees
provide products or services to the federal government and that all states
and territories and most of their subdivisions (e.g., counties, cities, other
entities) receive federal grants, EO 11246 has broad application. While not

24
 TABLE 2  EEOC Charges Filed by Category, Selected Years 1995-2016

Charges
1995 2000 2005 2010 2015 2016
Filed

Number % Number % Number % Number % Number % Number %

Total 87,529 100.0 79,896 100.0 75,428 100.0 99,922 100.0 89,385 100.0 91,503 100.0

Race 29,986 34.3 28,945 36.2 26,740 35.5 35,890 35.9 31,027 34.7 32,309 35.3

Sex 21,796 30.1 28,181 29.9 23,094 30.6 29,029 29.1 29,396 29.5 26,934 29.4

Age 17,416 19.9 16,008 20.0 16,585 22.0 23,246 23.3 20,144 22.5 20,857 22.8

EPA 1,275 1.5 1,270 1.6 970 1.3 1,044 1.0 973 1.1 1,075 1.2

Note: Columns do not sum because of the omission of a number of categories.

Source: U.S. Equal Employment Opportunity Commission. Charge Statistics (Charges filed with the EEOC), FY 1997 Through FY 2016. Retrieved from www1.eeoc.gov//eeoc/
statistics/enforcement/charges/cfm?renderorprint=1.

legislation, EO 11246 was an important development in the ongoing struggle

for equal opportunity.
While it would be hard to measure the relative effect of the EPA, CRA and
EO 11246, Table 2 presents data on charges filed with the EEOC by category
for selected years 1995 through 2016. Note that equal-pay cases are a minus-
cule percentage of cases filed; race, sex and age discrimination charges are
much more prominent.

LABOR FORCE PARTICIPATION AND COMPOSITION

It would be difficult to address the pay gap without first discussing what
has happened to the labor force participation of men and women and to the
composition of the labor force in recent decades.
The labor force participation rate (LFPR) is a measure of the (noninstitu-
tionalized) civilian population age 16 and older that is employed or actively
seeking employment. The LFPR is an important factor in the output of the
national economy. Other things being equal, the higher the percentage of
the population that is in the labor force, the larger the production of goods
and services (gross domestic product). As reported in Table 3, the total
Pay Equity at Work

LFPR grew from 59.4% in 1960 to 67.7% in 2000. That explains much of the
great bull market and the budget surpluses of the 1990s and early 2000s. It
declined to 62.7% in 2015.
In the 55 years reflected in Table 3, there were steady but countervailing
changes in the LFPR of men and women. In 1960, 83.3% of men were in the
labor force compared to 37.7% of women. The norm was for the husband
to go to work while the wife stayed home with the children. By 2015, a

25
 The Gender Pay Gap Today

TABLE 3  L abor Force Participation Rates and Composition, 1970-2015

Composition of the Civilian

Labor Force Participation Rate
Labor Force

Year Total Men Women Men* Women*

1960 59.4 83.3 37.7 66.6 33.4

1970 60.4 79.8 43.3 61.9 38.1

1980 63.8 77.4 51.5 57.5 42.7

1990 66.5 76.4 57.5 54.8 45.2

2000 67.7 78.0 59.9 53.5 46.5

2010 64.7 71.2 58.6 53.3 46.7

2015 62.7 69.1 56.7 53.2 46.8

*Calculated by author.
Note: Census Bureau data are for full-time year-round workers 15 years and older. BLS data are for same 16 years and older.
Source: U.S. Department of Labor. Bureau of Labor Statistics. Women in the labor force: A databook. Report 1065. Table 2.
Retrieved from www.bls.gov.

revolution had taken place. Male LFPR had declined to 69.1% while female
LFPR had increased to 56.7%, down from 59.9% in 2000 and 60.0% in
1999 (not shown).
Table 3 also displays the resulting changes in the composition of the
civilian labor force. This is a measure of the relative share of the labor force
made up of men and women. In 1960, it was 66.6% male and 33.4% female.
By 2015, it was 53.2% male and 46.8% female.
Meanwhile, the LFPR of women grew by 50.4%, due in part to the move to
the suburbs with its additional costs and expectations and made possible by
the new and improved home appliances and packaged foods. Birth control
pills became available in 1961, just in time for the EPA, CRA and EO 11246.
Before “the pill,” few employers would put a married woman in charge of an
important operation or project because of the idea that she could become
pregnant at any time.

THE CAMPAIGN
Between 1960 and 1980, the relationship between women’s and men’s pay
Pay Equity at Work

had not changed, notwithstanding the adoption of the EPA, CRA and EO
11246. Then things started to change. By about 1980, the campaign to reduce
or eliminate the differential between men’s and women’s pay within the
EEOC and by the National Organization for Women (NOW) and other groups
was underway. It evolved interestingly in the next 20 years.

26
Comparable Worth
In about 1980, a theory of comparable worth emerged within the EEOC that
proposed expanding the EPA’s requirement of “equal pay for equal work”
to “equal pay for work of comparable worth.” Job worth (or value) was to
be measured by using the point-factor method of job evaluation. The point-
factor method had been in use by employers since the beginning of the 20th
century to measure the relative worth of jobs within an organization.
The point-factor method involves identifying a number of compensable
factors (typically five to 10). Compensable factors are those job elements for
which an employer is willing to pay (e.g., physical demands, responsibility,
communications, hazard, closeness of supervision) and human factors (e.g.,
education, training, judgment, attention to detail). The compensable factors
are then ranked, weighted, broken into degrees and assigned point values.
The result is the job evaluation scale.
All or some of the jobs in the organization then are evaluated and
assigned point values for each factor. Those factor-specific point values
then are totaled to give each job a point score. When the jobs are posi-
tioned by point values, they result in the job structure. What is called pay
structure mechanics (or architecture) then is applied to the job structure:
determine the slope of the wage-policy line, pay grades and rate ranges
(available in compensation textbooks or Kilgour 2008).
Most proponents of comparable worth favored using the four factors
identified in the EPA: skill, effort, responsibility and conditions (equally
weighted). The comparable worth concept was adopted by several public-
sector employers. However, it was not well received by private-sector
employers, the courts or most economists.
If job evaluation is done in good faith and applied to the whole organiza-
tion (top to bottom, wall to wall), it should not result in pay discrimination.
The problem, though, was that it was almost universal to use multiple
job-evaluation systems based on different weighted compensable factors: one
for predominantly male production workers and another for predominantly
female clerical workers. Comparable worth would have used one system.
Comparable worth was a departure from the traditional market-based (or
Pay Equity at Work

collectively bargained) wage determination process to a form of adminis-

tered pricing (wage setting). Rather than having wage rates determined by
the supply of and demand for particular types of labor, rates were to be set
by fiat, based on a rather complex methodology that was difficult to explain
and not without its critics.

27
 The Gender Pay Gap Today

Who could argue against equitable pay? It sounds

so nice. The problem was, equity is pretty much a
value judgment; it’s not quantifiable.

Under comparable worth, if a male-dominated job and a female-dominated

job had the same number of evaluation points, the pay of the female-dom-
inated job would be raised to that of the male job. For example, if the job
evaluation points of a secretary summed to roughly the same as that of a
truck driver, the two would be paid the same, higher rate. The problem with
this approach, other than the short-term additional labor cost, is that the
employer would be flooded with applications for secretarial jobs but would
be unable to attract and retain truck drivers once the wage rates evened out.
Comparable worth was an attempted end run around Section 703(h) of
the CRA and its employer defenses. Employers and the courts rejected the
concept: It was hard to explain, conflicted with a market economy and made
little economic sense.

Pay Equity and the Pay Gap

By about 1990, comparable worth had been replaced by pay equity. Who
could argue against equitable pay? It sounds so nice. The problem was,
equity is pretty much a value judgment; it’s not quantifiable. One person’s
equity could be another person’s inequity. Moreover, what could be more
equitable than wages determined by the labor market?
By about 2000, pay equity had morphed into the pay gap. The new
concept had none of the failings of comparable worth or pay equity. It was
consistent with a market economy, easy to understand and communicate,
and easy to measure. Both the BLS and Census Bureau regularly publish
Pay Equity at Work

slightly different data on women’s pay as a percentage of men’s. If that

number is subtracted from 100%, you get the pay gap. Today, the terms “pay
equity” and “pay gap” often are used interchangeably.

Measuring the Gap

Table 1 presents women’s annual earnings as a percent of men’s for selected
years 1960 through 2016. The Census Bureau and the BLS publish somewhat

28
different data. The Census Bureau measures earnings for workers ages 15
and older, the BLS for ages 16 and older. There may be other methodolog-
ical differences as well. The result is that the pay gap appears to be slightly
larger when Census Bureau data are cited. The Census Bureau data have the
advantage of going back to 1960. The BLS data series began in 1979.
In 1960, before the EPA, CRA and EO 11246, women earned 60.7% of what
men earned. By 1980, they earned about the same as in 1960 relative to men.
After that, the annual unadjusted ratio increased substantially to 80.5% by
2016. Thus, the pay gap was cut roughly in half, from 40% to 20%.
So, is the glass half full or half empty? The answer is: both. However, to
the EEOC, NOW and related organizations, most women and many elected
officials would say half empty.
Table 1 shows a roughly 20% pay gap remaining in 2015, and that is what
usually is cited. However, it’s based on annual data that takes no account of
the hours worked in a week or weeks worked in a year. When adjusted for
hours worked, the results are quite different.

Employees Paid Hourly

About 60% of individuals in the civilian labor force (CLF) are paid hourly.
Table 4 reports women’s pay as a percent of men’s for selected years 1980
through 2015. Hourly earnings are a better gauge of the pay gap because
they are not distorted by differences in hours worked. However, they miss
the 40% of the labor force paid by salary or commission.

TABLE 4  Women's Earnings as a Percent of Men's for Workers Paid Hourly, Selected Years 1980-2015

16 Years and
16-24 Years 25 Years and Older
Older

All
Year Total 16-19 20-24 Total 25-34 35-44 45-54 55-64 65+
Workers

1980 64.8 84.1 93.2 77.0 58.7 64.1 54.9 54.1 54.4 89.2

1990 77.9 91.0 93.8 90.1 71.8 79.4 68.7 64.3 66.2 89.6

2000 83.8 91.7 93.8 80.4 80.8 88.3 76.3 73.2 76.8 94.7
Pay Equity at Work

2010 86.0 93.6 97.8 91.7 85.6 91.9 82.9 79.9 83.2 93.8

2015 85.6 95.1 97.5 93.5 87.8 91.0 85.7 84.3 82.1 89.5

Percentage
20.8 11.0 4.3 15.5 29.1 26.9 30.8 30.2 27.7 0.3
Point

Percent change 32.1 13.1 4.6 20.1 49.6 42.0 56.1 55.8 50.9 0.0

Source: U.S. Department of Labor. Bureau of Labor Statistics. Highlights of Women's Earnings in 2015. November 2016. Report 1064.
Table 12. Retrieved from www.bls.gov/opub/reports/womens-earnings/2015/home.htm.

29
 The Gender Pay Gap Today

In 1980, women paid hourly earned 64.8% of what men earned (all age
groups). Thus, the hourly pay gap was 35.2%. By 2015, such women earned
85.6% of what men earned and the hourly pay gap had declined to 14.6%.
Table 4 also disaggregated the pay data by age groups. For hourly workers
ages 16 to 24, women’s hourly earnings as a percentage of men’s increased
from 84.1% in 1980 to 95.1% in 2015 and the pay gap declined from 15.9% to
4.9%. For women ages 25 and older, it is more complicated, as that’s when
the “motherhood penalty” kicks in.

The Motherhood Penalty

Many women withdraw from the labor force to bear and/or raise children.
However, the percent of women doing so for lengthy time periods had
declined significantly over the years. Table 5 reports the percent of employed
women by age of their youngest child. It has increased markedly for all
children’s ages since 1975, when the data series began. The recent decline is
attributable to the decline in LFPR exhibited in Table 3.
Women who withdraw from the labor force for several years lose their
seniority and accrued pay increases with their former employer. In addition,
their job skills may atrophy, technology changes and they get older. When
women re-enter the labor force, they often find that their earnings have
declined, though not by as much today as in earlier years. That is reflected
in the significant reduction in women’s earnings as a percentage of men’s for
those ages 20 to 24 compared to those ages 35 to 44 and older, exhibited
in Table 4. That’s the motherhood penalty. Interestingly, there seems to be a
“fatherhood bonus.”

TABLE 5  Percent of Employed Women by Age of Children, Selected Years 1975-2015

Ages of Children

Year <3 <6 6 to 17 <18

1975 34.3 39.0 54.9 47.4

1980 41.9 46.8 64.3 56.6

Pay Equity at Work

1990 53.6 58.2 74.7 66.7

2000 61.0 65.3 79.0 72.9

2010 61.1 64.2 77.2 71.3

2015 57.2 59.8 71.5 66.4

Source: For 1975-2010: U.S. Department of Labor. Bureau of Labor Statistics (2013). Women in the Labor Force: A Databook. Table 7,
pp. 21-23. For 2015: Databook (2016). Table 6, no pagination. Retrieved from www.bls.gov/opub/reports/women-databook/2016/home.htm.

30
 There is something missing: It’s not only the age of the youngest child
that is important, but also the number of children in the family. Based on
anecdotal evidence and personal experience, the magic number seems
to be three. If a family has three or more children, the cost of child care,
preschool, after-school programs and babysitters often becomes prohibitive.
Someone chooses to stay home with the kids, and that usually (but not
necessarily) is the mother.

Hours Worked Per Week

Full-time employment is defined by the BLS as 35 hours or more per week.
Men employed full time work on average more hours in the week than
women. As shown in Table 6, median weekly earnings for men in 2015 was
$895. For women, it was $726. By that measure, women earned 81.1% of
what men earned, which is consistent with the BLS data in Table 1. However,
in 2015 the average hours worked per week by men was 40.9, down from
41.5 in 1980. That compares to 35.9 hours for women, up from 34.5 in 1980.
Therefore, in 2015 men worked on average five hours more per week than
women, down from seven in 1980. The additional five hours per week
worked by men on average amounts to additional 250 hours per year (50 x 5
= 250). In turn, that amounts to an additional 31.25 eight-hour days per year,
and that’s significant.
When the weekly earnings are divided by the average hours worked, we
get an imputed hourly rate of pay. In 2015, that was $21.88 for men and
$20.22 for women. By this measure, women’s pay as a percent of men’s

TABLE 6  M edian Weekly Usual Hourly Earnings of Men and Women Employed Full Time Adjusted for Hours
Worked Per Week

Men Women

Women's
Median Average Imputed Median Average Imputed Difference
Hourly Pay
Year Weekly Hours Hourly Weekly Hours Hourly in Hours
as a % of
Earnings ($) Worked Rate ($) Earnings ($) Worked Rate ($) Worked*
Mens*

1980 313 41.5 7.54 201 34.5 5.83 7.0 77.3

Pay Equity at Work

1990 481 42.3 11.37 346 35.8 9.66 6.5 85.0

2000 641 42.5 15.08 493 36.4 13.54 6.1 89.8

2010 824 40.5 20.35 669 35.5 18.85 5.0 92.6

2015 895 40.9 21.88 726 35.9 20.22 5.0 92.4

*calculated by author.
Source: U.S. Department of Labor. Bureau of Labor Statistics. Earnings: Highlights of women's earnings in 2015. November 2016.
Report 1064. Table 3. Hours: Women in the labor force: A databook. April 2017. Report 1065. Table 22.
Retrieved from www.bls.gov/opub/reports/women-databook/2016/pdf/home.pdf.

31
 The Gender Pay Gap Today

In recent years, as educational attainment has

increased, the ratio of women’s pay to men’s has
declined. That is, women’s pay as a percentage of
men’s goes down with more education.

was 92.4% and the pay gap was 7.6%. Few would contend that workers
averaging 35 hours per week should earn as much as those working 40
hours per week.

Weeks Worked Per Year

Table 7 shows that in 2015, 85.6% of working men and 73.0% of working
women were full time. Thus, 14.4% of men and 27.0% of women worked part
time. More importantly, the table shows that 73.9% of men who worked full
time (35 hours or more per week) averaged 50 to 52 weeks per year. That
compares to 61.4% of such women. Again, few would contend that workers
working less than a full year (50 to 52 weeks) should have the same annual
earnings as those who do.

Educational Attainment
Education is another complication. As indicated in Table 8, unadjusted
women’s pay as a percentage of men’s has increased markedly for each of
the educational attainment categories shown. In recent years, as educational
attainment has increased, the ratio of women’s pay to men’s has declined.
That is, women’s pay as a percentage of men’s goes down with more educa-
tion. It is 80.4% for high school dropouts, 77.2% for high school graduates,
75.2% for an associate’s degree and 74.9% for college and university gradu-
ates. What explains this?
As more women have graduated from colleges and universities — and
favored certain fields of study — it has increased supply of labor and
Pay Equity at Work

depressed pay in those fields. Not all baccalaureate and advanced degrees
are the same. There are important differences among the fields studied.
Table 9 shows the choice and composition of college majors and annual
earnings one year after graduation by men and women. In terms of compo-
sition of major, women dominate in health care (88%) and education (81%).
There is little or no difference in pay among these jobs. Also, in the human-
ities, where women make up 60% of the majors, and in sciences, where the

32
composition is nearly equal, there is little or no difference in pay. In social
sciences and “other applied fields,” where women outnumber men, they
make only 83% and 87% of what men make, respectively.
Men dominate in computer science (81%) and engineering (82%), and
in those jobs women’s pay as a percentage of men’s is 77% and 88%,
respectively. There is no difference in pay in the sciences. In business
administration, gender representation in the major is about equal; however,
women earn only 84% of what men earn. Business administration is a very
broad topic and within it there are numerous subcategories designated as
options, areas and specialties. There are many more women in the human

TABLE 7  Percent of Men and Women Who Work Full Time and Part Time and Weeks Worked
Per Year in 2015

Full Time* Part Time**

Men Women Men Women

85.6 73.0 14.4 27.0

50-52 Weeks 73.9 61.4 7.0 14.6

48-49 Weeks 1.6 1.1 0.3 0.8

40-47 Weeks 3.1 3.7 1.2 2.3

27-39 Weeks 2.3 2.4 1.2 2.2

14-26 Weeks 2.9 2.6 2.1 3.6

1-13 Weeks 1.8 1.8 2.5 3.4

*Defined as 35 or more hours per week including vacation and sick leave.
**Defined as 1 to 34 hours per week including vacation and sick leave.
Source: U.S. Department of Labor. Bureau of Labor Statistics. Work Experience of the Population - 2015.
2016. USDL-16-2256. Table 1, p. 4. Retrieved from www.bls.gov.

TABLE 8  Women's Earnings as a Percent of Men's by Educational Attainment for Full-Time

Wage and Salary Workers 25 Years and Older, Selected Years 1980-2015

Bachelor's
Less than H.S. H.S. Grads No Some College
Year Degree or
Diploma College or AA Degree
Higher

1980 61.4 61.5 64.5 67.9

1990 68.8 68.6 72.9 72.2

Pay Equity at Work

2000 74.9 71.1 73.1 74.1

2010 79.8 76.5 75.5 74.1

2015 80.4 77.2 75.2 74.9

Change
19 15.7 10.7 7
1980-2015

Source: U.S. Department of Labor. Bureau of Labor Statistics. Highlights of women's earnings in 2015. November 2016. Report 1064.
Table 14. Retrieved from www.bls.gov.

33
 The Gender Pay Gap Today

resources option than in production and operations research at both the

undergraduate and graduate level (based on author’s observation). It is likely
that similar relationships would be found between the biological and phys-
ical sciences and between electrical and industrial engineering.

Differences Among States

The pay gap usually is discussed on the national level using national data.
Yet, women’s pay as a percentage of men’s varies significantly among states.
Table 10 presents data on median weekly earnings of men and women in the
five largest states, the five “best” and “worst” states, and the corresponding
women’s earnings as a percentage of men’s. These data are not adjusted for
hours worked, and the terms “best” and “worst” states reflect a value judg-
ment on the part of the author (that a smaller pay gap is good).
The five largest states are a good sample of the whole, representing about
37% of the civilian labor force. In them, women’s earnings as a percent
of men’s average 84.3%, with a range of 79.1% (Texas) to 87.4% (Florida).
Among the five “best” states, women’s pay as a percent of men’s averages
87.2% with a range of 85.8% (North Carolina) to 87.9% (Hawaii). Among the
five “worst” states the average is 74.1% with a range of 69.0% (Wyoming)

TABLE 9  C ollege Majors and Annual Earnings One Year After Graduation

ANNUAL EARNINGS
COMPOSITION of
CHOICE of MAJOR ONE YEAR AFTER RATIO
MAJOR
GRADUATION

(%) Men (%) Women (%) Men (%) Women ($) Men ($) Women (%)

Health Care 2 10 12 88 45,582 45,582 None

Education 4 11 19 81 33,180 33,180 None

Social Sciences 14 18 37 63 38,634 31,924 83

Other Applied Fields 14 16 30 61 36,208 31,382 87

Humanities 12 13 40 60 31,015 31,015 None

Pay Equity at Work

Computer Science 5 1 81 19 51,296 39,618 77

Engineering 12 2 82 18 55,142 48,493 88

Business 27 19 No difference 45,143 38,034 84

Sciences* 9 7 No difference 34,989 34,989 None

*Biological and physical sciences, mathematics and agriculture.

Source: Corbett, Christianne and Catherine Hill (2012). Graduating to a Pay Gap: The Earnings of Women and Men One Year After College Graduation. American Association of
University Women. Figures 3, 4 and 5, pp. 12-14. Retrieved from www.aaup.org÷files÷2013÷02÷graduating−to−a−pay−gap.

34
TABLE 10  Five Largest States and the Five Best and Worst States in Terms of Women's Pay
as a Percent of Men's Pay

MEDIAN WEEKLY EARNINGS

Women's
Men Women Earnings as a Pay Gap
($) ($) % of Men's (%)
($)

FIVE LARGEST
STATES

California 914 775 84.8 15.2

Texas 864 683 79.1 20.9

Florida 800 699 87.4 12.6

New York 939 816 86.9 13.1

Illinois 911 760 83.4 16.6

Average: 886 747 84.3 15.7

FIVE BEST
STATES

Hawaii 829 729 87.9 12.1

Florida 800 699 87.4 12.6

District of
1,224 1,070 87.4 12.6
Columbia

Delaware 848 740 87.3 12.7

North Carolina 774 664 85.8 14.2

Average: 895 780 87.2 12.8

FIVE WORST
STATES

Wyoming 948 654 69.0 31.0

North Dakota 912 682 74.8 25.2

Utah 878 660 75.2 24.8

Alabama 815 615 75.5 24.5

Nebraska 856 652 76.2 23.8

Pay Equity at Work

Average: 882 653 74.1 25.9

United States 895 726 81.1 18.9

Source: U.S. Department of Labor. Bureau of Labor Statistics. Highlights of women's earnings in 2015. November 2016. Report 1064. Table
3. Retrieved from www.bls.gov.

35
 The Gender Pay Gap Today

to 76.2% (Nebraska). And for the United States, the average is 81.1% with a
range of 60.9% (Wyoming) to 87.9% (Hawaii).
That’s quite a spread. What accounts for it? Much is attributable to the
states’ industry mix and employment mix. Wyoming’s economy is domi-
nated by oil and mining while Hawaii has a lot of service workers in the
tourist industry.
Table 11 adjusts the median weekly earnings of Table 10 by the average
hours worked by men and women in the state in a manner similar to Table
6. The order of the states is the same as in Table 10. The imputed hourly
rate of pay of women as a percent of men’s for the five largest states is
95.3% and the pay gap is 4.7%. The gap ranges from 2.5% (New York)
to 8.5% (Texas).
Among the five “best” states, the gap averages 4.4% and ranges from 2.8%
(Delaware) to 6.8% (Hawaii). And, among the five “worst” states, the average
is 11.4% and the range is 8.5% (North Dakota) to 15.1% (Wyoming).

SOLVING A PROBLEM THAT DOESN’T EXIST

Congress, the DOL and the EEOC should be careful in passing federal
legislation or adopting policies to correct a pay-gap problem that in all like-
lihood no longer exists. A pay gap that is reduced to 5% or less simply by
controlling for hours worked per week is not a serious problem. If we also
were to control for weeks worked per year, physical demands, hazard, shifts
worked, working conditions, industrial and occupation mixes and so on,
we would find that the pay gap is gone. Indeed, we may find that in many
states and metropolitan areas (labor markets), women on average earn more
than men on average. Then what would we do?
Even if that is not the case now, it soon will be. The unadjusted pay gap
was cut in half from 1980 to 2016 (Table 1). The forces responsible for that
improvement are still at work, including the:
❙❙ Growth in the labor force participation of women and the corresponding
decline in that of men
❙❙ Resulting entry of many women into decision-making and policy-making
positions throughout the economy
❙❙ Dramatic increase of women earning baccalaureate and advanced college and
Pay Equity at Work

university degrees in nontraditional women’s fields.

What has not been directly important in closing the pay gap is federal
legislation. The Equal Pay Act was hobbled by the employer defenses and
those limitations were extended to the Civil Rights Act by the Bennett
Amendment, Section 703(h). What did help indirectly were the nonpay
provisions of the CRA and EO 11246, which required affirmative action to

36
TABLE 11  Imputed Hourly Earnings of Men and Women in the Five Largest States and in the Five Best States and
the Five Worst States in Terms of Unadjusted Women's Pay as a Percent of Men's Pay as of 2014

Men Women

Women's
Imputed
Median Average Imputed Median Average Imputed
Hourly The Real
Weekly Hours Hourly Weekly Hours Hourly
Pay as Pay Gap
Earnings Worked Earnings Earnings Worked Earnings
a % of
Men's

FIVE
LARGEST
STATES

California 914 40.1 22.79 775 35.5 21.83 95.8 4.2

Texas 864 42.5 20.33 683 36.9 18.51 91.5 8.5

Florida 800 40.4 19.80 699 36.9 18.94 95.7 4.3

New York 939 40.4 23.24 816 36.0 22.67 97.5 2.5

Illinois 911 41.1 22.17 760 35.7 21.29 96.0 4.0

Average: 886 40.9 21.67 747 36.2 20.65 95.3 4.7

FIVE
BEST
STATES

Hawaii 829 39.1 21.20 729 36.9 19.76 93.2 6.8

Florida 800 40.4 19.8 699 36.9 18.94 95.7 4.3

District of
1,224 41.8 29.28 1,070 38.4 27.86 95.2 4.8
Columbia

Delaware 848 40.1 21.15 740 36.0 20.56 97.2 2.8

North
774 40.3 19.21 664 35.7 18.60 96.8 3.2
Carolina

Average: 895 40.3 22.13 780 36.8 21.14 95.6 4.4

FIVE
WORST
STATES

Wyoming 948 45.0 21.06 654 36.6 17.87 84.9 15.1

North
912 44.4 20.54 682 36.3 18.78 91.5 8.5
Dakota

Utah 878 41.1 21.36 660 33.9 19.47 91.2 8.8

Pay Equity at Work

Alabama 815 41.9 19.45 615 36.2 16.99 87.3 12.7

Nebraska 856 42.1 20.33 652 36.3 17.96 88.3 11.7

Average: 882 42.9 20.55 654 35.9 18.21 88.6 11.4

United
895 40.9 21.88 726 35.9 20.22 92.4 7.6
States

Source: U.S. Department of Labor. Bureau of Labor Statistics. For weekly earnings: Highlights of women's earnings in 2015. November 2016. Report 1064. Table 3. For
hours worked: Women in the labor force: A databook. April 2017. Report 1065. Table 22. Retrieved from www.bls.gov.

37
 The Gender Pay Gap Today

be taken by employers with 50 or more employees. They prohibited discrim-

ination in hiring, promotion and so on, and that contributed greatly to the
increased labor force participation and career advancement of women.
None of this is to recommend doing away with the EPA, CRA or EO
11246. When pay or other forms of discrimination are found, they should be
pursued administratively or by litigation. It also should not be thought that
women do not have other employment-related grievances. They do, as illus-
trated in Table 2. However, the pay gap problem has been addressed. z

ABOUT THE AUTHOR

John G. Kilgour, Ph.D., (john.kilgour@csueastbay.edu)  is professor emeritus in the Department of

Management at California State University, East Bay, where he taught compensation and benefits and
related courses for 30 years. He holds a bachelor’s degree in economics from the University of Connecticut
and an MILR and Ph.D. from Cornell University. He has published numerous articles on compensation and
benefits topics. He is a long-time member of WorldatWork and a frequent contributor to the WorldatWork
Journal.

REFERENCES

Alter, Charlotte. 2016. “Hillary Clinton Calls for Closing the Wage Gap on Equal Pay Day.” Time, April 12.
Viewed: Jan. 26, 2018. http://time.com/hillary-clinton-equal-pay-day.

Kilgour, John G. 2008. “Job Evaluation Revisited: The Point Factor Method.” Compensation and Benefits
Review 40 (4): 37-46.

Kilgour, John G. 2014. “The Pay Gap from a Different Perspective: Hours Worked and Geographic
Differences.” Compensation and Benefits Review 46 (4): 195-203.
Pay Equity at Work

38
 rewarding
reads

Being Transparent About

Pay Transparency
In early 2019, Citigroup  —  with strong encouragement from
activist Natasha Lamb at Arjuna Capital  —  offered a blunt
assessment of its gender pay gap. One of the world’s largest
banking groups, Citigroup revealed that its female employees
earn 29% less than men performing similar work.
Meanwhile, Bloomberg News  —  which covered the Citigroup
story  —  released a list of 230 companies committed to gender
equality in the workplace. Guess who showed up on the list of
companies performing well?
Citigroup.
How can a company be lauded for its advancement of women
and, at the same time, reveal a significant gender pay gap?
The news reveals how measuring and achieving pay equity
can be tricky. It also provides a moment to pause and reflect
on pay transparency.
Some companies have made public proclamations about
their pay equity. Others are beginning to take steps toward
achieving pay equity but are keeping their efforts under wraps.
The fear of finding problems is enough for well-meaning
lawyers to advise against any public statements or even
discuss efforts among employees. And far too many other
companies have remained completely silent on the issue,
adopting a head-in-the-sand approach and hoping the pay
equity movement will quietly pass.
The truth is that resolving pay disparities due to gender or
race is a completely solvable problem. And yet, the problem
persists. As a CEO and mother of four daughters, this is both
troubling and encouraging.
To move toward lasting change, we must push forward a new
“We are committed to pay equity and,
as part of this commitment, we will
regularly analyze our pay and we will be
transparent with you about the results.”
Many critics may now rush to shame
Citigroup for paying women less than
men. And there’s no question that
Citigroup has much work to do. But
anyone expecting a company the size
and scale of Citigroup to lack pay equity
issues is simply disconnected from
the reality of pay and gender today.
We should laud Citigroup’s decision
to share this information with its
people and shareholders. The first step
toward solving a problem is acknowl-
edging that it exists. Only then can
solutions follow.
Maria Colacurcio is the CEO at Syndio Solutions Inc.,
a software analytics company that focuses on pay
disparities.
Pay Equity at Work

approach, leverage technology and applaud transparency,

even when it reveals disparities. Addressing pay inequality
requires leadership commitment. When a leader commits to
analyzing pay, they must have the confidence and courage to
know that, in most cases, the company will find at least some
areas of inequity.
Employees don’t expect perfection, but they deserve trans-
parency. The most effective approach a company can take
when addressing the pay gap is to say openly to its people, Maria Colacurcio
39
 False Positive,
False Negative
BEYOND THE SURFACE
OF GENDER PAY EQUITY

BY NARINE KARAKHANYAN AND

JOSH SCHAEFFER, EQUITY METHODS
June/Julyat
Pay |Equity Work
2018

40
56
57
June/July 2018

41
Pay |Equity at Work
 Shareholders are demanding it. Governments are
legislating it. From Hollywood to Washington, tech-
nology to nursing, Millennials to Boomers, equal
pay for equal work is now front-page news. With
long-simmering tensions reaching the boiling point,
gender pay equity has become a key issue that busi-
nesses can no longer avoid.
BREAKING DOWN THE GAP
Statistics can be inconsistent and even contradictory.
One study might show high levels of inequality across
a range of metrics. Another might appear to explain
gender pay differences by variables such as age, edu-
cation and experience.
Where’s the truth? Buried in the details. Only through
close examination of their own payrolls — and using
and synthesizing results from multiple methods — can
companies unpack the drivers behind variations in pay.
Once they know these, then they tackle any gaps for
which there is no reasonable explanation.
We wish we could tell you about a well-established,
add-water-and-stir technique for understanding
gender pay equity. The truth is that superficial anal-
yses are prone to what, in statistics, are called Type
1 (false positive) and Type 2 (false negative) errors.
A false positive concludes there is a pay equity
problem when there really isn’t one. A false nega-
tive fails to identify a pay equity problem when one,
in fact, exists.
Your compensation strategy and overall pay fair-
ness deserve a more nuanced approach. Here, we’ll
show how different statistical analyses can help
explain variations in pay, then discuss ways to form an
effective plan of action. There’s no silver bullet: Each
Work
method has merit but answers different questions.
2018
Still, it’s an analytical journey that anyone can take
June/Julyat
— one that can help you uncover actionable insights
Pay |Equity
about gender pay equity in your own organization.
GETTING THE NUMBERS
Methodology I: Simple Average
Let’s begin our journey with the most basic of tests:
Calculate the average compensation of all male
4258
employees, then compare it with the average com-
pensation of all female employees.
The advantage of this approach is that it’s simple.
That’s the reason it’s likely the first step in any
well-conducted gender test. The disadvantage is
that, by itself, it tells you very little — and might
even mislead your analysis.
To illustrate, suppose the men in a company have
more senior roles than women. This could be the
result of men having more experience. On the other
hand, it could be that men are awarded more senior
titles for doing the same job. Simple averages tell us
nothing about these possibilities. Therefore, stop-
ping there is insufficient.
Methodology II: Matched Difference of Means Test
A somewhat more sophisticated approach is to look
at the pay difference between two otherwise similar
groups doing the same job at the same time. If the
average male income in each group exceeds that of
the average female, there could be a problem.
This method, called a difference of means test, is
straightforward enough. It also allows for a modest
amount of further testing to see if any difference is
statistically significant or meets the intended frame-
work of equal pay for equal work.
But difference of means testing still isn’t sufficient to
determine gender pay inequity. For one thing, it doesn’t
always account for variables such as tenure, perfor-
mance or job complexity. Neither does it expose pay
differences in roles or job levels that are exclusively
male or female. Finally, a difference of means test
provides no information about differences between
employees in different groups.
Methodology III: Multiple Regression Analysis
For comparing employees across different groups, we
have regression analysis. A regression analysis requires
control variables that explain the pay gap between
different groups. These might include rank, tenure, edu-
cation and performance evaluations. Regression analysis
also lets you test for the effect of other non-numerical
variables such as gender and leave of absence.

Pay Role Experience Demographic Unexplained
Factors
Women
Men
Figure 1 | Explaining Differences in Pay Gap Using
Role, Performance and Other Factors
Here’s an example: Suppose the women in your
company earn 75 cents for every dollar their male
counterparts make. A regression analysis detects
that a big portion of the gap is due to role and
experience plus other demographic factors such as
education and location. However, some of the gap
remains unexplained, requiring additional analysis
and investigation. (See Figure 1.)
Regression models offer a great degree of flexibility.
They can explain not only the value impact of these
variables (i.e., how much someone can expect to make
from one additional year of tenure), but also the value
differential related to gender or any other area of con-
cern. On top of that, regression models can show how
the value of a variable (such as experience) can differ
across roles or departments. They even can show the
statistical likelihood of potential inequity.
What about employees that the model identifies
as outliers? Regression analysis can flag them for
further examination. For instance, Figure 2 shows a
case in which most employees earning less than the
expected salary range are female, indicating poten-
tial bias. But further analysis reveals that while most
of the company’s employees are in New York, the
lower-paid group works in Kansas City, where the
cost of living is substantially less.
None of this completely rules out a dimension of
underpayment. But multiple regression analysis can
yield an idea of which variables matter, to what extent
they account for differences in pay and whether
there’s any part of the pay difference that these vari-
ables don’t explain.
Understanding the Difference:
Distinguishing Self-Selection from Inequity
Statistical analyses can do a good job of identi-
fying differences between pay, but they don’t do
much to explain why those differences are happen-
ing. Consider an individual who self-selects out of a
particular type of role. It could be because the role
is hazardous. More men than women accept those
hazards and, as compensation for the inherent risk
in the job, they demand higher pay.
Then again, pay inequity just might be due to selec-
tion bias or a glass ceiling. Consider the company in
Figure 3. Here, by all indications, pay levels are easily
explained by factors such as role, experience and per-
formance. This still doesn’t tell us whether women
might be afraid to ask for promotions — or whether
men are promoted more than women.
Although job and experience levels affect pay,
Glassdoor’s 2016 “Demystifying the Pay Gap” study
found that industry and other socioeconomic fac-
tors (e.g., college major, career decisions) carry more
weight and these often are imbalanced by gender. In
other words, statistical analyses can do only so much
Kansas City New York Male
Average = $50,000 Average = $80,000 Female
Pay Equity at Work
Expected
salary
range
| June/July 2018
Below expected
salary range
Figure 2 | Identified Inequity Is Due to Geography
and Likely Not Problematic
43
59
 Multiple regression analysis can yield an idea of which variables matter,
to what extent they account for differences in pay and whether there’s
any part of the pay difference that these variables don’t explain.

as women declining to work on an oil rig, then a dif-

Job Level 1-5 Job Level 6-10 Male ferential in average pay might be acceptable for your
50% Female 20% Female Female
organization. On the other hand, if company-specific
factors are keeping women out of high-performance/
high-pay roles — or women have a higher rate of exit-
ing executive positions — you might be looking at
Expected
some serious remediation.
salary Finally, issues may be economically systemic,
range such as male computer programmers outnumber-
ing female ones. In that case, it can be particularly
difficult to develop a gender-balanced workforce.
Although workforce training may be an effective
starting point, industrywide collaboration on items
Figure 3 | Regression Analysis Can Fail to Detect a such as schooling, youth programs and support
may be required to eliminate persistent gender
Glass-ceiling Effect if Role Is Included
imbalances in a long-term and sustainable manner.
By all indications, gender pay equity is an issue
that’s here to stay. A simplistic approach to deal-
to explain differences in gender pay. Companies ing with it can fail to identify the root cause of pay
must be prepared to investigate thoroughly which inequity and lead to action that’s counterproductive
drivers of pay might unwittingly link to gender or at best.
other biases. Experience tells us that a thorough, rigorous analysis
is needed to match effective solutions with the appro-
FIXING THE PROBLEM: BUILDING A PLAN priate problems. With that, boards of directors and
If you do identify a problem, the changes you make shareholders can be assured that wherever gender
should be tailored to your organizational results and pay issues may come up, the task of resolving them is
Work

needs. Equal pay issues within the same position in the right hands.
2018

might be the easiest fix because it’s often possible to

June/Julyat

set up pay grades and make sure they’re consistently Josh Schaeffer is a director in Equity Methods’ valuation practice.
Pay |Equity

He can be reached at josh.schaeffer@equitymethods.com. Connect

applied between genders. Large adjustments can be with him on LinkedIn at linkedin.com/in/josh-schaeffer-1268097/.
taken right away. Small differences can be smoothed
by adjusting raises and bonuses. Narine Karakhanyan is a senior consultant in Equity Methods’
valuation practice. She can be reached at narine.karakhanyan@
Other problems are harder to solve. For example, if equitymethods.com. Connect with her on LinkedIn at linkedin.com/
women are less prevalent in higher-paid roles, compa- in/narine-karakhanyan-5731a5b/.
nies need to think about why. If it’s some factor such
44
60
 future
look

Mind the Gap: Seeking

Far-Reaching Solutions
to Pay Equity
The gender pay gap has closed some since the Equal Pay Act
was signed in 1963, but many politicians and media accounts
cite studies that claim women are still paid 80 cents for every
dollar paid to men. Some compensation thought leaders
contend such conclusions are oversimplifications because
they fail to consider job-related pay equity factors such as
disparate pay for different professions, the availability of
advancement opportunities, education, work experience,
tenure and pay-for-performance.
Many countries are addressing pay
equity and the gender wage gap. “It’s an
issue that employers must address,” said
Melissa Murdock, WorldatWork director
of external affairs. Until the gap closes,
policy makers will continue to search for
solutions to force the issue.
Brett Christie is a staff writer at WorldatWork.

Korn Ferry research discovered that when evaluating men

and women at the same job level in the United States, such as
director, the wage gap falls from around 20% to 7%.
And when considering the same level within the same
company, the gap is further reduced to 2.6%. When male
and female employees at the same level and the same
company worked in the same function, the average gap
amounted to 0.9%.
This special issue has two articles that challenge the “80
cents on the dollar” contention:
John H. Davis, Ph.D., CCP, takes a deep statistical dive into the
gender pay gap on Page 64 and John Kilgour, Ph.D., details the
colorful history of gender pay gap legislation on page 20.
However, Korn Ferry associate client partner Tracy Bosch, who
is based in Canada, said an unconscious bias in pay still exists.
Pay Equity at Work

“I get disheartened when I hear HR leaders and reward

professionals tell me that gender pay is not a priority issue
for them because they’ve done their pay equity analysis
and closed gaps where they needed to,” Bosch said. “In the
majority of cases, pay equity analyses are approached from
the perspective of compliance with legislation and don’t go
far enough to identify and address opportunities to close the
actual gender pay gap.”

45
46
Pay Equity at Work
 Pay Equity
Management
Practices:
A Survey of C-Suite
and Rewards Leaders

Understanding how to approach, diagnose and address pay

equity concerns has never been more important. Organizations
that proactively focus on addressing pay equity management
will not only be compliant with a changing regulatory envi-
ronment and reduce their risk of litigation, they will benefit by
increasing the trust and engagement levels of their employees
and better position their organizations as an employer of choice.
A vast majority of the 335 respondents to the 2019 WorldatWork-
Korn Ferry survey “Pay Equity Practices: Survey of C-Suite and
Rewards Leaders,” are either currently taking action on pay
equity issues (60%) or considering addressing those issues in
the near future (33%).

Pay Equity at Work

Tom McMullen
Korn Ferry

47
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders
P
ay equity is one of the most
complex, multifaceted, sensitive
and visible people issues facing
organizations today. Understanding how
to approach, diagnose and address pay
equity concerns has never been more
important. Today’s business, regulatory,
political and social climates are converging
to place unprecedented levels of scrutiny
on what organizations are doing — or
not doing — to ensure they are fostering
an inclusive environment in which all
employees have equal opportunity to
thrive, develop and be rewarded. This is
an issue of equal opportunities for access
to employment opportunities, as well as for
compensation once employment opportuni-
ties are realized.
Today, more than 80 countries have some
form of “equal pay for equal work” laws,
and more than a quarter of those have some
sort of mandatory reporting requirement.
In the United States, 44 states have unique
pay equity legislation (Seyfarth Shaw 2018).
Another 34 states and cities have recently
Pay Equity at Work
enacted legislation that bans employers from
enquiring about a candidate’s compensa-
tion history (Salary History 2019). Some of
the key themes behind recent changes of
enacted legislation include:
❙❙ Banning employers from enquiring about a
candidate’s compensation history.
48
❙❙ Broadening definitions of protected classes.
❙❙ Placing more burden on employers to
demonstrate pay equity practices.
❙❙ Providing a higher level of compensatory
damages to plaintiffs.
❙❙ Widening the statute of limitations from
which an employee can file a claim.
❙❙ Limiting legal risk for organizations proac-
tively remediating pay equity gaps.
In Western Europe, organizations are
increasingly being required to report data
on their organization’s gender pay gap. For
example, since 2018 the United Kingdom
has required companies with more than 250
employees to report their gender pay gap
data (Korn Ferry 2018a).
While the U.S. Equal Pay Act of 1963
brought forth the notion of “equal pay
for equal work,” this was focused only
on gender-based pay differences. Title
VII of the Civil Rights Act of 1964 further
expanded these protections by prohibiting
pay and employment discrimination on the
basis of race and national origin (Seyfarth
Shaw 2018). However, the overarching pay
gap between men and women in many
countries (including the U.S.) averages about
20% in favor of males. This is the raw pay
gap (i.e., compensation for all men versus all
women). After factoring in job level, func-
tion and company comparisons, the 20%
gap tends to drop to between a 1%-2% gap
in most countries. The data indicate that much of the raw gender pay gap is a
function of unequal access to higher-paying executive jobs and jobs in science,
technology, engineering and math (STEM) fields (Korn Ferry 2018b).
Increasingly, CEOs and human resources leaders in forward-looking organi-
zations are placing a strategic focus on the pay equity issue rather than solely
checking the box on regulatory compliance (Tomorrow’s Company 2014). Why?
Because it makes good business sense to do so. Research indicates that organiza-
tions with diverse leadership teams, fair rewards systems and talent management
processes that foster inclusiveness, development and increased capacity for all
employees financially outperform those that don’t. CEB, Catalyst and McKinsey
research all show that more diverse executive teams have much better finan-
cial returns than those that are not as diverse (Korn Ferry 2019). People from
different backgrounds look at problems from a different perspective and are
likely to come up with different ideas to solve them. Furthermore, Korn Ferry
(2019) research shows that organizations with more engaged employees finan-
cially outperform those with less engaged workforces.
C-suite leaders see this as an opportunity to “do the right thing,” improving
trust and engagement in the organization and employer brand. There will obvi-
ously be winners and losers in this area, based on actions that are taken — or
not taken. Organizations will likely need to demonstrate both of the following:
❙❙ That adapting to change will likely result in a much more positive future for
the organization.
❙❙ That not doing so will likely result in an unacceptably negative future for
the organization.

RESEARCH FINDINGS
Participant Characteristics: A sample of WorldatWork members, Korn Ferry
clients and registered website users were invited to participate in this research
in the spring of 2019. A total of 335 respondents from a diverse range of
industries and organization sizes participated in the survey. Most respondents
identified themselves as C-suite executives (36%) or total rewards leaders (60%).
This survey is relatively unique given the high number of C-suite participants
(WorldatWork and Korn Ferry 2019).
Pay Equity at Work

Prevalence of Action: The research indicates that a majority of organiza-

tions have taken action on pay equity management (60%). Most of the 40% of
organizations that have not taken any substantive action on the issue say they
are considering taking action in the near future. As indicated, the status quo is
becoming less of an option for organizations, in large part due to new regulatory
and reporting environments. (See Figure 1.)

49
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

Program Objectives: One of the key considerations for any pay

equity assessment is the primary objectives of the work. This research
identifies three primary organization objectives in these initiatives. (See
Figure 2.) These are:
❙❙ Building a culture of trust in the organization (31% of all organizations).
❙❙ Being legally compliant given the changing regulatory landscape (24% of
organizations).
❙❙ It makes good business sense to focus on pay equity (16% of organizations).
Direction and Ownership: It’s interesting to note that objectives vary
considerably between C-suite and rewards leaders. C-suite leaders are more
focused on building a culture of organization trust via pay equity initiatives
while rewards leaders are more focused on legal compliance objectives. Pay
equity initiatives are typically chartered by either the CEO/C-suite or by the
HR function. (See Figure 3.) However, perceptions vary significantly between
the C-suite and HR about who is actually driving the work. The different
perspectives on program objectives between HR and the C-suite, as well as
perceptions on who is driving the initiative, can have significant impacts on
how these initiatives are executed — particularly in implementation, communi-
cations and integrating these efforts with other people management processes.
Likely because of organization size, C-suite leaders tend to drive pay equity
initiatives in smaller companies and HR drives them in larger companies.
While much of the regulatory, political and social spotlight has been on
gender pay equity issues, the demographic focus of corporate pay equity
work is typically on both gender and ethnicity (46% of organizations)
versus solely gender pay equity (18%). (See Figure 4.) Many other organi-
zations report including additional demographic factors in analyzing pay
equity, such as age.
Once a pay equity management initiative has been chartered, HR tends
to be the process owner. The legal function, while not owning the process,
is often an integral part of the team, particularly in larger organizations.
Including the legal function in the work is key, not only because of the legal

FIGURE 1  Level of Pay Equity Assessment Activity

Pay Equity at Work

We are taking action 60%

On our radar but we are

33%
not taking any action yet

Not on our radar 7%

Source: WorldatWork and Korn Ferry 2019.

50
FIGURE 2  Primary Objectives of Pay Equity Initiative

All Organizations C-Suite Reward

Legal compliance given 24%

10%
changing regulations 31%

Align our actions with 10%

13%
employee expectations 9%

Build/maintain a culture 31%

41%
of organization trust 26%

Remove bias from 8%

7%
programs and practices 10%

Close overall (raw) 6%

4%
gender wage gap 8%

Because it makes busi- 16%

19%
ness sense to do so 13%
4%
Other 6%
4%

Source: WorldatWork and Korn Ferry 2019.

FIGURE 3  Primary Group Driving Pay Equity Initiatives

All Organizations C-Suite Reward

5%
The Board of Directors 6%
5%

The CEO/Senior 37%

64%
Executive team 22%

52%
The HR function 26%
66%
Pay Equity at Work

2%
The Legal function 0%
3%

4%
Other 4%
4%

Source: WorldatWork and Korn Ferry 2019.

51
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

FIGURE 4  Demographic Focus of the Work

Gender 18%

Ethnicity 0%

Both gender and

46%
ethnicity

Additional demographics 36%

Source: WorldatWork and Korn Ferry 2019.

issues and implications associated with the work, but the ability to protect
the confidentiality of the work product via attorney-client privilege.
Demographic Focus: For participating organizations, the geographic
focus of work is primarily the U.S. and North America. (See Figure 5.) This
is intuitive given the demographics of survey participants. Multinational
organizations conducting pay equity assessment work in multiple coun-
tries reported the propensity to conduct assessments across all countries
in which they operate versus a subset of those countries. This practice
may imply a somewhat mature analytic process in place for large multina-
tional corporations.
Resourcing: Many organizations use solely internal resources in initiatives.
Organizations using external resources typically rely on external compensa-
tion/HR consultants, followed by external legal counsel and then by external
statisticians. External communications consultants are rarely used. Smaller
organizations tend to favor external compensation/HR consultants. Larger
organizations use external legal counsel and statisticians. C-suite respondents
tend to use external compensation consultants. (See figures 5a and 5b.)
Analysis Approach: The most common data analysis methodology used
by organizations in pay equity initiatives is basic descriptive statistics (e.g.,
averages, medians, percentage differences) by employee group. Descriptive
statistics are also favored by smaller organizations while larger employers
tend to favor multivariate regression analysis. (See Figure 6.)

FIGURE 5  Geographic Focus of the Work

Pay Equity at Work

In the U.S.
68%
(or North America)

In several countries, but

8%
not all countries

In all countries in which

24%
we operate

Source: WorldatWork and Korn Ferry 2019.

52
FIGURE 5A  External Resourcing by C-Suite vs. Rewards Respondent

All Organizations C-Suite Reward

Solely internal 41%

43%
organization resources 40%

24%
External statisticians 13%
31%

33%
External legal counsel 21%
41%

External compensation/ 37%

60%
HR consultants 24%

External communications 2%
4%
consultants 1%
5%
Other 4%
5%

Not applicable/ 4%
3%
I don’t know 3%

Source: WorldatWork and Korn Ferry 2019.

FIGURE 5B  External Resourcing by Small vs. Large Employer

All Organizations C-Suite Reward

Solely internal 41%

34%
organization resources 44%

24%
External statisticians 47%
11%

33%
External legal counsel 53%
15%

External compensation/ 37%

26%
HR consultants 51%

External communications 2%
2%
consultants
Pay Equity at Work

1%
5%
Other 5%
6%

Not applicable/ 4%
3%
I don’t know 5%

Source: WorldatWork and Korn Ferry 2019.

53
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

While there are no federally mandated approaches to pay equity analysis,

U.S. courts have shown favor to multivariate regression approaches, which
is a more robust statistical analysis because of its ability to handle multiple
predictors of pay simultaneously in a model and to test for statistically signif-
icant differences in compensation between employee groups.
There is a place for both types of analyses. Descriptive statistics can be
used to identify high-level differences in pay between groups and can also
be used in smaller populations where data may be too thin for a multivariate
regression analysis. If there are differences in pay between employee groups,
multivariate regression analysis can provide more precise data in under-
standing those group differences.
Eligibility for Equity Adjustments: Most organizations take an inclusive
view of eligibility for pay equity adjustments, allowing any employee (irre-
spective of protected class) to be eligible. The C-suite in particular favors this
view. Rewards leaders tend to favor treating only members of the protected
class. A majority of organizations treat employees with a pay equity adjust-
ment where there are statistically significant differences in pay across
employee groups. (See Figure 7.)
Employees Receiving Increases: Organizations typically treat less than
5% of the workforce with pay equity adjustments. Smaller organizations tend
to treat a slightly higher percentage of their employees than do larger orga-
nizations. Pay equity adjustments, as a percentage of base salary, typically
range from 4% to 6% for those receiving increases. Therefore, pay equity
adjustments as a percentage of total base salary budget are in the range of
0.1%-0.3%. (See Figures 8 and 9.)

FIGURE 6  Primary Analysis Methodology

All Organizations C-Suite Reward

Basic statistics 56%

36%
(e.g., medians, averages) 82%

Multivariate regression 37%

59%
Pay Equity at Work

analysis 9%

4%
Management discretion 5%
5%

Not applicable/ 3%
0%
I don’t know 4%

Source: WorldatWork and Korn Ferry 2019.

54
FIGURE 7  Eligibility for Pay Equity Adjustments

All Organizations C-Suite Reward

To employees of a protected class 71%

who are paid substantially below 62%
expected/target levels 76%

To employees who are paid 79%

substantially below expected levels, 90%
irrespective of protected class status 72%

Only if there are statistically 59%

significant differences in pay 62%
across employee groups 58%

Source: WorldatWork and Korn Ferry 2019.

FIGURE 8  Percentage of Workforce Receiving Pay Equity Adjustments

All Organizations C-Suite Reward

We do not make/have not 13%

17%
made any equity-related pay 12%

31%
0.1-1% employees 34%
22%

33%
1.1-5% employees 26%
38%

13%
6-10% employees 10%
14%

5%
11-20% employees 7%
8%
1%
21-35% employees 3%
1%

Greater than 35% of 3%

2%
employees 5%

Source: WorldatWork and Korn Ferry 2019.

FIGURE 9  Adjustments as a Percentage of Base Salary for Those Receiving

From 1-3% of base salary 19%

From 4-6% of base salary 41%

Pay Equity at Work

From 7-10% of base salary 17%

From 11-15% of base salary 2%

Greater than 15% of
0%
base salary
NA 20%

Source: WorldatWork and Korn Ferry 2019.

55
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

Communications and Implementation: There are at least two types of

communications that organizations make following a pay equity assessment
initiative: broad program communications and individual employee commu-
nications. Most organizations report broadly communicating the intent and
general findings of the pay equity analysis to senior leaders (90%), then
followed by people managers (65%). A minority of organizations provide
broad-based communications to all employees (27%). A greater percentage of
companies (52%) communicate the program only to employees receiving an
increase. (See Figure 10.)
Most organizations avoid explicitly noting internal equity adjustments as
such and instead bundle them with other pay increases (e.g., market, perfor-
mance). This is likely due to pay equity increase processes becoming part of
the normal cadence of compensation management, as well as a risk mitiga-
tion strategy. (See Figure 11.)
Overall Program Effectiveness: Most organizations positively view
various aspects of their pay equity management processes. Organizations are
most favorable about their pay equity remediation strategies and how they

FIGURE 10  Broad-based Pay Equity Communications

All Organizations C-Suite Reward

90%
Senior Leaders 93%
89%

65%
People Managers 78%
57%

27%
All Employees 40%
21%

Only employees affected 52%

53%
by an adjustment 50%

Source: WorldatWork and Korn Ferry 2019.

FIGURE 11  Individual Employee Pay Equity Communications

Pay Equity at Work

Explicitly noted as provided to the employee

27%
as a result of a pay equity initiative

Not explicitly noted as a pay equity adjustment

64%
and bundled with other pay increases

Other 9%

Source: WorldatWork and Korn Ferry 2019.

56
are closing wage gaps around equal pay for equal work between employee
groups. The most room to improve for organizations is in closing aggregate
pay gaps across the organization. (See Figure 12.)

RECOMMENDATIONS
Based on this research, as well as consulting experience with clients, the
following recommendations are provided to guide organizations in their
analysis and management of pay equity.
Scope, Objectives and Approach: Given the regulatory, social and
business environment, addressing pay equity assessment and management is
becoming the only viable option for organizations. A key first step for orga-
nizations is to ensure alignment between the C-suite and HR/total rewards
leadership regarding the scope, objectives and approach to this work. As
seen in this research, C-suite and total rewards leaders often have different
perspectives and priorities within the context of pay equity. Companies
should also ensure that the legal function is involved to preserve attor-
ney-client privilege and safeguard the work product. External resources (such
as rewards consultants, statisticians and outside legal counsel) should also be
considered, as needed, to ensure organization capability gaps are covered.

FIGURE 12  Overall Program Effectiveness

We have a pay equity strategy

74%
guiding our work

We have the right data to

79%
conduct pay equity analyses

We are confident in our pay equity

80%
analysis methodology

Our remediation strategies are

84%
improving pay equity

We are addressing compensation

strategy, design and execution as 80%
part of our pay equity work
We are addressing talent acquisition
Pay Equity at Work

and talent management programs as 75%

part of our pay equity work

We are closing gaps in equal

84%
pay for equal work

We are closing aggregate pay gaps

68%
across employee groups

Source: WorldatWork and Korn Ferry 2019.

57
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

As part of the approach to this work, current job titles, classifications

and job grades are often assumed as correct by organizations. Our expe-
rience shows that this underlying assumption is often incorrect. Because
job grouping definitions are a critical foundation for pay equity analyses,
care should be taken in ensuring that job titles, job grades and employee
job mappings are accurate. If they are not correct, these gaps should be
addressed before embarking on a pay equity analysis.
Analysis: Organizations should consider using a combination of basic
descriptive statistics and multivariate regression analysis in supporting a pay
equity analysis. Basic descriptive statistics provide an intuitive high-level risk
assessment. In addition, they are useful for small group comparisons where
there is not adequate data density for a regression analysis. Multivariate
regressions provide the ability to handle multiple factors (variables) that
simultaneously affect pay levels, as well as the ability to test for statistically
significant differences in pay. Organizations using only descriptive analyses
will be missing underlying causal factors in pay differentiation and, therefore,
will likely be spending more money than needed to remediate pay gaps.
Remediation: Understand and consider trade-offs between an inclusive
(i.e., any employee) and exclusive (i.e., only members of a protected group)
view of pay remediation. Inclusive views are more common and carry less
legal risk but are more expensive to close gaps. Model different remediation
scenarios to understand budgetary impacts and the degree of closing pay
gaps. Any individual pay remediation should start with the most significant
pay outliers relative to the group.
Organizations will likely be best served by bundling pay equity-related pay
adjustments with other increases as part of the annual base salary increase
cycle. Doing this as part of a regular administration cycle reinforces that
pay equity management is part of the organization’s normal compensation
administration process.
Budgeting: Financial allocation for increases should be an iterative
process in organizations (at least in initial analyses) starting with a prelim-
inary assessment and testing of different funding options to start to close
pay gaps. HR, working with senior leadership, can then determine funding
Pay Equity at Work

levels and a course of action based on pay equity objectives, current issues
and available resources. It is important to note that organizations do not get
themselves into pay equity issues overnight and they will not end them over-
night. Organizations should view pay equity management as a journey versus
a one-time event. And the courts look more favorably on organizations that
have assessed their issues, have a plan for addressing them and have a track
record at closing these gaps.
58
 Communications: As pay equity management is becoming a more inte-
gral part of the total rewards framework, organizations should consider
refining their rewards strategy to directly address internal equity pay
management principles. For example:
❙❙ We hold pay equity as a key tenet of our reward strategy.
❙❙ We examine pay equity on an ongoing basis.
❙❙ We review pay equity by a number of key employee characteristics.
❙❙ We provide pay equity adjustments, as needed.
Consider individual employee pay equity increase communications as
part of ongoing salary increase management processes that complement
the bundling of pay equity increases as a component of the broader salary
increase program.
Sustaining the Program: As mentioned previously, pay equity manage-
ment is a marathon, not a sprint. Organizations focused on a sustainable
process should consider conducting periodic reviews and address pay dispar-
ities across employee groups. Consider measuring effectiveness in pay equity
management by keeping a scorecard of progress, consisting of:
❙❙ Closing of significant equal pay for equal work gaps across employee groups
(e.g., gender, ethnicity)
❙❙ Closing raw/aggregate pay gaps across employee groups over time
❙❙ Improving the perception of pay equity and fairness via engagement surveys
❙❙ Making inroads in talent management and diversity and inclusion objectives.
One can argue that pay equity issues are a symptom of a broader problem
of “employment equity” and differences in treatment across the entire
talent supply chain (i.e., talent acquisition, talent management and reward
management processes) over the course of an employee’s career. To ensure
a robust assessment of your pay equity management program, consider
reviewing processes across the talent supply chain to focus on the following
drivers of pay equity:
❙❙ Rewards management: Work structures, job evaluation, base pay delivery,
promotion guidelines, bonus calibration and payouts.
❙❙ Talent acquisition: Hiring guidelines, candidate distributions, compensation
offers and offer approval processes and employer branding.
Pay Equity at Work

❙❙ Leadership: Beliefs and values of leaders that drive an inclusive approach

to leadership and behaviors in attracting, motivating, developing, promoting
and retaining key talent.
❙❙ Culture: An organization’s values, tolerated and encouraged behaviors and
employee engagement.
❙❙ Talent management: High-potential candidate identification, career manage-
ment, promotion practices and distributions and succession management.
59
 Pay Equity Management Practices:
A Survey of C-Suite and Rewards Leaders

❙❙ Performance management: Performance goal setting, coaching, assessment

and pay-for-performance.
Organizations that proactively focus on addressing pay equity management
will not only be compliant with a new regulatory environment and reduce
their risk of litigation, they will benefit by increasing the trust and engage-
ment levels of their employees and better position their organizations as an
employer of choice. z

EDITOR’S NOTE

The author would like to acknowledge the substantive contributions of Alison Avalos, director of total
rewards strategy and membership at WorldatWork; Lindsay Strack, research manager at WorldatWork;
and Prachi Khanna, senior consultant at Korn Ferry.

ABOUT THE AUTHOR

Tom McMullen (tom.mcmullen@kornferry.com) is a Global Rewards and Benefits thought leadership

and intellectual capital leader for Korn Ferry. He is based in Chicago. McMullen has more than 30 years
of combined HR practitioners and rewards consulting experience. His work focuses primarily on total
rewards, organization effectiveness and performance engagement program design. Prior to joining Korn
Ferry, McMullen worked for Humana Inc. and Kentucky Fried Chicken Corp. in senior compensation analyst
roles. He holds a bachelor’s degree in mathematics and a master’s of business administration degree
from the University of Louisville.

REFERENCES

Korn Ferry. 2019. “New Report: Strengthening Performance Through Greater Employee Engagement. Viewed:
June 13, 2019. https://focus.kornferry.com/new-report-strengthening-performance-through-great-
er-employee-engagement/.

Korn Ferry. 2018a. “More Than a Pay Gap: The Wider Problem of Gender Inequality at Work.” Viewed:
June 13, 2019. https://dsqapj1lakrkc.cloudfront.net/media/sidebar_downloads/KF-More-Than-a-Pay-
Gap-Digital.pdf.

Korn Ferry. 2018b. “New Numbers on Pay Equity.” Viewed: June 13, 2019. https://www.kornferry.com/
institute/pay-equity-leadership.

“Salary History Bans.” 2019. HRDrive, June 13. Viewed: June 17. https://www.hrdive.com/news/salary-
history-ban-states-list/516662/.

Seyfarth Shaw. 2018. “50 State Pay Equity Desktop Reference: What Employers Need to Know
About Pay Equity Laws.” Viewed: June 13, 2019. https://www.seyfarth.com/dir_docs/publications/
PayEquity_50State.pdf.

Tomorrow’s Company. 2014. “Tomorrow’s Global Leaders: How to Build a Culture That Ensures Women
Reach the Top.” Viewed: June 13, 2019. https://cdn.ymaws.com/www.shrm-emeraldcoast.org/resource/
resmgr/Docs/Tomorrows_Global_Leaders_rep.pdf.
Pay Equity at Work

WorldatWork and Korn Ferry. 2019. “Pay Equity Practices: Survey of C-Suite and Rewards Leaders.” May.
Viewed: June 12, 2019. https://www.worldatwork.org/Survey%20Brief%20-%20Pay%20Equity%20
Practices%20Snapshot.pdf.

60
PAY EQUITY PRACTICES
Moving Forward but Room for Improvement
WorldatWork and Korn Ferry 2019 Pay Equity Practices Survey

C-SUITE AND HR EXECUTIVES ARE PAY EQUITY ANALYSES LOOK AT

ADDRESSING PAY EQUITY. SLOWLY. GENDER & ETHNICITY

46 %
consider gender
36 %
take additional demographics
& ethnicity (e.g., age) into account

60 %
are taking action
33%
still considering
doing the
7%
not on my
company PAY EQUITY WORK
necessary work radar
NOT TRANSPARENT TO ALL

REMEDIATION
LEAVES ROOM FOR
90 % share intent & findings with
senior leaders

IMPROVEMENT
Roughly three-fourths of
65% share with people managers

organizations have or are conducting

52%
report communicating findings
remediation or are working to resolve
only to employees affected by
causes of pay inequities. the adjustment

23 % are considering remediation

strategies but haven’t yet
initiated them
27% report any broad-based
communications to employees

28%
are considering working to
identify/resolve root causes
of pay inequities, but haven’t
started yet ONCE RAMPED UP, LEADS THE HR
PAY EQUITY MANAGEMENT PROCESS.

MOST ORGANIZATIONS
ADJUST PAY EQUITY FOR TYPICAL PAY EQUITY INCREASE
LESS THAN 5%
OF THEIR WORKFORCE. 4 6 % to %

ABOUT THE STUDY WorldatWork and Korn Ferry collected survey data for the “Pay Equity Practices Survey of C-suite and Reward Leaders” in early 2019. The
survey report was based on 769 responses. Survey respondents were WorldatWork members (primarily Total Rewards professionals) and Korn Ferry contacts
employed in the C-suite, human resources and Total Rewards functions across a wide range of industries and size of organizations.
 workspan
daily
Five Ways Organizations
Can Address the Gender
Pay Gap
Pay equity “is not a fad,” asserted Maria Colacurcio, CEO of
Syndio Solutions Inc., at the start of WorldatWork’s pay equity
webinar, “How to Address the Gender Pay Gap: Five Tips for
Business Leaders,” on Wednesday.
“If anything, this movement is gaining momentum,” she said.
Because of this momentum, organizations are under
increasing pressure — from both outside and within — to do
and/or say something on the topic.
“But to say something, you need to know what you’re doing,”
Colacurcio said.
Colacurcio noted that while there are “huge benefits” to
publicly committing to address the issue of pay equity in a
transparent way, there are many ways to get it wrong. As such,
Colacurcio and Zev Eigen, founder and chief data scientist of
Syndio, laid out five actions business leaders should take.
1. Define and Commit to Ongoing Pay Equity Practices and
Pay Equity at Work
Culture
Organizations, Colacurcio said, “have a responsibility to ensure
fair pay.” As such, buy-in from leadership is of tantamount
importance, as any program will not go far without it. Setting
an ongoing cadence to analyze the results is also a good idea.
“Pay transparency is a key driver of retention,” Colacurcio
said. This could be a way to frame the argument for creating
pay equity practices to begin with. And those designing the
62
best practices should also keep
in mind that committing to being
transparent on pay equity does not
necessarily mean releasing exact
salaries, but it could mean being
upfront about which pay equity
methodologies are in place and what
the results are.
2. Put in the Work to Get Groupings
Right
“There is no way to circumnavigate
getting the groupings right,” Eigen
said. At least not if you hope to make
“meaningful comparisons.”
And while Eigen conceded that
“there is no one correct way of
looking at groupings,” he did suggest
taking a look at them through “an
outsider’s lens.”
3. Adopt and Follow Unbiased Meth-
odology
“Don’t just treat the symptom,” Eigen
noted. “Treat the cause.”
A pay equity program must analyze
“all elements of compensation,”
Eigen said, including total annual
discretionary pay. He also advised
using multiple forms of testing in
order to determine if any gaps that
do arise — both Eigen and Colacurcio
said such a thing was not uncommon
— are random or if a trend appears.
Eigen said this process could also
help determine which policies and/
or behaviors need to change to create
an equitable field.

For instance, Eigen recommends that starting pay is
equitable from day one, as pay inequity can be “ampli-
fied” over time.
4. Leverage Technology with Proven Methods
“Let’s be clear,” Colacurcio said. “Companies don’t do
‘one-and-done’ because it’s the best way to go.”
In fact, it’s based more on the belief that reviewing and
analyzing pay equity can be too cumbersome, or even too
expensive, to do with any consistency — at least, if the
process is being done manually. But using technology based
on well-vetted methodologies can make the process go
smoother, whether it’s the first time your organization has
ever broached the subject, or if your organization is under-
going a “life event,” such as a merger.
Of course, part of leveraging technology is ensuring that you
have chosen the right tech to accomplish your goal.
“It’s about asking the right questions,” Eigen said. “And
you’ve got to get the math right.”
5. Hold Yourself Accountable and Ensure Transparency
Setting a goal of 100% pay equity may seem overly ambitious,
but this is exactly what Colacurcio insists should be done.
“Then measure yourself against that goal,” she said.
This can be done, in part, by creating a communications
strategy that reaches all levels of your organization. And don’t
hold back if you find something has gone terribly awry.
“You will, in all honesty, find problems,” Colacurcio said.
“And that’s OK.” But those problems should be based only on
“neutral” differences, such as tenure and education.
What is of the utmost importance at that time is that you
are clearly communicating the problem with your employees
— and perhaps even the public — and being transparent on
how you are working to solve the problem.
“It takes a lot of courage and discipline from the leadership
team” to admit that their organization has pay equity issues,
said Lisa Nelson, CHRO of MatchGroup. MatchGroup worked
with Syndio on evaluating their own pay practices and, at the
workspan
daily
outset, MatchGroup was “committed to
sharing the results, good or bad.”
Once all the reviewing and analyzing is
done, it’s time to design and implement
pay equity standards for your business.
“You’ve got to impose those pay
equity standards at the time of hire or
transfer,” Eigen said.
Ultimately, you could end up with a
program that accurately reflects the real
causes of the pay equity problem within
your organization and also provides
workable solutions.
“When you pay fairly, you send a
powerful message to your current
team, your potential employees and
your customers,” Nelson was quoted as
saying in the presentation. “You care
about something bigger and you’re
willing to make changes to reflect
those values.”
Stephanie N. Rotondo is a writer/editor at
WorldatWork.
Pay Equity at Work
63
 at Work

64
38
Pay |Equity
October 2018
Looking Beneath the Surface
Pay Equity at Work

of the Gender Pay Gap

| October 2018

BY JOHN H. DAVIS, PH.D., CCP, DAVIS CONSULTING

65
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 O
ver and over we hear that women in
the United States who work full-time
are paid only 80 cents for every dollar
paid to men. This statistic is repeated
by many organizations and in many publications.
(See “The 20% Gender Pay Gap Is Misleading
Without Context.”) So, what are all of these exam-
ples missing? While some sources talk about
occupations, there is no discussion of the actual
work being done, no mention of the job.
SOURCE OF THE 80% FIGURE
Because gender pay inequity addresses the pay
of all employees, it is an obvious major issue
that demands the attention of total rewards pro-
fessionals. Only by exploring the issue in depth
can we properly respond to inquiries from not
only employees and executive management but
also the inquiring press and politicians.
THE 20% GENDER PAY GAP IS
MISLEADING WITHOUT CONTEXT
Where does 80% come from and what is the context? As total rewards
professionals, it is our responsibility to exercise critical thinking and
dig beneath the 80% number to discover its origins and the context
surrounding it. We must be innately curious and aggressively inquisitive
to want to know what things are and why they are the way they are.
Any relation of the 80% statistic to the actual work being done is
absent from each of the following articles:
• The National Women’s Law Center article, “Equal Pay & the Wage
Gap” begins with “Women in the U.S. who work full time, year-round
are paid only 80 cents for every dollar paid to men …”
• The American Association of University Women report, “The Simple
Truth about the Gender Pay Gap” asks, “Did you know that in 2016,
women working full time in the United States typically were paid
just 80% of what men were paid, a gap of 20%?” (The article pro-
vides a link to what you can do politically to fight the pay gap and
asks for donations.)
at Work
• The 2018 Institute for Women’s Policy Research article, “The Gender
Wage Gap: 2017 Earnings Differences by Race and Ethnicity” states,
October 2018
“In 2017, the ratio of women’s to men’s median weekly full-time
Pay |Equity
earnings was 81.8%.”
• The Business Insider article, “6 charts show how much more men make
than women” states, “Today, on average, a woman earns 80.5 cents for
every dollar a man earns …” The article contains several charts and
one photograph of the Jan. 21, 2018, Women's March in Las Vegas.
66
40
The articles referenced in the first sidebar all
use data from the exact same source, namely
the Census Bureau report, “Income and Poverty
in the United States: 2016.” (See Tables 1 and
2.) What do these numbers represent? It is the
ratio of the median income of more than 47,000
women to the median income of more than
63,000 men who were respondents to a Census
Bureau “Current Population Survey” (CPS), no
matter the industry, occupation, level of work
and location.
The CPS, which originated in the late 1930s, is
the longest-running survey conducted by the
Census Bureau. It is a household survey primar-
ily used to collect employment data. Data are
collected throughout the year, every year. (See
“Census Bureau’s CPS Methodology.”)
After the data are collected for each gender,
everything is thrown into one big pot for the
calculation of the median income: secretaries,
bricklayers, senior IT professionals, dishwashers,
company presidents, chemical engineers and so
on. Most importantly, there are no questions in
the survey questionnaire about the specific work
people were doing. Hence, those compensation
factors that may account for legitimate pay dif-
ferences were neither gathered nor considered.
(See “Survey Shortcomings.”)
In general, what factors do determine a per-
son’s pay? Figure 1 identifies factors that help
determine a person’s pay, including five system
factors and three individual factors. The five
system factors typically are the foundation for
PHTOTO © ISTOCK/KRYSTIANNAWROCKI; MICROGEN; OKEA
the pay range of a job. Two factors of the job that
focus on the work — market pay and internal
value — are combined to form a job’s pay range
(usually determined by an assigned grade). Note
the emphasis on the job rather than the occupa-
tion or the title: This is what is missing from the
discussion of, and efforts to achieve, pay parity.
We all are familiar with the concept and laws
regarding equal pay. The Equal Pay Act was
enacted in 1963, and it mandates equal pay for
“equal work on the jobs the performance of
which requires equal skill, effort, and respon-
sibility, and which are performed under similar
working conditions, except where such payment
is made pursuant to (i) a seniority system; (ii)
 Table 1 | Income and Earnings Summary Measures
by Selected Characteristics: 2015
2015 EARNINGS OF FULL-TIME, YEAR-ROUND WORKERS
Sample Size Median Income
Men with earnings 63,887 51,859
Women with earnings 47,211 41,257
Dividing the pay for women by the pay for men we get 0.7956,
rounded to 0.80.
Note: Some articles report that differences are in “average” salaries, even though the actual figures referred to are median salaries. (As total rewards
professionals, we do know the difference.)
a merit system; (iii) a system which measures
earnings by quantity or quality of production;
or (iv) a differential based on any other factor
other than sex.”
Notice the act’s focus on the work. Again, there
was no reference to the work or jobs in any of
the articles that would form a basis for 80%.
SIMPSON’S PARADOX
For all practical purposes, the 80% number
is conceptually meaningless with regard to
pay parity because it only indicates that many
female-dominated jobs are paid less than many
male-dominated jobs. From this data, we do not
know how the two genders are paid within a job.
As such, nothing actionable can be derived from
this figure regarding parity for the work done.
This is a prime example of a statistical phe-
nomenon known as Simpson’s Paradox. This
paradox can get you into a heap of trouble if
you inappropriately combine different groups
into one, especially if the results are a basis for
a policy decision. (See “Simpson’s Paradox.”)
After examining the example, the answer to the
question, “Should I combine the data for different
jobs into one figure?” is “Do so at your own peril.”
WHY IS THE WORK IGNORED?
Why do the articles and pronouncements
ignore the missing link of work? We can only
speculate. The information in the CPS is
there for all to see. One wonders, then, why
those articles’ authors did not dig into the
data to understand what the numbers really
represent. Assuming the authors are familiar
Table 2 | Income and Earnings Summary Measures
by Selected Characteristics: 2016
2016 EARNINGS OF FULL-TIME, YEAR-ROUND WORKERS
Sample Size Median Income
Men with earnings 64,953 51,640
Women with earnings 48,328 41,554
Dividing the pay for women by the pay for men we get 0.8047, rounded
to 0.80.
CENSUS BUREAU’S CPS METHODOLOGY
The Current Population Survey (CPS) is administered by the Census Bureau
using a probability selected sample of about 60,000 occupied households. The
fieldwork is conducted during the calendar week that includes the 19th of the
month. The questions refer to activities during the prior week; that is, the week
that includes the 12th of the month. Households from all 50 states and the
District of Columbia are in the survey for four consecutive months, out for eight
months, and then return for another four months before leaving the sample
permanently. This design ensures a high degree of continuity from one month
to the next (as well as throughout the year). The 4-8-4 sampling scheme has the
added benefit of allowing the constant replenishment of the sample without
excessive burden to respondents.
The CPS questionnaire is a completely computerized document administered
by Census Bureau field representatives across the country through both personal
and telephone interviews. Additional telephone interviewing is conducted from
the Census Bureau’s two centralized collection facilities in Jeffersonville, Ind., and
Tucson, Ariz.
To be eligible to participate in the CPS, individuals must be 15 years of age or
older and not in the armed forces. People in institutions, such as prisons, long-
term care hospitals and nursing homes, are ineligible to be interviewed in the CPS.
In general, the U.S. Bureau of Labor Statistics (BLS) publishes labor force data only
for people ages 16 and older because those younger than 16 are limited in their
labor market activities by compulsory schooling and child labor laws. No upper age
limit is used, and full-time students are treated the same as nonstudents.
One person generally responds for all eligible members of the household.
The person who responds is called the “reference person” and usually is the
person who either owns or rents the housing unit. If the reference person is not
knowledgeable about the employment status of the others in the household,
attempts are made to contact those individuals directly.
Pay Equity at Work
In addition to the regular labor force questions, the CPS often includes
supplemental questions on subjects of interest to labor market analysts. These
include annual work activity and income, veteran status, school enrollment,
| October 2018
contingent employment, worker displacement and job tenure, among other
topics. Because of the survey’s large sample size and broad population
coverage, a wide range of sponsors use the CPS supplements to collect data on
topics as diverse as expectation of family size, tobacco use, computer use and
voting patterns.
Source: U.S. Census Bureau. 2017. Current Population Survey, Technical Documentation.
67
41
 with the Equal Pay Act, why did they ignore

SURVEY SHORTCOMINGS
• Survey instructions cover 354 pages in nine chapters and nine appendixes in
the 2016 “Annual Social and Economic Supplement (ASEC)” of the CPS.
• The survey questionnaire covers 132 pages of that document.
• Sometimes answers, including income, are provided by one member of a
household for another member.
• The questionnaire does not ask about those work aspects that a compensa-
tion professional would use in any pay analysis. There were only two ques-
tions related to the work:
• What kind of work (were/was) (you/he/she) doing (e.g., Electrical Engineer,
Stock Clerk, Typist)?
• What were (your/his/her) most important activities or duties (e.g.,
types, keeps account books, files, sells cars, operates printing press,
finishes concrete)?
Figure 1 | Factors Determining a Person’s Pay
Pay Philosophy
Market Pay
Affordability
of Job
the context of equal work in their statements?
Are they so caught up in a narrative that
women are undervalued that it clouds their
thinking process? Or are they using these fig-
ures to advance a political agenda? These are
not idle questions, given the false statements
in a presidential political campaign, and given
the almost universal ignorance of the missing
work context.
In 2012, the ratio was 0.77 from that year’s
Census Bureau survey, which was the source
of a 2012 campaign TV ad stating, “President
Obama knows that women being paid 77 cents
on the dollar for doing the same work as men
isn’t just unfair, it hurts families.” The addition
of “same work” was misleading and this same
misleading notion was repeated in his State of
the Union address.
They’re not “lying with statistics,” but are being
dishonest by not telling the whole story with the
context of the figures (lying by omission).
For whatever reason, authors of the articles
apparently either did not dig into the data to
discover the context of what was reported, or
simply chose to ignore it. But that is our task as
total rewards professionals.

WHAT SHOULD WE DO?

The 80% figure raises volatile false expec-
tations because it creates a climate of envy,
Balance oppression and divisiveness. Improperly dis-
Internal Value with Other
of Job
cussed, it can be very contentious. What
Factors
might women think? “Either my company or
ICON © THE NOUN PROJECT/CREATIVE STALL

the government is going to bring me to parity.

Someone has to do something.” But that’s not
going to happen, because it can’t happen.
at Work

The implication is that a woman doesn’t have

Individual Individual to change jobs or careers. So, envy, dissatis-
October 2018

Performance Experience faction and frustration occur because of the

Pay |Equity

Individual incompleteness and subsequent misleading

Education/ nature of the 80% pay statements and articles.
Skills
The “something” that must be done is to be
honest with the numbers, and that includes
their context. To repeat, it is incumbent on
total rewards professionals to exercise their
68
42
 SIMPSON’S PARADOX
Simpson’s Paradox is a statistical paradox in which the trends observed in several groups are reversed when the
groups are combined, or when the trend observed in a combination of groups is reversed when examining the groups
separately. This paradox is related to the concept of weighted averages.
It would be instructive for the total rewards professional to verify these calculations, as it will give a better
understanding of this phenomenon.

FEMALE MALE PAY RATIO F/M

Number of Avg. Pay Number of Avg. Pay
Incumbents Incumbents
Software Developer 10 $80,000 50 $80,000 1.00

Elementary School 30 $54,000 10 $54,000 1.00

Teacher

Weighted Average 40 $60,500 60 $75,667 0.80

Median 40 $54,000 60 $80,000 0.68

Suppose that all software developers, female and male, were paid the same ($80,000). And suppose that all
elementary school teachers, female and male, were paid the same ($54,000). For both jobs, the pay is equal between
genders, with pay ratios of 1.00. But note that the lower paying job is predominately female and the higher paying job
is predominately male.
When the weighted average is calculated for the females, the larger number of incumbents in the lower paying job, 30
out of 40, pulls down the weighted average to $60,500. Similarly, when calculating the weighted average for the males,
the larger number of incumbents in the higher paying job, 50 out of 60, pulls up the weighted average to $75,667. That
is the nature of a weighted average: It goes toward the number where the larger weight is. In this case, for each job
the weight is the number of incumbents.
When the data for each job are combined into weighted averages, the result is a female-to-male pay ratio of 0.80.
Even the median is susceptible to Simpson’s Paradox, as the pay ratio is 0.68 for the medians. Everything is fine
pay-wise when examined by job, but is apparently not fine when combined, indicating that in this instance, the
jobs should not be combined at all, as the results would be conceptually meaningless for any pay equity study and
subsequent action.
Source: Davis, John H. 2011. Statistics for Compensation: A Practical Guide to Compensation Analysis. New York: John Wiley and Sons.

critical thinking, especially when the message
to female employees is so misleading.
The actions to take are three-fold:
• Ensure your own house is in order vis-à-
• Educate yourself on the source and context
of the 80% figure. Focus on gender pay dif-
ferences within jobs. Be prepared to tell the
whole story. Truth is what we are seeking ––
Pay Equity at Work

vis equal pay. In my consulting experience, the truth, the whole truth and nothing but
most companies want to pay their employees the truth.
| October 2018

fairly for the work that they do. Employees
who perceive they are paid fairly are engaged
employees and that is clearly in a company’s
self-interest. Most total rewards professionals
have or can get the statistical tools needed to
conduct internal audits and identify and cor-
rect equal pay issues.
• Speak out about it with complete facts and
don’t let the misinformation spread by the
default of your silence. Silence is assent
with the misleading statements.
John H. Davis, Ph.D., CCP, is the retired president of Davis
Consulting. He can be reached at john@jhdconsulting.com.
69
43
 46th
Annual
Survey

2019
Salary Budget Survey
2020
Pay equity among the factors in upward trend in salary budgets
CEOs, Chief Financial Officers, and HR professionals have turned to WorldatWork each year to ensure
their compensation plans are competitive and designed to achieve the results needed to drive
organizational success.

Data covers

14
Survey points to Base Salary Increases
Pay Equity Work
Covers million Merit Budgets

19
Minimum Wage Adjustments employees worldwide
countries. Salary Structure Adjustments
from
Lower Unemployment Rate
Promotional Increases
Lower Inflation Rate

as factors. Variable Pay Plans

Stay competitive. Order your report today.

worldatwork.org/payequity-salarybudget

Pay Equity Update:
Legislative Landscape
History has its eyes on us, and with what seems to be the
entire world focused on issues of pay equity and pay equality,
the legislative landscape is shifting. Arguably, every industry
conference, news outlet, blog, organization and association
have examined the equal pay challenge, offering many
perspectives. Still, with the impending EE0-1 reporting deadline
on Sept. 30 of this year, there is additional focus on the ever-
changing legislation at all levels.
U.S. Legal Changes
In the United States, pay equity legislation, which emphasizes
equal pay for equal or comparable work, is not new. We have
been trying to tackle this issue at the federal level since
1963 with the Equal Pay Act (EPA), one of the first attempts
to abolish wage disparity based on gender. Since enacting
the EPA, women’s salaries have risen relative to men’s from
62% in 1979 to 82% in 2017. Most of this growth occurred in
the 1980s and 1990s, but has remained in the 80% to 83%
range since 2004.
As a result of this stagnation, other attempts at federal legis-
lation followed, including various iterations of the Paycheck
Fairness Act since 2011, which to date has not passed. Even
with a delay because of the government shutdown in the U.S.
in early 2019, the EEO-1 extended deadline is upon us, requiring
government contractors with 50 or more employees and
private employers with 100 or more employees to report on
their employment data categorized by race/ethnicity, gender
and job categories.
Despite federal requirements and in the wake of the
November 2018 midterm elections that resulted in a divided
Congress (historically proven to be ineffective), state and local
governments have taken action in an effort to move the needle
further and faster on the pay equity challenge.
California has been leading the pack since 1949 with its Equal
Pay Law. As recently as 2015, the Fair Pay Act amended the law
as it applies to an employee’s gender. Then, in 2017, the law
was also expanded to provide protection for employees of a
different race or ethnicity. In early 2018, California was one of
the first few states to ratify new legislation that prohibited
employers from inquiring about an applicant’s salary history
and clarified an employer’s obligation to provide a salary range
upon reasonable request from an applicant.
workspan
daily
This enforces that an employer may
not use an applicant’s prior salary
as a factor in determining whether
employment should be offered, or
what salary to offer an applicant, in
hopes of not perpetuating the cycle of
pay discrimination.
As of Jan. 16, 20 states, including
Florida, New Jersey and Pennsylvania,
plus the territory of Puerto Rico, have
enacted gender-specific protections.
Additionally, 27 states, including
California, Illinois, New York and
Texas, have taken a step further to
include other protected categories,
such as race/ethnicity or religion.
The remaining three states (Alabama,
Mississippi and North Carolina) have
not yet endorsed any state-specific
laws regarding pay equity.
Additionally, as of January, 12 states
and Puerto Rico have enacted a ban
on inquiring about salary history.
Since then, eight more states have
or are in the process of enacting
similar salary history bans. Local laws
have also passed in cities like San
Francisco, Chicago and Philadelphia,
as well as various counties in New
York, creating further restrictions on
salary history disclosure. Meanwhile,
states like Michigan and Wisconsin
have implemented legislation that
Pay Equity at Work
prohibits local government from
legislating laws that would ban
employers from inquiring about salary
history. This ever-evolving landscape
requires us to be even more diligent
than ever to make sure that we are
not only compliant, but that we can
anticipate the spread of such legis-
lation and more.
71
 workspan
daily
Global Legislation Trends
For companies operating on a global scale, navigating the
landscape becomes much trickier. Many countries, predom-
inantly in Europe, have much more strict legislation than in
the U.S. According to the International Labour Organization’s
most recent “Global Wage Report,” 40% of all countries have
adopted the full principle of “equal pay for work of equal
value,” while the remaining countries concentrate on the
narrower principle of “equal pay for equal work.”
Global legislation can be sorted into four main categories.
However, it is important to note that these legislations are
still primarily focused on gender pay gaps. In Nordic coun-
tries like Norway, Sweden and Finland, pay transparency
legislation requires that employees’ tax returns are available
upon request, while in Germany, employees can request the
Pay Equity at Work
median pay of colleagues of the opposite sex in the same or
comparable role employed at their organization once every
two years. In the U.S., specifically for federal contractors as
well as in countries like Spain, Austria, Denmark, Belgium,
France and Sweden, companies are required to undertake
gender audits to detect, remedy and prevent unjustified
differences between women’s and men’s pay, terms and
conditions of employment. They are also required to devise
equal pay action plans.
72
Gender-specific
Gender, plus Other
Protected Categories
Salary History Inquiry Ban
(State and/or Local Law)
No state-specific pay
equity laws in effect as of
January 2019
The third category encompasses those
countries that mandate reporting of
gender pay gaps. Australia was the first
country to mandate the reporting of
gender pay gaps with the Workplace
Gender Equality Act 2012. And beginning
in 2017, the United Kingdom followed
suit as companies based in England,
Scotland or Wales were subject to
mandatory gender pay gap reporting
which requires them to publish gender
pay gap data on their own as well as a
government website.
And finally, the most stringent legis-
lation was passed in Iceland through
the recent amendments to the Gender
Equality Act, which went into effect in
January 2018. Employers with at least 25
employees are now required to obtain
certification from an accredited auditor
as proof that women and men in their
employment get paid on an equal basis.
Although there is no real global legis-
lative requirement, it is evident that

the legislation being enacted in various locations is not only
in reaction to the local climate, but also based on precedent
already set by neighboring or related places with similar
political and financial environments. It is worthwhile to note
the evolution of global legislation recognizes a shift away from
laws that focus on fair pay within similar jobs. It has been real-
ized that remediating pay alone only addresses the symptom
and not the real causes of pay inequality. Later legislation
begins to examine overall pay gaps and forces organizations
to analyze further and explore the complete employee life-
cycle to identify and attend to the root of their pay equality
issues. For companies that are operating on a global scale, it is
crucial to understand what legislation applies to your compa-
ny’s operations.
Key Takeaways
The grand landscape of pay equity legislation may not be
intended to be the silver bullet that will solve the pay equality
problem. But instead, it can be argued that legislators are
bringing a public focus on the measurable aspects of the
problem so that we can all work together within our respective
employment and associations to further analyze the issues
and find potential long-term solutions.
The intense attention on and public discussion of pay equity
and pay equality challenges have led to more awareness
throughout organizations, as evidenced by groups such as
the CEO Action for Diversity and Inclusion or the Equal Pay
International Coalition (EPIC). Likewise, organizations, including
Bloomberg, are publishing a Gender Equality Index to help
satisfy the demand from current and prospective employees
for pay information. The public awareness of pay equality
issues is challenging organizations to be more transparent
about their pay practices even as early as the recruiting and
hiring process. Ultimately, the emphasis on pay equity is only
scratching the surface of the overall diversity and inclusion
workspan
daily
challenges that we
have all been facing
for some time now.
With that in mind, it
recalls another passion
of mine: musical
theater. It seems that
whether you’ve been a
theater buff your whole
life, or you’ve never
seen a Broadway show,
you have likely heard
of the Tony Award-
winning Broadway hit
musical “Hamilton,” brilliantly crafted by
Lin-Manuel Miranda. If you’re a fan, you
may have caught my reference at the
beginning of this article.
Aside from modern storytelling told
through predominantly hip-hop beats,
one of the most profound aspects of
the show is the very deliberate choice
in casting. Whether you see the original
Broadway production, catch the show
as it’s passing through your area, or are
fortunate enough to see it in London’s
West End, I’d venture to say that the cast
of characters will be the most diverse
you’ve ever seen on a professional stage.
Miranda shared that it’s the story of
American history told by America today.
If our organizations all tackle the pay
equity challenges with the ultimate
goal of true diversity and inclusion in
mind, we will be able to create cultures
of diversity and inclusion in our work-
places and beyond. This is the moment
we’ve been waiting for, and it’s time
Pay Equity at Work
to “Rise up!”.
Glizcel Ditto is a principal compensation consultant
at Curo.
73
74
Pay Equity at Work
Pay Fairness:
Insights from
Rewards Leaders

Government regulations and courts reinforcing employee rights

to access pay information, availability of pay data on various
websites and a young generation of employees who do not
place as much importance on pay privacy have collectively made
pay fairness a much more significant and challenging issue for
rewards leaders. To motivate and engage employees with different
backgrounds and experiences, organizations must ensure that
rewards programs are rooted in principles of fairness. This article
addresses the “Study of Reward Fairness and Equity,” conducted
with WorldatWork, that replicates and extends the original 2011
pay fairness study, also conducted with the association. The find-
ings indicate that rewards professionals believe rewards policies
and programs affect employee perceptions of fairness, and that
male and female employees may develop perceptions of rewards
fairness based on different criteria

Pay Equity at Work

Tom McMullen Dow Scott, Ph.D.

Korn Ferry Loyola University Chicago

75
 Pay Fairness:
Insights from Rewards Leaders
M
ultiple factors have caused pay
fairness to become a much more
important and challenging issue
for rewards leaders in recent years. First,
there has been a flurry of both state and
local government regulations aimed at
closing the gender gap and other discrep-
ancies in pay. The Dodd-Frank Wall Street
Reform and Consumer Protection Act of
2010 requires publicly held companies
to report their CEO-to-worker pay ratio,
and the courts are reinforcing the right
of employees to share pay information.
Furthermore, attitudes toward pay trans-
parency have changed as a result of social
media, websites that share pay data and
younger generations of employees who
do not seem to place as much importance
on pay privacy as did earlier generations.
In addition, the increased diversity of the
workforce has created varying views of
how employees define fairness. Finally,
Pay Equity at Work
tight labor markets require employers to be
increasingly sensitive to employee prefer-
ences for more disclosure in order to attract,
engage and retain talent.
Research indicates that rewards policies
and programs perceived as unfair under-
mine employers’ ability to attract and retain
76
talent and motivate employee performance.
Specifically, rewards fairness and the
related constructs of pay justice and equity
have been found to be strongly related to
employee attitudes, including:
❙❙ Pay satisfaction (Cowherd and Levine 1992;
Folger and Konovsky 1989; Lee, Law, and
Bobko 1999; Miceli and Mulvey 2000; Shaw
and Gupta 2001; Tekleab, Bartol, and Liu 2005)
❙❙ Commitment (Cohen and Gattiker 1994;
Dulebohn and Martocchio 1998)
❙❙ Intention to quit (Miceli, Jung, Near, and
Greenberger 1991)
❙❙ Perceived organ i zat ion al suppor t
(Miceli et al. 2000).
Perceptions of rewards fairness also have
been found to affect employee behavior
in areas such as:
❙❙ Absenteeism and citizenship (Lee, 1995;
Colquitt et al. 2001)
❙❙ Individual performance (Cohen-Charash and
Spector 2001; Colquitt et al. 2001)
❙❙ Organizational outcomes, including
employee turnover and customer satisfaction
(Simons and Roberson 2003).
Although it is known that employee
perceptions of rewards fairness are strongly
related to employee attitudes, behaviors and
performance, as Scott, McMullen and Royal
(2011) pointed out, it is less clear what effect rewards practices have on these
perceptions. In other words, do certain types of rewards programs or policies
more closely align with perceptions of fairness than other programs or policies?
To motivate and engage employees with different backgrounds and experi-
ences, employers must ensure that rewards programs are rooted in principles
of fairness. This article addresses the “Study of Reward Fairness and Equity”
conducted with WorldatWork that replicates and extends the original 2011 pay
fairness study also conducted with the association. We examined which rewards
policies and programs improve or erode employee perceptions of rewards
fairness and the extent to which this has changed in the past eight years. We
also specifically examined the effect that gender may have on perceptions of
rewards fairness.

DATA COLLECTION AND SAMPLE CHARACTERISTICS

A sample of WorldatWork members, primarily mid- to senior-level rewards
professionals in the United States, were invited to participate in the study. The
survey required up to 15 minutes to complete and was open from March 1
through April 10, 2018. A total of 290 WorldatWork members from around
the world participated in the research. For research purposes, the number of
responses for a survey of this type and length is considered adequate.
The study replicated and extended a fair-pay study published in the
WorldatWork Journal in 2011. The primary change in the survey instrument was
an additional section examining how fair-pay perceptions might differ between
male and female employees. The authors would have liked to survey employees
directly about their perceptions of rewards policy and program fairness but,
from a practical perspective, few organizations provide such access. Moreover,
because rewards professionals are the employers’ stewards accountable for
the strategy, design administration and evaluation of effectiveness of rewards
programs and policies, they tend to have the best perspective within organiza-
tions regarding employee and management perceptions and concerns of rewards
fairness and equity. Rewards professionals also provide the best perspective on
how senior leaders view rewards programs and their effect on employee percep-
tions of fairness.
Pay Equity at Work

Figures 1 through 3 indicate that the organizations sampled in the study are
diverse and represent industry in general. Figure 1 shows that respondents repre-
sented organizations ranging in size from fewer than 100 to more than 100,000
employees. More than 70% of respondents represented organizations with more
than 1,000 employees.
Figure 2 indicates the range of industries represented. The largest industry
represented was manufacturing (24%), and the second and third largest were
77
 Pay Fairness:
Insights from Rewards Leaders

financial, real estate and insurance (12%) and professional, scientific and
technical services (11%).
Figure 3 shows that organizations in different sectors of the economy are
represented, with private sector/publicly held and private sector/privately
held having the largest percentage of respondents, 40% and 35%, respectively.
Only 6% of respondents were employed in the government/public sector.

FINDINGS
Employee Concerns About Internal and External Fairness
Table 1 shows the extent to which rewards professionals report that
employees express concerns about internal equity or fairness among major
elements of their total rewards policies and programs. Promotion opportu-
nities (78%), career development opportunities (73%) and base-pay amounts
(67%) were most frequently identified as the rewards components with which
employees express fairness concerns. This represents a change from the 2011
study, in which career development opportunities and base salary increases
were identified as the areas of most concern among employees.
As in the previous research, employees express concerns across a mix
of financial and nonfinancial rewards. Fairness in base pay (levels and

TABLE 1  E mployee Concerns About the Lack of Internal Equity Rewards

2018 Mean 2018 2011 Mean 2011

(Standard Frequency (Standard Frequency
Deviation) (%) Deviation) (%)
Base pay amount 2.85 (.82) 67 2.87 (.84) 67
Base pay/merit increases 2.86 (.88) 64 3.02 (.85) 73
Job leveling or grading 2.57 (.90) 54 2.54 (.94) 52
Job titles 2.48 (.86) 44 2.54 (.92) 49
Variable pay (incentives bonuses) 2.50 (1.03) 48 2.58 (.96) 52
Overtime (opportunities) 2.01 (.80) 21 N/A N/A
Opportunities for special assignments 2.23 (.77) 32 N/A N/A
Flexible work arrangements 2.57 (.98) 48 2.47 (.94) 49
Recognition 2.62 (.94) 52 2.85 (.92) 66
Health-care benefits 2.24 (1.03) 36 2.34 (1.00) 40
Retirement benefits 1.95 (.87) 23 2.10 (.94) 32
Pay Equity at Work

Time off requests or approvals 2.22 (.89) 31 N/A N/A

Employee development
2.58 (.92) 51 2.66 (1.00) 55
or training programs
Career development opportunities 2.92 (.90) 73 3.05 (.96) 74
Promotion opportunities 3.06 (.83) 78 N/A N/A

Note: Frequency percentages include “Constantly or Persistently,” “Frequently” and “Occasionally” answers.

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

78
FIGURE 1  S tudy Participation: By Number of Full-Time Employees

2%  100,000 or more employees

4%  40,000 to 99,999 5%  Fewer than 100 employees
10%  100 to 499
9%  20,000 to 39,999

9%  10,000 to 19,999 12%  500 to 999

9%  5,000 to 9,999

22%  1,000 to 2,499

19%  2,500 to 4,999

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

FIGURE 2  S tudy Participation: By Industry

24% Manufacturing

34% Other

12% Financial,
insurance, and
5% Utilities
real estate
5% Information (includes
publishing, IT, etc.)
11% Professional, scientific,
9% Health care and social assistance and technical services

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

FIGURE 3  S tudy Participation: By Sector

6% Government/
public sector

19% Nonprofit/ 40% Private sector/

not-for-profit publicly traded
Pay Equity at Work

35% Private sector/
privately held

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

79
 Pay Fairness:
Insights from Rewards Leaders

increases) and career development are consistently seen as the top areas of
concern. These findings likely are not surprising, given that base salaries
tend to make up the greatest component of total rewards for most employees
and the component most easily compared with others. Other factors affecting
employee concerns about internal equity or fairness include the increasing
degree of transparency and ability to benchmark base salary increases (from
surveys and news accounts), base salaries (from crowd-sourced websites) and
career development opportunities (from promotion announcements).
Respondents said employees express fewer concerns relative to fairness
with overtime compensation, opportunities for special work assignments,
flexible work arrangements, health-care benefits, retirement benefits and
time-off requirements. These programs are probably likelier to be extended
to employees organizationwide with more consistent and easier to under-
stand eligibility and award criteria. As such, there likely is a perception that
fairness is “built in” to these rewards given the lack of differentiation across
employees within a group.
Perceptions of fairness of these rewards policies or programs have
remained relatively constant since the previous study, except for salary
increases, recognition and retirement benefits, for which concerns about fair-
ness have decreased.
Table 2 shows the extent to which rewards professionals reported that
employees express concerns about external fairness among rewards policies
and programs. As is true for concerns about internal equity, rewards profes-
sionals indicated that employees have the most external fairness concerns
about base-pay amounts (81%), promotion opportunities (65%), salary
increases (61%) and career-development opportunities (60%).
Interestingly, external fairness concerns are much higher for base-pay
amounts, likely because it is easier to gauge competitiveness for this rewards
element than it is for others. Furthermore, concerns about base pay are more
frequently expressed with regard to external pay fairness concerns (81%)
rather than internal fairness concerns (67%), as shown in Table 2. Again, this
finding likely is because of the employee’s ability to easier benchmark his
or her pay externally than internally given crowdsourced websites providing
Pay Equity at Work

this information.
Although external fairness perceptions have changed little in the past eight
years, perceived fairness of flexible working arrangements has become more
important. This is most likely due to flexible work arrangements that have
increased substantially both in terms of schedules and locations in the past
several years. They have received considerable attention in the media as
well. Furthermore, other research indicates that flexible work arrangements
80
 TABLE 2  E mployee Concerns About the Lack of External Equity Rewards

2018 Mean 2018 2011 Mean 2011

(Standard Frequency (Standard Frequency
Deviation) (%) Deviation) (%)
Base pay amount 3.17 (.83) 81 3.06 (.83) 78
Base pay/merit increases 2.81 (.95) 61 2.86 (.94) 66
Job leveling or grading 2.38 (.88) 44 2.20 (.89) 36
Job titles 2.39 (.81) 42 2.32 (.88) 38
Variable pay (incentives and/or
2.60 (1.00) 52 2.55 (.99) 50
bonuses)
Flexible work arrangements 2.56 (.95) 47 2.32 (.96) 40
Recognition 2.41 (.93) 42 2.39 (.93) 43
Health-care benefits 2.47 (.96) 44 2.36 (.99) 41
Retirement benefits 2.20 (.90) 33 2.12 (.94) 32
Employee development
2.40 (.91) 43 2.43 (.99) 44
or training programs
Career development opportunities 2.70 (.95) 60 3.05 (1.00) 59
Promotion opportunities 2.81 (.95) 65 N/A N/A

Note: Frequency percentages include “Constantly or Persistently,” “Frequently” and “Occasionally” answers.

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

have become increasingly important and highly desired by managers and

employees at all levels (Fractl 2016; Eriksen 2018).

Determinants of Rewards Fairness

Table 3 lists the criteria believed to most directly influence perceptions of
rewards fairness. Respondents were asked to select the two criteria they
thought were the most important in driving perceptions of rewards fairness
for base pay, variable pay and nonfinancial rewards. While respondents were
asked to identify two criteria for each reward type, some reported only one
criterion; thus, the columns do not add to 100%.
For base pay, rewards professionals indicated that individual performance
(76%) and work responsibilities associated with the job (67%) have the most
impact on perceptions of fairness. Note that in the past eight years, the
Pay Equity at Work

importance placed on individual performance has increased substantially,

from 63% to 76%, and now is considerably greater than the impact of work
responsibilities. Also, note that all other factors dropped substantially from
2011 to 2018 and all are now less than 20%.
For variable pay, individual performance (57%) and overall organizational
performance (58%) were the most important criteria influencing perceptions
of rewards fairness. Overall, organizational performance was reported almost

81
 Pay Fairness:
Insights from Rewards Leaders

TABLE 3  Most Important Criteria in Determining Rewards Fairness

Nonfinancial Nonfinancial
Base Pay Base Pay Variable Variable rewards rewards
2018 2011 Pay 2018 Pay 2011 2018 2011
Seniority/tenure 11 22 3 8 19 26
at organization
Time in job 18 24 2 6 10 17
Work responsibil- 67 64 17 20 24 18
ities associated
with the job
Individual poten- 11 16 5 13 43 20
tial
Individual perfor- 76 63 57 55 53 38
mance
Team/depart- 2 10 29 27 10 23
ment/strategic
business-unit
performance
Overall orga- 5 19 58 52 5 16
nizational
performance

Note: Frequency percentages are reported. Because respondents had the option to choose multiple responses, the frequency percentages add to
more than 100%.

Source: WorldatWork, Loyola University Chicago, and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

twice as frequently as a criterion than were team, department or busi-

ness-unit performance.
Finally, the top driver of the perceived fairness of nonfinancial rewards
was reported to be individual performance (53%), which has increased
substantially since 2011 (38%). Individual potential also has increased as
a criterion from 2011 to 2018 (20% to 43%). Seniority/tenure, time in job,
and team, department or business-unit performance as fairness criteria for
nonfinancial rewards have fallen, as shown in Table 3.
In terms of the importance of broader factors in determining how rewards
are distributed, Table 4 indicates that consistency with the organization’s
rewards philosophy (92%), employee pay in similar jobs (86%) and rewards
promised to employees (85%) are most important in determining rewards
Pay Equity at Work

in organizations compared to other factors. Although these ratings have

increased somewhat, they are consistent with findings from the previous
research. Consistency with how employees are paid in other organizations
has much less influence (46%) than did other factors, as shown in Table 4.

Importance of Rewards Fairness Among Senior Management

Survey participants were asked to provide insight into how senior manage-
ment perceived the importance of designing rewards systems that were
82
 TABLE 4  D eterminants of Rewards Fairness

2018 Mean 2018 2011 Mean 2011

(Standard Frequency (Standard Frequency
Deviation) (%) Deviation) (%)
Consistency with what has been 3.32 (.78) 85 3.27 (.79) 84
promised to the employee
Consistency with organizational 3.55 (.67) 92 3.39 (.74) 88
rewards philosophy, goals or objec-
tives
Consistency with how other 3.27 (75) 86 3.12 (.76) 82
employees in similar jobs are
rewarded within the organization
Consistency with how other 1.93 (.78) 60 N/A N/A
employees in similar jobs (same titles)
are rewarded within the organization
Consistency with how other 2.69 (.81) 60 2.76 (.81) 65
employees in similar employee groups
(but not similar jobs) are rewarded
within the organization
Consistency with how employees are 2.45 (.84) 46 2.38 (.81) 43
rewarded in other organizations

Source: WorldatWork, Loyola University Chicago, and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

perceived as fair. Because rewards professionals work closely with senior

leaders to design and implement programs, the authors believe that these
rewards professionals have credible insight into the perception of senior
leaders on this topic.
According to the respondents, 25% of senior management is most likely to
rate internal rewards fairness as a mission-critical objective — a substantial
increase (more than 50%) from the 2011 study. Only 30% reported seeing
pay fairness as a secondary objective, not an objective or not considered in
rewards system design. Respondents said they see senior managers having
similar views on the importance of external rewards fairness.

Rewards Fairness Perceptions of Male vs. Female Employees

Rewards professionals were asked to identify the areas in which male and
Pay Equity at Work

female employees might have pay preference differences. Table 5 shows

that respondents believed that male employees placed more importance on
seniority/tenure at the organization and external pay comparisons than their
female counterparts. Females were believed to place more importance on
internal pay comparisons and work responsibilities with the job. Because
male employees often have more tenure than females, who often take time

83
 Pay Fairness:
Insights from Rewards Leaders

TABLE 5  Policies, Comparison and Performance Criteria with Strongest Influence on the
Perceptions of Pay Fairness for Male and Female Employees
No
Women % Men % Difference %
Seniority/tenure at organization 10 32 58
External (outside the company) pay comparison 9 37 54
Internal (inside the company) pay comparison 39 8 53
Time in job 10 20 70
Work responsibilities associated with the job 25 9 66
Individual potential 21 19 60
Individual performance 20 14 66
Team/department/strategic business-unit perfor- 8 7 84
mance
Overall organizational performance 2 8 89

Note: Frequency scores are reported in percentages. Due to rounding, some lines will not equal 100%.

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

TABLE 6  Rewards Programs with the Strongest Influence on the Perceptions of Pay Fairness
for Male and Female Employees
No
Women % Men % Difference %
Base pay amount 38 16 46
Base pay/merit increases 19 13 67
Job leveling or grading 14 10 75
Job titles 16 24 60
Variable pay (incentives and/or bonuses) 8 16 77
Flexible work arrangements 52 2 46
Recognition 17 8 75
Health-care benefits 18 3 79
Pay Equity at Work

Retirement benefits 1 9 90
Employee development or training programs 20 2 77
Career development opportunities 28 7 66
Promotion opportunities 23 17 60

Note: Frequency scores are reported in percentages. Due to rounding, some lines will not equal 100%.

Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018. “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

84
off to raise children, this probably is not a surprise. What is more curious
is that male and female employees differ in terms of external and internal
pay comparisons.
Gender differences are explored in terms of which rewards programs and
policies are most closely associated with pay fairness concerns. (See Table
6.) Female employees were believed to express more fairness concerns,
according to respondents, with the amount of base pay, flexible work
arrangements, health care and career opportunities. Male employees were
more concerned about job titles, variable pay and retirement concerns.
Overall, female employees were seen to have greater concerns about rewards
fairness than male employees.

Suggestions to Improve Employee Perceptions of Rewards Fairness

Respondents were asked which rewards programs, policies and practices
enhance perceptions of fairness. As shown
in Table 7, several practices are seen to TABLE 7  Factors that Enhance Rewards Fairness

enhance rewards fairness, including market Percent

surveys/benchmarking (81%), rewards Market survey benchmarking external 81
rewards fairness
strategy and design (43%), rewards communi-
Rewards strategy and design 43
cations (41%), and a culture of openness and
Communication of internal rewards 41
transparency (36%). fairness
Table 8 shows policies and practices that Culture of openness and transparency 36
respondents said they believe erode percep- Nonfinancial recognition internal 32

tions of rewards fairness. Communication Communication external rewards fair- 20

ness (benchmarking)
is seen as a double-edged sword, in that it
Nonfinancial recognition 11
both enhances and erodes perceptions of pay
Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018.
fairness. In addition, inconsistent treatment/ “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

favoritism/exceptions (39%), poor economy/

pay cuts/pay freezes (26%), and leadership TABLE 8  Factors that Erode Perceptions of
(25%) erode perceptions of fairness. Internal or External Rewards Fairness

Effect of Internal Rewards Equity on Percent

Pay Equity at Work

Employees Communication 45

Finally, the survey asked rewards profes- Inconsistent application/favoritism/ 39

exceptions
sionals what effect they believe internal Poor economy/pay cuts/pay freezes 26
rewards equity or fairness has on employee Leadership 25
engagement, employee motivation, employee Rewards strategy and design 19
satisfaction and employee retention. More
Source: WorldatWork, Loyola University Chicago and Korn Ferry. 2018.
than half of respondents reported believing “Study of Reward Fairness and Equity.” Scottsdale, Ariz.: WorldatWork.

85
 Pay Fairness:
Insights from Rewards Leaders

that it is “extremely influential or moderately influential” for engagement

(53%), motivation (49%), pay satisfaction (57%) and retention (52%). Few
rewards professionals said they think that engagement (11%), motivation
(11%), pay satisfaction (10%) and employee retention (12%) are only “mildly
influenced” or experience “no effect or neutral influence.”

Rewards Fairness and Organization Demographics

Organizational characteristics were examined to determine whether rewards
programs and policies have different effects on employee perceptions of fair-
ness and equity in different organizational contexts. In the 2011 study, the
authors found two organizational characteristics that were associated with
important differences in employee perceptions of fairness: size of the orga-
nization (number of employees) and type of the organization (public sector,
private sector/publicly traded, private sector/privately held, and nonprofit/
not-for-profit). These differences, however, were not found in the 2018 study.

CONCLUSIONS AND RECOMMENDATIONS

This study reaffirms the importance of fairness in rewards programs and that
rewards policies and programs may affect male and female employees differ-
ently. Furthermore, there have been relatively few changes in the past eight
years as to how rewards leaders believe rewards policies and programs affect
employee perceptions of fairness. From these findings, one can draw some
conclusions as to how to create rewards policies and programs that influence
perceptions of rewards fairness.
The findings indicate that rewards professionals believe that rewards
policies and programs have different effects on employee perceptions of
fairness. Specifically, employers need to pay particular attention to fairness
issues when individual performance is the primary criterion for rewarding
employees, as compared to rewards programs that are distributed to
employees based on team or group results (e.g., variable pay) or membership
(e.g., retirement and health-care benefits).
Next, rewards communications were found to be paramount for creating
positive perceptions of rewards fairness and equity. One must recognize that
even if employers are using job evaluation, pay surveys and other methods
Pay Equity at Work

to help ensure fairness, employees may not be aware of this effort unless
they are told. Moreover, poor communications concerning rewards issues
will erode these perceptions. This includes communications content (i.e.,
the messaging) and communications processes (i.e., equipping managers,
communications media). The communications challenge is further compli-
cated by the emergence of pay transparency as an increasing employee

86
expectation. This has been driven by the availability of pay information
on social media, legislative requirements for pay openness and increased
employee diversity.
We have also learned that challenging economic times have had a
corrosive effect on employee perceptions of rewards fairness and equity.
As such, leadership and the HR organization need to leverage rewards
fairness strategy, design and execution to reinforce employee trust in
rewards systems, particularly during downturns in the economy and within
an organization.
This research indicates that male and female employees may develop
perceptions of rewards fairness based on different criteria. Given the perva-
sive aggregate pay gap between male and female employees, perceptions as
to what constitutes fairness with employees in general and between genders
in particular should be further examined. Employee engagement surveys can
confirm what rewards leaders believe in terms of rewards fairness percep-
tions. These surveys are an important step in addressing concerns of key
demographic groups. Developing related action plans and rewards communi-
cations that address these concerns is an important second step in improving
perceptions of rewards fairness.
It is too early to tell what impact the Trump administration will have on
pay fairness. Initial indications are that there will be less invasiveness from
the federal government on wage and hour issues than under the Obama
administration. However, several states and local governments (particularly
on both coasts) have been active in passing regulations to strengthen the
notion of pay equity. This includes trends such as banning compensation
history in the recruitment process, broadening the statute of limitations
to litigate equal pay disputes, providing more punitive damages for equal
pay violations and moving from equal pay for equal work to equal pay for
comparable work. Given this as well as the societal changes toward more
transparency in pay, we think employers need to continue enhancing their
efforts to communicate why employees are paid what they are paid.
Employee perceptions of fairness and equity have a strong impact on
employee engagement, commitment and tenure. To foster and maintain high
Pay Equity at Work

levels of employee motivation, perceptions of fairness should be monitored,

and actions taken as needed. z

ABOUT THE AUTHORS

Dow Scott, Ph.D., (dscott@luc.edu) is a professor of human resources at Loyola University Chicago and
president of Performance Development International LLC. He is a nationally recognized compensation
and program evaluation expert, appearing in more than 100 publications. Scott’s teaching, research and
consulting have focused on the creation of effective teams, employee opinion surveys, performance

87
 Pay Fairness:
Insights from Rewards Leaders

improvement strategies, pay and incentive systems and the development of high-performance organi-
zations.

Tom McMullen (tom_mcmullen@kornferry.com) is the Global Reward and Benefits thought leadership
and intellectual capital leader for Korn Ferry and is based in Chicago. He has more than 30 years of
combined HR practitioner and reward consulting experience. His work focuses primarily on total rewards,
organization effectiveness and performance management program design. Prior to joining Korn Ferry,
McMullen worked for Humana Inc. and Kentucky Fried Chicken Corp. in senior compensation analyst
roles. He holds bachelors and masters of business administration degrees from the University of Louisville.

REFERENCES

Cohen, A. and U.E. Gattiker. 1994. “Rewards and Organizational Commitment Across Structural
Characteristics: A Meta-Analysis.” Journal of Business and Psychology 9(2): 137-157.

Cohen-Charash, Y. and P.E. Spector. 2001. “The Role of Justice in Organizations: A Meta-Analysis.”
Organizational Behavior and Human Decision Processes 86:278-321.

Colquitt, J.A., D.E. Conlon, M.J. Wesson, C.O. Porter, and K.Y. Ng. 2001. “Justice at the Millennium: A
Meta-Analytic Review of 25 Years of Organizational Justice Research.” Journal of Applied Psychology
86: 425-445.

Cowherd, D.M. and D.L. Levine. 1992. “Product Quality and Pay Equity Between Lower-Level Employees
and Top Management: An Investigation of Distributive Justice Theory.” Administrative Science Quarterly
37: 302-320.

Dulebohn, J.H. and J.J. Martocchio. 1998. “Employee Perceptions of the Fairness of Work Group Incentive
Pay Plans.” Journal of Management 24(4): 469-488.

Eriksen, K. 2018. “Are Flexible Schedules More Valuable than a Pay Increase?” Deputy, May 5. Viewed Oct.
31, 2018. https://www.deputy.com/blog/are-flexible-schedules-more-valuable-than-a-pay-increase

Folger, R. and M.A. Konovsky. 1989. “Effects of Procedural and Distributive Justice on Reactions to Pay
Raise Decisions.” Academy of Management Journal 32(1): 115-130.

Fractl. 2016. “Cost of Employee Happiness.” Viewed Oct. 31, 2018. http://www.frac.tl/

Lee, C. 1995. “Prosocial Organizational Behaviors: The Roles of Workplace Justice, Achievement Striving
and Pay Satisfaction.” Journal of Business and Psychology 10(2): 197-206.

Lee, C., K.S. Law, and P. Bobko. 1999. “The Importance of Justice Perceptions on Pay Effectiveness: A
Two-Year Study of a Skill Pay Plan.” Journal of Management 25(6): 851-873.

Miceli, M.P., I. Jung, J.P. Near, and D.B. Greenberger. 1991. “Predictors and Outcomes of Reactions to
Pay-for-Performance Plans.” Journal of Applied Psychology 76: 508-521.

Miceli, M.P. and P.W. Mulvey. 2000. “Consequences of Satisfaction with Pay Systems: Two Field Studies.”
Industrial Relations 39(1): 62-87.

Scott, D., T. McMullen, and M. Royal. 2011. “Reward Fairness: Slippery Slope or Manageable Terrain?”
WorldatWork Journal 20(4): 50-64.

Shaw, J.D. and N. Gupta. 2001. “Pay Fairness and Employee Outcomes: Exacerbation and Attenuation
Effects of Financial Need.” Journal of Occupational and Organizational Psychology 74(3): 299-320.

Simons, T. and Q. Roberson. 2003. “Why Managers Should Care About Fairness: The Effects of Aggregate
Pay Equity at Work

Justice Perceptions on Organizational Outcomes.” Journal of Applied Psychology 88(3): 432-443.

Tekleab, A.G., K.M. Bartol, and W. Liu. 2005. “Is It Pay Levels of Pay Raises that Matter to Fairness and
Turnover?” Journal of Organizational Behavior 26: 899-921.

88

How to Create a Culture
of Fair Pay
Pay equity and the question of fairness in pay practices
remain in the public eye. This ongoing, keen interest implies
that companies are not doing enough, despite the fact that
many organizations have invested years of efforts to create
fair pay practices.
Yet the needle on inclusion and diversity at the highest levels
has not moved significantly. Employers are fielding questions
from their employees about pay fairness, and shareholders are
introducing proxy proposals requiring more disclosure about
corporate pay practices.
Legislators worldwide have also actively tried to effect
change. In the United States, legislation has been in effect
since the 1960s, and states continue to put new laws in place.
Many countries outside the U.S. are adopting even more
aggressive laws.
How to Measure Up
Organizations’ progress on pay fairness is all over the map:
Some are doing an excellent job, and others have far to go
and are at a loss as to how to make real gains. So how can
companies determine how they measure up? Although it’s a
complicated effort, some essential steps and a compelling
workspan
daily
and straightforward presentation of the
findings can clarify where you stand and
actions that are needed.
1. Conduct an equal pay analysis.
A robust pay equity analysis (sometimes
referenced as an “adjusted” pay gap
analysis using multivariate regression)
will uncover the extent your organi-
zation is paying equally for equal or
substantially similar work. Establishing
comparability is key: Each employee
must be examined through this lens,
no matter the job title, with the focus
on the work performed, the manner
in which it is performed, and the skills
required to perform it.
This analysis determines what drives
pay most — whether desirable factors
like job level and/or performance rating,
or undesirable factors like race, gender,
and/or age. It will reveal important data
such as which employees are not paid
as we would expect, whether there
are supportable reasons for those
differences, and whether there are pay
patterns across different segments of
employees. Finally, the analysis is a good
starting place to investigate unintended
Pay Equity at Work
pay differences which can help mitigate
significant legal or turnover risk. It helps
to quantify the adjustments that may be
required to correct inequities.
2. Figure out what caused pay differ-
ences in the first place.
Despite their complexity, pay equity
analyses only help to identify the
89
 workspan
daily

employee pay and opportunity gaps that exist; they don’t dig the composition of our work-
into the deeper causes of those gaps. force change in three years?
Further, the employee results of a pay equity analysis are In five years? And if not, what
only one element of what is needed to adjust salaries and levers can we pull now to
ensure fair pay that reflects an organization’s compensation affect future change?
philosophy. Other compensation management tools used
to guide compensation decisions, such as salary structures, 3. Take action with full leadership
are also needed. support and monitor progress.
Employers must conduct pay and talent management Unless leaders are committed to
analytics (such as calculating the “unadjusted” pay gap changing how talent is managed,
between employee segments or forecasting the anticipated analytics may fall short. Change
gender mix across career levels.). These analyses support orga- can only happen with commitment
nizations in understanding both the nature and origin of pay or at every level to ensure fairness,
talent differences and where potential systemic gaps exist so consistent communication and inclu-
they can be corrected. Analyses include examining: sive talent management practices.
•• The distribution of different employee segments across the Commitment means the willingness
levels of an organization to change what isn’t working, try new
――Are different segments of employees represented equitably programs and processes, set new
throughout the organization, especially in core business goals and see them through. This
areas: senior positions, feeder roles for leadership and high includes a commitment to monitor
potential programs? progress against goals with a regular
•• The highest-paid and lowest-paid in each grade across func- schedule of analyses, communication,
tions and departments and change leadership.
――Are the highest-paid always a member of one group and the Effective action may include:
lowest-paid another? Are the gaps defensible? •• Pay adjustments guided by the pay
•• The results of calculating the median average pay by equity analysis formula results with
employee segment, by salary grade, by function, and more additional guidelines influenced by
――What does it reveal about overall trends in salaries and job the employee’s position in range,
opportunities across different employee segments? time in position and other compen-
•• How employees are promoted and the trajectory of the sation management factors
careers of different segments of the population •• Refinement of criteria for promotion
――Is it the same across different groups of employees? Do the to key roles with less emphasis
differences appropriately reflect differences in the nature on years of experience and more
of the job functions (i.e. some promotion patterns will have emphasis on demonstrated
longer periods between steps than others)? successes, work experiences
•• Employee engagement survey analytics to uncover and competencies
how different segments of employees experience •• More prescriptive hiring salary
Pay Equity at Work

their employment guidelines that emphasize market

――Does everyone feel similarly about career and opportuni- competitiveness and consistency
ties, rewards, performance, their sense of belonging? Or across candidates
are certain populations feeling underappreciated, causing •• A review of promotional increases
greater risks to the organization such as lost productivity, so that more emphasis is placed
higher turnover and potential reputational risks? on the salary for the new role
•• Composition of the workforce over time and less emphasis on the candi-
――If we continue to hire and move employees around the date’s current salary
organization in the same way we’ve always done, will
90
 workspan
daily

•• The creation of analytics dashboards so that leaders
can more easily monitor progress against goals and take
action, such as more support for and growth of a diverse
talent pipeline or sponsorship/mentorship of employees in
specific segments
•• Steps to identify unconscious bias in the performance
management process (as it relates directly to pay decisions).
A Shared Ownership
Without question, it is a challenge for organizations to
conduct fair pay analyses and take action, especially when
one area of the organization — often human resources or
legal — is considered the “owner” of fair pay. Leading organi-
zations recognize that everyone owns this: Leaders that drive
these efforts recognize their strategic value and how critical
they are to the sustained success of the business. It is only by
investing the time and resources to conduct these analyses
in a holistic manner and take action across the employee
experience that employers are able to
ensure they are rewarding and treating
employees fairly.
For more information on this topic, see
“Why limited gender diversity and pay
equity among named executive officers
should concern you,” Executive Pay
Matters, Jan. 17, 2019.)
Nancy Romanyshyn is a director in the Talent &
Rewards practice at Willis Towers Watson.
Rich Luss is a senior research economist in
the Research and Innovation Center at Willis
Towers Watson.

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worldatwork.org/
payequity-corporatesolutions Maximize ROI Synergy Skills Competence Goals

Portugal Passes Law
Designed to Close
Gender Pay Gap
Portugal has passed legislation that addresses its significant
gender pay gap in both private and public organizations. The
legislation took effect on Feb. 21, 2019 to promote equal pay in
a nation that’s unadjusted gender pay gap is 17.5%.
Under the new law, all companies are required to have a
transparent compensation policy based on an objective evalu-
ation of employee jobs, which accounts for differences related
to productivity, merit pay, attendance record and seniority.
Further, companies must use annually updated data from the
labor authority to calculate their gender pay gap. Employers
with 250 or more employees must submit an annual assess-
ment of their gender pay gap, an action plan for eliminating
the gap during the coming year, and a report on their progress
in fulfilling the previous year’s plan. The assessment and plan
must be submitted within 120 days of the labor authority’s
publication of the pay gap data. In the annual progress report,
organizations must set out justified salary differences and
the reduction of unjustified pay gaps. Gender pay differences
that are not corrected or justified will be presumed to be
discriminatory.
workspan
daily
“Portugal’s new law goes a step further
than the United Kingdom. In the UK,
companies are required to disclose the
difference between salary and bonus
for all male and female employees,
and they are encouraged to publish an
action plan to address any inequities,
but it isn’t mandatory,” said Melissa
Murdock, director of external affairs
at WorldatWork.
The Portuguese legislation is one more
example of policy makers trying to figure
out what laws and policies will be effec-
tive to force companies to address the
gender pay gap, she added.
Portuguese employers with at least 50
employees will be required to assess
gender pay gaps and publish an action
plan three years after the law goes
into effect. Trade unions and worker
representatives can ask a government
committee to review specific allegations
of gender pay discrimination. In such
cases, employers would have to provide
information to the committee within
strict timeframes. The committee’s
report will be binding and organizations
Pay Equity at Work
found to have discriminated must set out
remedial steps.
Companies will face penalties for
noncompliance and a two-year ban on
tendering for public contracts.
Brett Christie is a staff writer at WorldatWork.
97
98
Pay Equity at Work
 Gender-Based
Pay Equity Differences
and Upward Occupational
Mobility Through the Lens
of Comparable Worth
In an effort to view and analyze gender-based pay differences through the lens
of comparable worth, the author used the Federal Evaluation System’s (FES)
General Schedule (GS) pay grades 1-15 to help ensure a consistent group of
jobs that are classified and evaluated using similar criteria. Those pay grades
are part of the U.S. Office of Personnel Management (OPM) Fedscope Online
Analytical Processing (OLAP) databases, which contain employment statistics
for more than 2 million federal employees. Findings in the research generally
indicate that differences in pay between genders when analyzed as a whole
have been greatly distorted due to the uneven distribution of males and
females across occupations. Women are paid equal to males when comparing
jobs of equal value. Poor mobility of women into the higher occupational pay
ranks distorts female-to-male pay differences overall due to the skewed nature
of the employment profile. Generalization of these findings beyond the federal
service may be supported by the fact that the federal civil service competes
in the same labor markets as all other employers for employees across a wide
range of occupations, including management, professional, technical, scien-
tific, administrative and skilled trades. The article is based on the book Human
Capital Systems, Analytics and Data Mining (Hughes 2018). That research is
reviewed and updated in this article. Pay Equity at Work

Robert C. Hughes Jr.

Golden Gate University

99
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth
Editor’s note: This article is based on the book Human
Capital Systems, Analytics and Data Mining (Hughes
2018). The research is reviewed and updated in the
article, which also contains excerpts from the book. The
book is available through CRC Press at https://www.
crcpress.com/Human-Capital-Systems-Analytics-and-
Data-Mining/Hughes/p/book/9781498764780 or through
book dealers.
P
ay equity issues have been widely
written about and researched during
the past few decades, often with
findings that women are paid less than
men by a significant percentage. However,
in nearly all cases, the research has not
been focused within job and occupational
categories. This lack of focus on jobs of
comparable worth, based on pay grade
assignments, has mostly led to looking at
the issue through a foggy lens and at a high
altitude, where conclusions and findings
may be misleading.
For example, if a division of an organiza-
tion has an average internal compa-ratio of
105%, a conclusion may be drawn that the
average pay is slightly above market rates
Pay Equity at Work
and all is fine, assuming the salary struc-
ture midpoints are in line with the average
market rates. However, when drilling down
to individual units and/or job families, it is
not unusual to find widely varying differ-
ences on internal compa-ratios that may be
100
based on a wide variety of factors including,
but not limited to, average length of service,
average performance ratings, turnover
and organizational factors. If any signifi-
cant differences exist involving protected
groups and/or gender, they may need
to be examined.
Research based solely on aggregate gender
pay differences — where jobs in all cate-
gories are viewed together — results in
typically distorted findings because they do
not take into account the skewed nature of
female participation in higher-paying job
categories. As illustrated later, women have
low participation in the highest pay grades.
This leads to heavily distorted average pay
comparisons between genders due to the
higher percentage of men employed in
higher paying jobs, which inflates gender
pay differences when not examining gender
compensation differences based on occupa-
tions of equal value.
The Equal Pay Act (EPA) prohibits
sex-based wage discrimination between men
and women in the same establishment who
perform jobs that require substantially equal
skill, effort and responsibility under similar
working conditions.
 Given the legal requirement, there should not be pay discrimination between
men and women, so why do differences in average pay exist? Does the fact
that women and men have differences in employment levels across occupation
groups affect the wage differences? For example, if men have higher levels of
employment than women in occupation groups with better wage levels, would
that account for the differences? If men have longer lengths of employment than
women, could that account for some of the differences? Do women have higher
levels of wages in female-dominated occupation groups than men?
The U.S. Office of Personnel Management (OPM) FedScope Online Analytical
Processing (OLAP) site provides OLAP cubes by quarter for employment,
accessions, separations, employment trends and diversity within the federal
government. An OLAP online viewer (Cognos PowerPlay) is automatically
enabled when accessing any of the available FedScope OLAP cubes. Public
access to Federal Human Capital Data stored in OLAP cubes is accessible
through the FedScope website at https://www.fedscope.opm.gov/. (Note that
only the Mozilla/Firefox Web Browser is compatible with the enhanced or
generic cube interfaces with the Cognos PowerPlay Studio OLAP viewer at the
FedScope website.)

MULTIDIMENSIONAL OLAP CUBES

An OLAP cube is a database that is built for high-speed reporting and anal-
ysis. While production relational databases are designed for online transaction
processing (OLTP) for financial, human capital, sales and other business appli-
cations, OLAP databases are built for quick response in analytics and reporting.
Regular relational databases treat all data in the database similarly while
OLAP cubes separate information into two groups: dimensions and measures.
Dimensions are essentially information attributes by which measures are sorted.
Measures represent aggregated or summarized information. In essence, data is
pre-aggregated in the OLAP database so that responses to most queries have
been previously calculated and can be quickly presented. OLAP cubes can have
many dimensions.
Prior to OLAP databases, data had to be extracted from databases using struc-
tured query language (SQL) programs, which could take many minutes or hours,
Pay Equity at Work

depending on the complexity of the request and the amount of data involved.
OLAP cubes prebuild summarizations for the data, which results in reports and
analytics that can be run in seconds instead of many minutes or hours.
OLAP database sizes are based on the facts or measures and the number of
dimensions only and not the size of the database source. OLAP databases are
typically much smaller and usually represent only a small fraction of the size of

101
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

the source production relational databases. As a result, responses from OLAP

databases are nearly instantaneous in most cases.

OLAP DRILL DOWN

In OLAP databases, dimensions may be set into hierarchies, such as days,
months, quarters and/or years for a date-specific attribute (for example, a
performance review date in a human capital OLAP database). Dimensions
with hierarchical structures allow drilling down in OLAP cubes.
Drilling down through the data reveals differences that, for some segments
or divisions of the data, hold different results than what hold true at a
higher level of aggregation. For example, internal compa-ratios (salary grade
midpoint/average salary/100) for a department may be within the 90% to
100% range, indicating a comfortable average of employees with salaries
within 10% of the salary grade midpoint on average. However, when drilling
down to the job family and by job classification, one may find variances
indicating that some job families and/or individual jobs have large variances
on average, with internal compa-ratios that are well outside acceptable
compensation policy limits.
Figure 1 shows a detailed view of female vs. male pay relationships as
developed through the FedScope site. (Extensive tutorials covering all
Fedscope OLAP employment database views and analytics are contained in
Human Capital Systems, Analytics and Data Mining [Hughes 2018].)
For example, within the cabinet-level agencies in the professional and
administrative group jobs in pay grade levels 9 through 13, women make
a higher average salary than men. Lower and higher pay grades show the
reverse finding. If one did not drill down further to the pay grade level,
where jobs of equal value are together in the same category, one would
have incorrectly assumed from the higher-level analysis that all women
in the professional and administrative group had lower average hourly
wages than men.

COMPARISONS OF FEDSCOPE EMPLOYMENT DATE, 2015 TO 2018

Overall in the GS schedule, women earned 91.5% compared to 92.9% of
Pay Equity at Work

men from 2015 to 2018 when not adjusting for jobs of comparable worth.
Figure 1 shows that for 10 of the 15 GS pay grades, women earned more
than 100% of what men earned in the FedScope 2015 Employment OLAP
dataset. For 2018, Figure 2 shows women earning in excess of 100% of what
men earned for 12 of the 15 GS pay grades. For all GS pay grades, the 2015
to 2018 relationship has remained roughly the same, from 100.6% to 100.8%
when adjusted for comparable worth based on pay grade assignments of the

102
FIGURE 1  O LAP View FedScope Percentage of Women and Men All Measures by Cabinet
Level Agency and GS Grade. March 2015 Data

MEASURES
as values

01
02
03
04
05
Cabinet Level Agencies

06
07
08
09
10
11
12
13
14
15
N/A
General Schedule
and Equivalent
Grade (GSEG)-All

Source: Hughes 2018

FIGURE 2  O LAP View FedScope Percentage of Women/Men All Measures By Cabinet Level
Agency and GS Grade. March 2018 Data

MEASURES
as values

01
02
03
04
05
Cabinet Level Agencies

06
07
08
09
10
11
12
Pay Equity at Work

13
14
15
N/A

General Schedule
and Equivalent
Grade (GSEG)-All

Source: Hughes 2018

103
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

Federal Evaluation System (FES). This view would indicate that women are
paid equal to men when comparing jobs of equal value.

FEMALE UPWARD JOB MOBILITY

Lack of upward job mobility for
women in the federal workforce FIGURE 3  Pivot Table Stage 1 View
is apparent when we look at Percentage Employment, Fedscope Data
employment density by GS grade. March 2015.

When looking at the Percent

Employment columns for female
and male, we see that women
have more than 50% employment
in GS grades 2 through 10. This
is in sharp contrast to grades 11
through 15, where women have
less than half of the employment
levels of males. (See Figure 3.)
For GS 13 through 15, the rate
of employment for women is less
than 40% for March 2015. Figure
4, which contains data for March
2018, shows employment rates
Source: Hughes 2018
for women less than 40% of men
for GS grades 12 through 15. A
small improvement from 36.85% FIGURE 4  Pivot Table Stage 1 View
to 38.33% for women compared Percentage Employment, Fedscope Data
March 2018.
to men did occur in the highest
pay grade, GS 15.

LENGTH OF
SERVICE QUOTIENTS
Figure 5 shows an extended pivot
table worksheet where additional
length of services (LOS) calcula-
Pay Equity at Work

tions have been added. The PCT

Average Salary/LOS Female/Male
column indicates that women earn
a much lower percentage of salary
than men per length of service.
For each year of service based
Source: Hughes 2018

104
on total length of service, women were paid 76% to 96% for all GS grades
from 1 to 15, except for the next to lowest of the pay grades, GS grade
02, where the ratio is 123%. Overall, the length of service earnings gap for
women is 19% based on the female versus male length of service earnings
quotient of 81%. The base length of service quotient indicates that women
have 104% to 132% longer length of service than men for all GS pay grades
except for GS 02.
The radar chart in Figure 6 shows the lower salary totals for female versus
male categories in the GS pay grades of 12 through 15. As indicated in the
pivot chart, the employment levels of women to men in grades 12 through
15 range from 37% to 41%. Both the salary totals and relative employ-
ment quotients further indicate a weakness in female employment upward
mobility, which may be due in part to discrimination based on sex.
In Figure 7, we can more clearly see the distance between total salaries
earned by women versus men in GS 12 through 15.
Figure 8 shows the dominance of women in the lower GS pay
grades (1 through 8).
Examining gender-based pay equity issues through the appropriate lens
of comparable worth clearly indicates that gender-based pay equity gener-
ally exists only at the very highest pay grade levels and that occupational
mobility and representation of both genders equally across all occupations
and grade levels are the real issues at hand in pay equity research. Past pay
equity research has largely distorted and improperly used statistics to paint a

FIGURE 5  G ender Wage Gap Pivot Table Stage 3 View

Pay Equity at Work

Source: Hughes 2018

105
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

FIGURE 6  Pivot Table Radar Chart All GS Levels

Source: Hughes 2018

FIGURE 7  Pivot Table Radar Chart GS Levels 12-15

Pay Equity at Work

Source: Hughes 2018

106
 FIGURE 8  Pivot Table Radar Chart GS Levels 1-8

Source: Hughes 2018

pay-fairness problem that does not generally exist in government and misses
the real problem of occupational opportunity for both genders.
From previous analysis of pay equity in the federal government employ-
ment, it was found that women earn slightly more than males on average
when adjusted for comparable worth after examining gender-based pay rela-
tionships for jobs within the same GS pay grade. However, it took longer for
women to attain those pay levels and their mobility to higher GS grade levels
has been limited.

DATA MINING
OLAP and data mining are used to address different kinds of issues. OLAP
summarizes aggregated data and can be used to make forecasts and predic-
tions and to reveal characteristics of data relationships by drilling down
Pay Equity at Work

through compound levels of data dimensions. Data mining is an exploratory

endeavor using algorithms to uncover hidden patterns in data and operates
at a more detailed level.
Decision trees are used the most often and are easily understood algo-
rithms in data mining. Based on categorical splits weighted by observations,
tree nodes/leaves are developed where multiple independent variables can
be used to predict one or more dependent variables. In decision tree and
107
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

other data mining algorithms, further ranging investigation of variables

involved in pay equity and in particular, career mobility, can be explored.
The decision tree in Figure 9 focuses on the gender tree and the back-
ground is set to female. The concentration of women in lower-level salary
groups is apparent.

GENDER MOBILITY ISSUES

In Figure 10, the probability of any case in GS groups 1 through 5 being
female is 0.63, or 63%. For all length of service groups, regardless if they are
further split by age group, the range of probability for women is 59% to 72%
for inclusion in the lowest GS pay grade group segment.
Conversely, women have only a 41% chance of being included in jobs
within the highest GS pay grade levels. For those women who are included,
most have much longer lengths of service than their male counterparts (48%
chance of inclusion with more than 20 years of service and 38% chance of
inclusion with less than 20 years).
It is most interesting that, beyond the expected strong prediction link from
GS pay grade group to gender, both gender and occupation group have
strong bidirectional prediction links. (See Figure 11.)
This further underscores gender mobility issues not only with regard
to higher pay grades, it also indicates segregation issues with regard to

FIGURE 9  D ecision Tree Gender and Salary Group 01

Pay Equity at Work

Source: Hughes 2018

108
 FIGURE 10  D ecision Tree Gender and GS Grade Group Mining Model Content View 01

Source: Hughes 2018

FIGURE 11  D ecision Tree — Dependency Network Stronger Links

Source: Hughes 2018

Pay Equity at Work

occupation groups. This led to altering again the variable column input and
predict settings, as shown in Figure 12.
Given previous findings via OLAP-based research, the interest in pay
equity based on comparable worth analysis did find occupational mobility
issues for women with regard to higher GS grade levels. We also found that
men dominate higher GS grade levels, which skews the data on the differ-
ences in average wages and salaries based on gender.

109
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

FIGURE 12  D ecision Tree - Gender Occupation and GS Pay Grade

Source: Hughes 2018

CLUSTERING
Clustering is an example of unsupervised learning in data mining. No depen-
dent variables or predictors are determined initially in unsupervised machine
learning endeavors.
Clustering algorithms in data mining consist of processes designed to
group data across several variables (such as salary group, age, length of
service, gender, etc.) so that the density of data that fall in the same group,
or cluster, are more similar to each other than to those in other clusters
(based on data relationships in other variables).
Normally, the first order of inquiry in cluster analysis is to examine the
clusters that show a preponderance of data points in the highest GS grade
levels (13 through 15). Figure 13 shows the two clusters in the latest cluster
analysis model, which includes GS grade level as an attribute that has heavy
participation in the GS grade levels 13 through 15.
In Cluster 2, men account for 95% of the population. In Cluster 3, they are
56%. In Cluster 3, all members are in GS grade levels 13 through 15, whereas
Pay Equity at Work

in Cluster 2, 80% are in the highest GS pay grade level bracket.

No other clusters show any significant membership of data in the highest
GS grade level bracket, which further confirms the findings dealing with
occupation mobility issues for women. This also underscores the conclusion
that gender pay equity when measured by average salaries was generally
distorted in previous research and, in fact, is not the issue often portrayed
by politicians and the popular press.
110
 In a dependency network view,
FIGURE 13  P rofiles for Clusters 2 and 3 with GS Grade
the strongest links are shown by
connectors from attribute categories to
predictor attributes. Figure 14 shows
that the highest GS grade levels have
the strongest relationships to the male
gender category, while the lowest GS
grades have the strongest connection
to the female gender category. This
view again confirms earlier findings
of gender-based occupation upward
mobility problems for women. It further
dilutes the findings of other research
in regard to significant average gender-
based pay differences.

SUMMARY
When female versus male federal service
salaries are compared, women are paid Source: Hughes 2018

equal to men when comparing jobs of

equal value. Poor mobility of women
into the higher occupational pay ranks distorts female-to-male pay differences as
a whole, due to the skewed nature of the employment profile of women to men.
Korn Ferry studies across 25 countries indicated that women earn 98%
of the wages of men who are in the same roles at the same employers

FIGURE 14  D ependency Network View Association Rules

Pay Equity at Work

Source: Hughes 2018

111
 Gender-Based Pay Equity Differences and Upward Occupational
Mobility Through the Lens of Comparable Worth

(Economist 2017). Analysis of average salary when compared to length of

service for women versus men indicates that women receive a much lower
percentage of salary than men per length of service years. For each year of
service based on total length of service, women are paid 76% to 94% for all
GS grades from 1 to 15, except for the next to lowest of the pay grades, GS
grade 02, where the ratio is 123%.
Generalization of this study’s findings beyond the federal service may be
supported by the fact that the government has to compete in the same labor
markets for employees across a wide range of occupations including manage-
ment, professional, technical, scientific, administrative and skilled trades. z

ABOUT THE AUTHOR

Robert C. Hughes Jr., M.S. (rhughes@ggu.edu) has more than 40 years’ experience in human capital
management including compensation and information systems. Hughes, who has taught courses in
compensation, management information systems, data analysis, business intelligence and predic-
tive analytics and human resource management information systems at several universities in the San
Francisco Bay Area, is currently an adjunct professor in the Ageno School of Business at Golden Gate
University in San Francisco. He has developed compensation systems that have been marketed in the
United States, Europe and the Middle East. Hughes was awarded WorldatWork’s Lifetime Achievement
Award in Compensation in 2000. Hughes is an Academic member of WorldatWork, and an Associate
member of the American Psychological Association (APA) and Division 14 of the APA, and the Society for
Industrial and Organizational Psychology. His blog can be found at compensationarchitectnotes.blogspot.
com.

REFERENCES

Economist. 2017. “The Economist Explains: Why Do Women Still Earn a Lot Less than Men?” Oct. 20:
Viewed: March 2, 2019. https://www.economist.com/the-economist-explains/2017/10/20/why-do-wom-
en-still-earn-a-lot-less-than-men.

U.S Office of Personnel Management. 2018. FedScope, Cubes. Viewed: March 1, 2019. https://www.
fedscope.opm.gov/employment.asp.

Hughes, Robert C. 2018. Human Capital Systems, Analytics and Data Mining. Boca Raton, FL: Chapman
& Hall.
Pay Equity at Work

112

Ignore Pay Transparency
at Your Own Peril
Let’s be clear: While the hot-topic terms
gender pay gap and gender pay equity are
often used interchangeably, they are two very
different things.
The gender pay gap is a broad, societal issue
that takes the median pay of all women divided
by median pay of all men, regardless of position.
Gender pay equity speaks to the concept of equal
pay for equal work and is covered under laws like
The Equal Pay Act.
These two issues sound similar, but they aren’t. What they
do have in common, however, is that they are often misunder-
stood, draw attention and spark debate.
Partly driven by the attention both pay issues command, the
broader topic of pay transparency has become a focus in the
media, politics and general public discourse. This elevated
level of scrutiny is challenging companies to act and many
are doing so by:
1. Proactively addressing the gender pay gap and, in many
cases, voluntarily disclosing how they stack up to empha-
size a commitment to social responsibility;
2. Conducting formal pay equity assessments so any inequi-
ties can be remedied quickly and appropriately to mitigate
the risk of legal action; and
3. Revisiting compensation communication strategies to
make any necessary messaging adjustments in order to
maintain control of their own narratives.
Not surprisingly, pay transparency has become quite complex.
There are disclosure laws that require companies to share
compensation data in public filings, and there are activist
investors who demand that boards publish more information
on gender and racial pay gaps.
But the key thing to remember is how your employees view
pay transparency. To them, it’s personal; it’s far less about pay
gap statistics or knowing everyone’s salaries. Instead, what’s
really at the crux of pay transparency is an employee’s interest
in understanding that their own compensation is based on
myriad factors (experience, tenure, education, market value
and performance) and grounded in methodologies and gover-
nance practices that create fair and responsible compensation
structures. Employees want to be reassured that they are
being paid competitively and fairly based on their specific
roles within their organizations.
workspan
daily
Tactically, this means different
things for different companies. Some
companies create PowerPoint presen-
tations and develop communication
toolkits with FAQs, while others
establish more face-to-face inter-
actions or more formal training for
leaders. Regardless of their approach,
companies need to be confident and
prepared to answer questions about
pay ranging from “What’s your compa-
ny’s gender pay gap?” to “Do you pay
equally for equal work?” to “Why do
I get paid less than the person who
sits next to me?”
Given the current environment,
especially as these issues continue to
be conflated in the presidential run
for 2020, it would be irresponsible for
companies to ignore the groundswell
of public debate on pay.
This is a powerful opportunity for
companies to highlight their commit-
ment to social responsibility and their
efforts to close the gender pay gap.
It’s an opportunity to ensure that pay
Pay Equity at Work
structures are unbiased and legally
sound, that they reinforce messages
about how compensation is designed
and delivered based on culture, busi-
ness strategy and talent objectives.
And most importantly, it’s simply
good governance.
Sharon Podstupka is a principal at Pearl Meyer.
Sharon Podstupka
113
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Maritz EX beqom JER HR Group Salary.com
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For more information, visit worldatwork.org/payequity-vendordirectory

 T H E P U S H TO A DVA N CE
Pay Equity at Work

116
BY MELISSA MEANS, PEARL MEYER

W
ith the maelstrom of social issues coming to a head in 2017, gender
pay inequality once again is at the forefront, although the issue
has been discussed for decades and remains a global social
challenge. As human resources and compensation professionals,
we cannot forget that it also is a legal issue, one that “depresses
wages and living standards for employees ... prevents the
maximum utilization of the available labor resources … burdens
commerce and the free flow of goods in commerce, and constitutes an unfair
method of competition,” according to the Equal Pay Act of 1963.
While there have been numerous attempts at the federal level to enact laws
that would improve or even alleviate pay inequality (see “A Brief History of
Federal Equal Pay Legislation”), women today make only 80 cents to every
dollar made by men, based on a U.S. national average. This statistic prevails,
even though women make up nearly half of the employed U.S. labor force,
enroll and graduate from higher education institutions at rates higher than
men, and make a majority of household buying decisions. Why does this
inconsistency still exist when there are rules to prevent and prohibit it? Much
of the answer may lie in the fact that grievances are difficult to prove, and data
can be scarce or inconsistent.
In September 2017, the Trump administration set aside an effort to collect
pay data by gender, race and ethnicity for businesses with more than 100
employees, stating that such efforts would be ineffective and too burden-
some for employers. (See “Federal Efforts.”)
Nevertheless, all but two states — Alabama and Mississippi — have had
their own pay equality laws in place for years. And with increased focus
on the issue, many states — including California, Delaware, Maryland,
Massachusetts, New York, Oregon and the territory of Puerto Rico — recently
made their laws more robust, providing for retaliation protections and, in
some cases, eliminating the ability of a prospective employer to ask about
salary history — a real potential game-changer for companies as they seek to
hire the best talent at the right compensation level.

Pay Equity at Work

| May 2018

117
35
 T H E P U S H TO A DVA N C E

A Brief History of Federal Equal Pay Legislation

When What The Outcome

Adopted policy to provide women with equal pay in jobs where they
1942 The National War Labor Board
replaced males.

Congress introduced a failed bill that would have mandated equal pay for
1945 Women’s Equal Pay Act
“comparable quality and quantity” of work performed.
Passed by Congress as an amendment to the 1938 Fair Labor Standards Act
1963 The Equal Pay Act which mandates equal wages for equal jobs with skill, effort, and responsibility
that is “performed under similar working conditions.”
Bans employment discrimination on the basis of “race, color, religion, sex,
1964 Title VII of the Civil Rights Act
or national origin.”

Expanded the Equal Pay Act to include white collar jobs, which were
1972 Educational Amendment of 1972
previously excluded.

1978 Pregnancy Discrimination Act Strengthened protections for pregnant employees.

Expanded ability to file pay discrimination complaints beyond 180 days

2009 Lilly Ledbetter Fair Pay Act
after an initial pay decision.

With no intended focus by the federal government
(at least not now), we are finding that in addition
to the initiatives by state and local authorities, pay
parity also is being addressed by various stakehold-
ers in unexpected ways:
• A few of the largest U.S. companies in the technol-
ogy industry, including Amazon, Apple, Facebook,
Microsoft and Uber, are voluntarily disclosing
gender pay statistics.
• Activist and institutional investors are putting
forth gender pay resolutions at annual shareholder
meetings for publicly traded U.S. companies.
• Proxy advisory firms such as Institutional
Shareholder Services (ISS) and Glass Lewis are
May 2018at Work
implied perspective? Are you or others in the orga-
nization fielding internal or external questions on
the topic? Has your company analyzed its own data
to see where it stands?
Salesforce is just one example: CEO Marc Benioff
took the issue seriously and spent $3 million
in 2016 to help close the gender pay gap in his
company. In 2017, he spent another $3 million to
increase compensation for more than 11% of its
workforce to further address gender pay gaps. He
also made pay parity an explicitly stated priority
for the company.
Many organizations could take a page from the
Salesforce CEO’s playbook by being more explicit

including policies on gender pay in their 2018 in company policies and actions regarding gender
proxy voting guidelines. pay. While it does have merit to simply state to
• Many board members are asking management large employee groups the importance of the
Pay |Equity

about their company’s policies and practices
regarding gender pay parity.
So where does your company stand on this long-
time social and legal subject? Is there an explicitly
stated policy in the corporate handbook or only an
118
36
issue, taking some initial action and outlining next
steps are key to eventually resolving this problem.
Absent a CEO like Benioff, HR and compensation
professionals have the means to push this dis-
cussion to the top using several steps to impart
initiative and action.
 Gather the Data
Take the time to download all pay data into an easily
editable format that allows for various sorting capa-
bilities. Include all employees, ranging from the lowest
paid to the senior-most executives, along with title,
grade, gender, ethnicity (if available), company and
position tenure, educational background, historical
annual performance assessment ratings, and a com-
plete pay data history. Remember that elements of pay
(e.g., annual incentives, long-term incentives) will vary
by level of position, so look at all pay elements, not just
base salary.
Evaluate the Data Using Different Lenses
Once the data is gathered in one file, it is time to
begin the evaluation process. The key to this step is to
not seek the best answer that positions the company
and its practices in the best light, but rather analyze
the data in multiple ways using different lenses to see
if a real problem truly exists.
Determine Whether an Issue Exists
By looking at pay data though various lenses, one
should be able to determine if an issue exists. Identify
specific departments, functions, groups and/or individ-
ual positions of concern. Determine how many people
are affected, by how much, and through what forms of
compensation. Decide if this is a systemic issue, a cor-
porate administration issue or something else entirely.
Develop Potential Solutions
Potential solutions should account for cost, impact,
timing and exposure as well as the behaviors that
resulted in the issue. Once we understand the who,
Federal Efforts
In early 2016, President Barack Obama and the Equal Pay Task Force tasked
the Equal Employment Opportunity Commission (EEOC), in partnership with
the U.S. Department of Labor, to “help focus public enforcement of our equal
pay laws and provide better insight into discriminatory pay practices across
industries and occupations” to create new reporting for all U.S. companies
with more than 100 employees.
Such a process would have required all qualifying companies to provide
annual pay data by gender, race and ethnicity covering more than 63 million
employees. While this information could be enormously helpful and allow for
a better understanding of the scope and distribution of pay inequality, many
believe the directive as written could create an undue administrative burden
on companies. There currently are no reliable and comprehensive publicly-
available data sources on the subject.
what and where, we need to understand the why —
the behaviors behind how we got to pay inequality.
Solutions that fi x only pay for affected individu-
als will not address the long-term behavioral issue.
Re-education of HR departments, corporate recruit-
ers and managers who make pay and hiring decisions
likely is needed. Companies also should craft and com-
municate a procedure for employees to report pay
inequality issues and determine how such reports will
be investigated and resolved in the future.
Address the Issue
Select and approve the best, most efficient and rea-
sonable approach to address the gender pay gap issue.
Consider bringing the board of directors into the dia-
logue (if it’s not already involved), as many boards are
being asked or even pressured by activist investors on
this topic, (i.e., 3% to 4% of shareholder proposals in
2017 were related to gender pay or related pay dispar-
ity). The company may even want to weigh the benefit
of voluntarily disclosing, at a high level, the company’s
explicit policy on pay parity in its next proxy statement
to help guard against external pressures.
Avoid Future Complicity
As long as companies hire or replace talent every day,
pay inequity will be an issue. It is important to estab-
lish a regular process of review to stay on top of the
issue. Companies may want to create a pool of funds
to help address pay gap issues that creep back into
the system along with determining ways to continu-
ally educate (and even discipline) managers who make
pay or hiring decisions. Stay on top of pay gap issues
reported by employees and keep the board informed of
the internal processes to help avoid unintended issues
in the future.
Making Strides
With collective focus and action, we can make a
real impact and move the issue of pay parity for-
ward faster than it has moved in the past 55 years.
Pay Equity at Work
Perhaps by working together in an environment of
social pressure for change, energized HR and man-
agement teams, along with their boards, will be able
| May 2018
to accomplish what decades of federal laws have
failed to do.
Melissa Means is a managing director with Pearl Meyer. She can be reached
at Melissa.Means@pearlmeyer.com. Follow her on Twitter (@MelissaLMeans)
or connect with her on LinkedIn at linkedin.com/in/melissameans.
119
37
 research
research
ininbrief
brief

Perceptions of Pay Fairness

Affected by Communication
Human resources professionals believe rewards policies
and programs impact employee perceptions of fairness, and
that male and female employees may develop perceptions of
rewards fairness based on different criteria.
This was a main finding from WorldatWork’s Study of Reward
Fairness and Equity with Dow Scott, Ph.D., of Loyola University
Chicago. The survey of 290 WorldatWork members revealed
insights into employee concerns when it comes to pay and
promotional opportunities and how communication of rewards
practices is critical for organizations to achieve a positive pay
fairness reputation both internally and externally.

Policies, Comparison and Performance Criteria with Rewards Programs with the Strongest Influence
Strongest Influence on the Perceptions of Pay Fairness on the Perceptions of Pay Fairness for Male and
for Male and Female Employees Female Employees

10% 32% 58% 38% 16% 46%

Seniority/tenure at organization Base pay amount

9% 37% 54% 19% 13% 67%

External (outside the company) pay comparison Base pay/merit increases

39% 8% 53% 14% 10% 75%

Internal (inside the company) pay comparison Job leveling or grading

10% 20% 70% 16% 24% 60%

Time in job Job titles

25% 9% 66% 8% 16% 77%

Work responsibilities associated with the job Variable pay (incentives and/or bonuses)

21% 19% 60% 52% 2% 46%

Individual potential Flexible work arrangements

20% 14% 66% 17% 8% 75%

Individual performance Recognition

8% 7% 84% 18% 3% 79%

Team/department/separate business unit (SBU) performance Health-care benefits

3% 9% 89% 1% 9% 90%
Pay Equity at Work

Overall organizational performance Retirement benefits

| October 2018

21% 3% 77%
Employee development or training programs

28% 7% 66%
Women Men No
Career development opportunities
Difference

23% 17% 60%

Promotion opportunities
120 80
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