Preparing for the Storm: Are You Ready for U.S. Pay Equity?

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April 25, 2017

Preparing for the Storm: Are You Ready for U.S. Pay Equity?

By Lisa Misakian, Consultant

InsideNGO

Winter’s weather may have subsided, but April has certainly been stormy on many fronts. The headlines that caught my eye over the last few weeks have focused on pay and equity.

First came Equal Pay Day on April 4, the annual day recognizing that women have to work longer to earn the same pay as men in the U.S. workforce. This is hardly “news” as this statistic has been commemorated in this fashion over the last 22 years. But less than a week later, the U.S. Office of Federal Contract Compliance Programs alleged a gender gap in pay at one of its many contractors, but this time it was an organization with deep pockets – Google – and they have been on the defensive ever since. More locally, New York City announced it was joining a growing list of municipalities (and states) banning asking for a job candidate’s salary history, labeling that line of questioning an unlawful discriminatory practice that perpetuates the gender pay gap. 

What gives? Could this year be the tipping point when actions displace the statistics and handwringing on this subject? Will we move to a climate of greater pay transparency? I’d like to be optimistic, and there are some economic forces at play in the U.S. that are creating the opportunity for organizations to address this and other pay equity issues. But these same forces could wreak a bit of havoc in an unprepared organization.   

There are multiple forces increasing competition to attract new talent to organizations, and that usually translates into pressure for higher starting salaries for new staff which can disturb pay equity across the organization. 

  • First, unemployment rates continue to drop, with many organizations experiencing longer waits to replace exiting staff.
  • Second, more baby boomers (those born between 1946 and 1964) are retiring from full-time work.  Over the next dozen years, nearly one in five Americans will be 65 or older. And although many boomers want or will have to work when retirement eligible, their exodus from full-time work will make the competition for talent even more challenging. 
  • Third, the new administration’s policies to limit immigration, including H1-B visas, mean that access to a global talent pool has significantly shrunk. 

Additionally, the new administration’s budget proposals will have a dramatic effect on organizations whose missions depend on U.S. government funding. And, finally, we have this momentum to regulate pay decisions, especially for federal contractors. 

Is your organization ready for this storm?

In 2017, it’s more important than ever to ensure that your organization has a solid foundation for compensation administration. As a compensation consultant to InsideNGO’s member organizations over the last five years, I’ve helped some forward-thinking organizations take on the hard work of re-examining their compensation philosophies, instituting regular benchmarking to ensure that their pay systems are anchored in their competitive labor markets and to their mission and principles. For some organizations, we have also tackled the thorny issue of increasing transparency in pay. These organizations are prepared to ensure that their organization’s spending on pay is fair, equitable, and competitive, and perhaps most importantly – not wasteful. Additionally, over 200 human resources generalists and finance/operations staff from 15 countries have attended InsideNGO’s Introduction to Compensation Management for NGOs workshop over the last three years to learn how to do much of this important work themselves. 

If Google, with all its financial and technology resources, was caught off guard on the issue of pay equity, how can a globally operating NGO prepare for this type of public scrutiny? Global NGOs generally have a greater emphasis on maintaining internal equity than for-profit employers, usually leading to a greater likelihood of external market blind spots than internal equity issues. That type of introspection may help an organization prevent internal equity problems like those alleged at Google, especially if gender, race, and age analyses are part of the regular compensation administration cycle. But for those organizations that rely heavily on biodata forms outlining an individual candidate’s salary history to set competitive salaries, there’s a strong possibility of importing equity problems and losing touch with what the market generally pays. Balancing broad-based external benchmarking with internal equity analyses to build and maintain an effective compensation program is an art that improves with regular practice.  

If your organization is unsure where it stands on pay equity and if it’s been more than two years since your compensation structures were last broadly benchmarked against the external market, it’s time to start preparing. As budgets tighten, understanding where your pay approach is strong and where it could be strengthened will help you ensure that you maximize your budgets to improve your compensation program’s and organization’s overall effectiveness. 

Lisa Misakian is an independent compensation and benefits consultant with over 25 years of practitioner experience and has been working with InsideNGO’s compensation practice since June 2012. Her consulting projects for member organizations includes executive compensation reviews, benchmarking studies, benefits and international assignment policies, guidance on compensation strategy, and developing employee communications strategies. With Swati Patel, Lisa developed and leads InsideNGO’s Introduction to Compensation Management for NGOs workshop.

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