To achieve success in reducing the pay gap, organisations need to understand the issue holistically and design solutions accordingly.
To achieve success in reducing the pay gap, organisations need to understand the issue holistically and design solutions accordingly. For that it is important to identify the very nature of problem.
Identify the nature of gender pay gap
The pay gap can be broadlyFour key insights to reduce gender pay gaps classified into two groups – group-to-group gaps between role-to-role gaps.
There are certain jobs where there is high concentration of women employees, and that’s why they are low paying – for instance, female nurses have paid far lower than male doctors. This gender pay gap between female nurses and male doctors has been there for so long that it has become rigid and it’s almost impossible to break.
Now when we compare the same female nurses to male nurses, it becomes a case of role-to-role gaps where male nurses are paid more than female nurses despite the two doing the same job.
The gaps can exist in other sectors as well. Organisations need to identify these segments in order to address this problem.
Identify the factor
In addition, the gender pay gaps are also a result of several other factors such as talent, choice of occupation, organisational factors such as size, industry or geography, and human factors such as difference in education and experience. Typically in a large scale organisation the gender pay gap is 27 per cent of which 9 per cent is due to choice of occupation, 6 per cent is due to organisational factors and 5 per cent is attributed to human capital factors. However, the reason behind the remaining 7 per cent gap cannot be identified which says that the problem is bigger than it looks.
There are certain jobs which are low paying such as female nurses only because they have high concentration of women. These are classified as group-to-group gaps.
Conventional pay practices are ineffective
The fact is that conventional pay practices are not effective at delivering on equal pay. The role-to-role pay gaps are trending upward at an average rate of close to 0.2 percent per year. Ad hoc pay adjustments that fix current gaps will not hold over time, and they will leave organisations open to increasing legal, talent and reputational risk. Leading organisations have figured out ways to conduct equity audits as an ongoing process, rather than a one-off event.
By integrating pay equity assessments as a key process of the compensation function – not as an ad hoc initiative, organisations can sustain equity by conducting regular analyses that identify pay gaps between employees performing similar work and integrating HR partners into audit processes.
Organisations need to address employee perceptions of pay gaps via open communication. The communication must define what steps have been taken to address gaps so they can prepare managers to communicate pay adjustments effectively.
Sooner the better
As role-to-role pay gaps trend upwards the average cost to correct gaps is also increasing. Organisations that act now to close pay gaps and sustain equity will pay less than those that delay investing in equity.
In addition, organisations need to address employee perceptions of pay gaps via open communication. The communication must define what steps have been taken to address gaps so they can prepare managers to communicate pay adjustments effectively. It will enable to drive better employee outcomes than simply correcting the gaps quietly.
Typically in a large scale organisation the gender pay gap is 27 per cent of which 9 per cent is due to choice of occupation, 6 per cent is due to organisational factors and 5 per cent is attributed to human capital factors. However, the reason behind the remaining 7 per cent gap cannot be identified which says that the problem is bigger than it looks.
By proactively preventing the creation of pay gaps throughout the employee life cycle – instead of only assessing and correcting existing gaps – is necessary to ensure sustainable pay equity.