When Will We Learn? – Pay Inequality Doesn’t Pay

I’m not one to belabor a subject, but salary inequality is an issue that bears repeating, since it seems like every time you turn around, another gender discrimination in pay case is in the news. And typically, the headline is that the plaintiffs have proved victorious in the courtroom.

Just two months ago, a Federal court in North Carolina granted a $45 million settlement with the plaintiffs in Scott v. Family Dollar store, Inc., a class-action pay discrimination suit. The settlement included attorney’s fees of one-third of the common fund – $15 million – in addition to litigation expenses of up to $1 million.

Granted, this was a long-fought battle that began 15 years ago, when 49 female Family Dollar employees filed EEOC charges, alleging a pattern and practice of discrimination where female store managers were paid less than men for the same job.

But this recent settlement – and many cases like it – highlight that this is a pervasive problem and is not going away without a conscious effort to change the course.

I’ve been hopeful many times for many years that legislation was the answer. I naïvely thought these issues would go away after the passing of the Equal Pay Act of 1963, then after the Equal Pay Act of 1970, then after the Sex Discrimination Act of 1975, and then after the Equal Pay Act of 2010. But the last U.S. Census Bureau study on this issue found that today, women are paid 20 percent less, on average, than their male counterparts.

Intentional or not, the practice has followed us into the 21st century.  A recent “60 Minutes” segment included some statistics that illustrate how widespread pay inequality is in the United States. The reporter referred to this as “unconscious bias.”

For example, when men have children, their earnings go up six percent, on average. So, they are essentially rewarded for being a father. On the other hand, when women have children, their earnings decrease by four percent with each child. The “unconscious bias” is that mothers won’t be at work when you need them because family comes first. Some HR professionals refer to this as the “mommy penalty.”

Last year, I wrote two newsletter articles about a reported pattern of pay discrimination lawsuits in the IT industry. In November 2017, my co-author, Caroline Gibson, and I pointed out that only 60 percent of companies surveyed by WorldatWork reported that they monitor pay equity in their organizations.

We professed that two of the most common missteps companies make in this area include:

  • Bad assumptions – They assume they pay equitably and don’t want to waste money and time on studies, analyses or expert advice.
  • Failure to train – They don’t train their managers on compensation management and pay equality.

A case in point is a well-intentioned software company recently featured on the same “60 Minutes” episode I referenced above. The cloud computing company, Salesforce.com, is a perfect example of how difficult it can be to close the pay gap between men and women, even when driven by the CEO.

Salesforce includes 30,000 employees with $10 billion in annual revenue. In 2018, it was ranked by Fortune as the number-one place to work among big companies.

Feeling good about this, the founder, Marc Benioff, was surprised by statistics shown to him by his company’s HR department head. She indicated that they may have a problem – they may be guilty of pay discrimination among women. His response was, “With such a great culture and being the best place to work, we don’t have that kind of thing.”

They had already made promoting and recruiting women a priority at Salesforce, but they had not thought to ensure that the women who were being hired and advanced were paid the same as men in the same or similar positions. After conducting an audit, the company found there was a persistent pay gap between women and men doing the same job. This was widespread throughout every division and position.

To remedy this, Salesforce spent $3 million. Nearly 10 percent of women at Salesforce received pay increases. In addition, they put in programs to address the “mommy penalty” by offering onsite day care, generous family leave and flexible schedules.

Salesforce found out how hard it is to stay ahead of sex discrimination in pay. The second time Salesforce completed a pay equity audit, the same problem arose again. Women on average were being paid less than men. The CEO couldn’t believe it. But it turned out that while Salesforce was working hard to correct gender bias, they had bought 2,000 companies and inherited each of their failed HR practices.

Salesforce is now doing pay equity audits on an ongoing basis. On “60 Minutes,” Benioff noted that they are, after all, a software company and have the tools to do this. They run continuous reports and monitor data previously not gathered in order to take a closer look at how women and men are given merit increases, stock grants and promotions… all in an effort to hold a magnifying glass above any possible bias. Since then, Benioff has become a national advocate for equal pay for equal work.

Legislation is certainly crucial to eliminating the gender pay inequity issue, as it provides the framework for companies to create and enforce their own policies. But we know from all the recent headlines that legislation alone won’t solve the problem. And, as Salesforce discovered, policies and culture won’t either. It takes all these pieces – plus continuous review and calls to action – to finally solve this puzzle.

David Smith, PhD, is the president and CEO of EASI•Consult®. EASI•Consult works with Fortune 500 companies, government   agencies, and mid-sized corporations to provide customized Talent Management solutions. EASI•Consult’s specialties include leadership assessment, online pre-employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring compliance. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more about EASI•Consult, visit www.easiconsult.com, email ContactUs@easiconsult.com or call 800.922.EASI.

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