What is Pay Equity?
“Pay equity” is an umbrella term that includes issues related to the fairness of compensation paid by employers to their employees, without regard to gender or race or other categories protected by law (such as national origin or sexual orientation).
It includes fairness both in terms of base pay and in total compensation, such as bonuses, overtime, employee benefits, and opportunities for advancement.
Pay equity does not mean that all employees are paid the same; it is concerned with ensuring those employees performing comparable work are receiving comparable compensation. Pay equity is also concerned with rectifying past injustices with respect to unequal pay. Pay equity is influenced by laws, policies, regulations, and internal practices.
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Why Should I Care?
Pay equity is an issue to watch because it is reshaping business, non-profit, and government sectors, particularly In light of the #MeToo and #TimesUp movements, as well as growing national and international concern over compensation practices.
Pay equity increases respect, dignity, and fairness in the workplace, and assists in attracting and retaining qualified candidates. Perhaps most urgently, it is a best practice for mitigating the significant risks of litigation posed by unequal pay practices.
Under the federal Equal Pay Act and an increasing number of state and local laws, providing unequal pay for comparable work is illegal.
Who Does it Affect?
Pay equity literally affects all working people and their families because it aims to level the playing field in terms of compensation. It is of particular concern to women and members of racial and ethnic groups, and other groups that have historically been victims of wage discrimination.
For example, Equal Pay Day falls on the date upon which women must work in the current year to earn the same as men in the prior year.
(Equal Pay Day 2018 was April 10, 2018, illustrating that women, on average, had to work more than four additional months to earn the same as men, on average, in 2017.)
What Kind of Things Do I Need to Look for When Evaluating my Company's Compliance?
You need to first understand what affirmative obligations you have in your jurisdiction as an employer. The Equal Pay Act and its prohibition on compensation discrimination applies to all employers, but you may have additional obligations under state or local law.
For example, California’s Equal Pay Act prohibits an employer from paying its employees less than employees of the opposite sex, or of another race, or of another ethnicity for substantially similar work “when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”
The Massachusetts Equal Pay Act forbids the payment of salary or wage rates less than the rates paid to employees of the opposite sex for “work of like or comparable character or work on like or comparable operations.” These state by state differences can have major impacts on the workplace.
Which Forms Do I Need to Submit and Where Can I Find Them?
There is no current nationwide form to submit to report pay practices. The Office of Management and Budget stayed a new requirement that employers submit summary pay data along with their EEO-1 Reports.
However, federal contractors have reporting requirements through the Office of Federal Contract Compliance Programs (OFCCP), and businesses in San Diego, San Francisco, New Jersey, New York, among other jurisdictions do have various reporting obligations related to pay equity.
How is Pay Equity Being Enforced?
Pay equity is enforced on a state by state basis, or, at the federal level, under the Equal Pay Act.
There are a number of enforcement mechanisms available to the federal, state, and local governments, including: civil fines and penalties, cancellation of contracts and/or licenses for public works contractors, and individual and class litigation that can result in significant payouts.
What Kind of Experts Should I Consult?
Pay equity has far-reaching impacts on many elements of your workforce, including legal, financial, and human resources-related.
We recommend consulting with your general counsel, or outside counsel, accountants, and most importantly, experts in data cleansing and validation.
As the saying goes, garbage in, garbage out (“GIGO”)—a meaningful review of pay practices depends on the integrity of your employment data.
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