Equal pay is on the rise – What can employers do about it?

Equal pay is gaining momentum in Switzerland and abroad. It is no longer just an issue of morality; it is also a legal imperative and there is a hard business case for closing the gender pay gap. In this article, we share with you a couple of reasons why employers should care about equal pay, and what they can do to make sure all employees receive equal pay for equal work.

3 reasons why employers should care about equal pay

There are of course many more than three reasons why one should care about equal pay but, due to the role they play in the promotion of gender equality, some of these reasons are most relevant to employers. Here they are:

1. A gender pay gap has bottom line impact
   Companies are doing everything they can to maximise performance, and companies that don’t prioritise fair pay are leaving ‘easy money’ on the table. In modern times, we do not challenge the direct link between staff engagement and corporate performance, but how can women and men be truly engaged knowing (or believing) that they are not paid the same for doing the same work? Ignoring that equal pay is a topic of discussion in the workplace is a serious business error. Companies that reduce the gender pay gap increase diversity of skills, collective curiosity and ultimately, bottom line results. The gender pay gap has a direct impact on employer branding, talent attraction and retention.
   
2. Put your money where your mouth is
   Sustainable Development Goals are more than ever part of corporate value propositions where both climate change and gender equality are two of the topics that get most attention. We still see that many companies are speaking about ‘social entrepreneurship’, but one can question to which extent companies really care. Closing the gender pay gap is an important societal challenge, but the fact that it is measurable and actionable represents a great opportunity for companies to demonstrate they take things seriously.
   
3. You are required by law to pay people equally for the doing the same work
   Principles of equal pay have been present in many countries’ constitutions for quite some time now. However, during the past decade or so, we have been witnessing an increase in the number of specific laws and regulations meant to reinforce the principle of equal pay and avoid discrimination based on gender (among others). For instance, Iceland, the UK, France, and Switzerland have all implemented new laws requiring that employers analyse and report on their gender pay gaps.
   Want to better understand the gender pay gap legislation in the country that your company is operating in?

How to tackle pay inequalities?

Over the past years, we have supported many companies in tackling the gender pay gap. In most cases none of those companies was actively discriminating, and most of those companies nevertheless were facing challenges in closing the gender pay gap.

There is a fair chance that your company also has gender pay gap challenges, even when it pro-actively works on equal pay for equal work. So, what can an employer do to make sure they are treating their employees fairly?

1. Define equal work so you can determine equal pay
   In order to ensure equal pay for equal work a company first needs to clarify how it defines "equal work" or "work of equal value". The most common way to clarify this is working through a "job evaluation" methodology allowing its the corporate hierarchy and functions to be mapped out in an objective manner. In this way, remuneration levels can be set for every function, and people in similar functions can be paid equally. In order to get there, we typically assess every function against a set of pre-defined criteria (e.g. level of responsibility, complexity, demanding nature of the post, etc.), map the different functions along some sort of hierarchy, and match functions with equal value. Once you have defined what equal work means, it will be easier to implement equal pay along the lines of a salary grid.
2. Look closely at what data tells you
   Investing in promoting and ensuring equal pay is only worth it if you keep track of what is happening and making sure you are on the right path. Quantitative analyses is paramount as this allows you to identify discrepancies between salaries. One could, of course, compare average or median salaries between women and men (as required under UK law), but we strongly recommend going a step further. We typically run a sophisticated regression analysis that identifies quite precisely the unexplainable gender pay gap overall and for each individual employee. With this information you can make specific remediations but the outcome also enables you to make trends and analysis on the root causes of pay differences.
3. Increase transparency in recruitment, promotion and reward processeses
   To provide all your employees with equal opportunities, it is important to be transparent about what is happening in your organisation, how you operate, and how important decisions are taken. For all people to be treated equally, it is indeed important that they all know what matters the most when you decide to promote them, or when you will determine if they can receive a raise. Certain organisations even push transparency further and share details on their remuneration policies with their employees. From an employee’s perspective, this helps reduce uncertainty, verify that the processes are fair, and increase their engagement and performance. From an employer’s perspective, this helps building a culture of fairness and openness which is a flywheel for talent attraction, egagement and retention. 
4. Strengthening HR practices and policies
   Pay inequalities do not only creep into the system because of poor pay policies. They can be reinforced by flaws in recruitment procedures, salary determination, performance evaluation, promotion decisions, etc. which might lack the appropriate level of robustness and controls to avoid biases based on gender. Accordingly, it is important to make sure that these processes are bias-free and applied in a systematic way. Training the people involved in your HR processes (e.g. line managers) is crucial for your efforts to succeed.

What about an external evaluation of equal pay?

While the strategies used, the policies in place, and the level of maturity vary for every organisation, their common goal is to ensure that men and women are treated fairly in the workplace.

Internal analysis help track progress, and this might even be sufficient to ensure that your company is legally compliant. That being said, an external assessment of the situation will take you another step forward. An external recognition of a company's commitment and efforts to promote gender equality helps increase the trust one has in the fairness of an organisation, the employee engagement levels, and attract new talent. Overall, it can serve as a key differentiator in the market, and help overall the organisation to achieve better results.

Getting recognition through an external independent non-for-profit certification for instance is a great way of demonstrating that your company really takes the topic seriously. The benefits of such recognition have been confirmed by many companies who have worked with the EQUAL-SALARY Foundation. They also value the principles underlying the Foundation’s certification process, process which allows to identify improvement opportunities, develop relevant action plans, and a mid- to long-term vision for achieving gender equality in the workplace.

While society is pushing for gender equality, employers have a unique responsibility in making sure men and women receive equal pay for equal work. There are many reasons for which an organisation might want to ensure equal pay, and many more ways in which an organisation can try to improve the fairness of its practices. When progress is made in the right direction, there are many advantages in taking action so that one’s efforts are externally recognised. This notably ensures a strong demonstration that companies care about equal pay, while ensuring continuous improvement in the matter.