On The Excuses You May NOT Use to Defend Gender Pay Disparities

A new pay equity court case signals pretty clearly that there are some excuses that will not stand in defending gender pay differences - specifically among them, superior salary negotiating skills.

Click over to my post on the Compensation Cafe for more, including a link to and excerpt from an analysis of the case by a leading employment law blog.

Image: Creative Commons Photo "Gavel" by walknboston

Comparable Worth Bill Reintroduced to House & Senate?

It appears that comparable worth may be back on the table.

From an article on the Washington D.C. Employment Law Update site:

To commemorate Equal Pay Day, Sen. Tom Harkin (D-Iowa) and Rep. Eleanor Holmes Norton (D-DC) reintroduced the Fair Pay Act (S. 904, H.R. 2151).  While full text versions of these bills are not yet available, they are believed to be substantially similar if not identical to the bills Harkin and Holmes Norton introduced during the last congressional session. Notably, this bill would amend the Fair Labor Standards Act (FLSA) by introducing the concept of equal pay for comparable – not equal – work.

According to this source, the House version of the Fair Pay Act has been referred to the House Committee on Education and Labor.  The Senate companion bill has been referred to the Senate Committe on Health, Education, Labor and Pensions.

This will bear watching.  (Hat tip and thanks to reader Paul for the alert.)

A Salute to Equal Pay Day

Today, I have just discovered, is Equal Pay Day.  So, my best wishes go out to those who will be recognizing this in one manner or another.

Gender pay equity is a topic I care about, have opinions on and have written frequently about over the past couple of years.  In honor of the day, I present a few of Compensation Force's gender pay equity selections for your perusal:

Disturbing News from the Pay Gap Front (April 24, 2007)

Head Up: U.S. House Passes Paycheck Fairness Act (August 4, 2008)

The Role of Culture & Communication in Paycheck Fairness (October 23, 2008)

Age and Gender Differences in Pay Discussions & Requests (December 1, 2008)

On Comparable Worth, Pay Equity & the Paycheck Fairness Act (January 9, 2009)

Pay Transparency: (Not) The Solution to Pay Discrimination (January 30, 2009)

Flexibility: Your Salary Program's Strength ... or its Achilles' Heel? (February 27, 2009)

If Transparency Be The Path to Fairness, What Else (Besides Pay) Must We Reveal? (March 4, 2009)

We see a lot of writing and discussion these days (as alluded to in some of my later posts above) touting transparency as the answer to pay discrimination.  My advice is to be judicious about whose advice you take in this regard.  Me, I pay more attention to the opinion of those who have direct experience managing compensation programs and dealing with the employee relations aftermath of pay communication mishaps - rather than those who don't (politicians, academics, business philosophers, to name a few).

Taking advice on pay transparency from those who've never had to manage or deal with pay communication challenges is like taking advice on how to raise teenagers from people who've never been parents.  In other words:  FAIL.

If Transparency be the Path to Fairness, What Else (Besides Pay) Must We Reveal?

Would pay transparency (sharing pay details) make pay more fair?  Respondents to the recent KnowHR pay transparency survey were almost evenly split between answering "yes", "no" and "maybe".

As I am being made to understand it, revealing employee salaries is expected (by those answering "yes" and "maybe" above) to lead to fairness by virtue of the fact that employees will then have the information they need to judge the equity of their own paychecks compared to what others receive.

Or will they?

Education, experience and performance are among the factors that legitimately affect compensation, according to the Department of Labor.  Will employees, armed with information on their coworkers' salaries and seeking to judge the fairness of their own compensation relative to others, also have access to the details of their peers' education, certifications, work experience and performance appraisal documentation?  How else can they be in a position to judge the appropriateness of others' pay compared to theirs?  Or would we simply turn them loose armed with half of the relevant information and let them draw their own conclusions about the other half?

Where, exactly, would we draw the line here?  I'm just asking...

Image:  Creative Commons Photo "Magnifying Glass" by Tall Chris

Flexibility: Your Salary Program's Strength... or its Achilles' Heel?

When talking with leaders about their compensation programs, I will often ask them what they see as the program's biggest strengths and weaknesses.  Often enough, particularly in reference to base salary programs, they will mention the program's flexibility as one of its strengths.

More than a few of them will note, however, that this flexibility serves as a two-edged sword.

By flexibility, they typically mean some level of managerial discretion.  They will say that while they appreciate the program's structure and rigor, they also appreciate that there is some room for maneuvering, for "tweaking", in order to respond to specific circumstances and needs.  Effective managers, who have the overall organization's best interests at heart (versus merely their own), use this flexibility to ensure that the program truly works as intended.  Less-than-effective managers ... not so much.

Does the newly honed focus on potention pay discrimination that the Lily Ledbetter Act and other prospective pay legislation are bringing to our lives change this?  Should it?

At a minimum, I think it may be time to take a close look at the role that "flexibility" plays, particularly in the administration of our wage and salary programs.  Are we giving managers the rope they need to do the right thing ... or just enough to hang themselves?

The KnowHR Pay Transparency Survey Results are Out!

Over 600 people responded to Frank Roche's brief pay transparency survey at the KnowHR blog.

His Part 1 post provides a rundown of the responses themselves - here's a recap:

Question 1

 

Question 2

   

Question 3

 

Question 4

 

In his Part 2 post, Frank shares just a few of the written comments respondents shared - which helps shed light on the thoughts behind some of the responses to the survey.

It is interesting to see that some of the patterns revealed in earlier research conducted by Ceridian show up here as well - although the specific questions asked are different.  One similar finding:  We are reluctant to have our own pay information shared.  The KnowHR survey finds that 75% of respondents don't want their personal pay details shared beyond their close friends, or at all.  This confirms one of my concerns about the issue of pay transparency - whether employees have some right to privacy around their personal pay information.  

Would pay transparency make pay more fair?  Respondents are almost evenly split between "yes", "no", and "maybe".  More thoughts on this question in an upcoming post!

Are We Looking at a Job Evaluation Revival in '09?

I know.  In many places, for many organizations, job evaluation - of the traditional factor-based type - has kept its place as a cornerstone of the base salary program.  In most organizations, however, the dominant method of valuing jobs has been a market-based approach. 

A WorldatWork poll, conducted in 2005 (the most recent research I've been able to find on the subject), confirms what I have found to be true in my own travels.  The responding 450 member organizations identified their "dominant" job evaluation method as:

• Market pricing - 61.0%

• Point factor - 23.0%

• Whole job (e.g., ranking or classification) - 8.8%

• Job component - 3.8%

• Do not use (formal) job evaluation - 3.4%

I've written about the choice of market versus factor-based (or internal job content based) job evaluation approaches before, and have done some hypothesizing of my own as to our strong preference (at least in the past decade or so) for the former over the latter:

Why is market trumping internal job content as a job evaluation approach in most organizations today?  Primarily because most organizations today do not have the same luxury of disregarding, or giving "second fiddle" status to the labor market in setting employee pay that they may have had in the past. 

Job evaluation approaches which focus on internal job content (like point factor plans, of which the Hay Group had the brand name product for many years) came into prominence in an era when people stayed with the same employer for years, often their entire career.  Most hiring was done at the entry level, after which employees typically progressed through the internal hierarchy as talent and opportunity permitted.  Sourcing and recruiting talent from the outside, while certainly important, was not nearly as widespread or critical as it is for today's organization. For these reasons, the most important pay relationships were the ones between jobs inside the organization and there was little risk if the internal job hierarchy that developed was out of sync with the external labor market.

So ... market pricing appears to dominate today.  I wonder, though, if that might be about to change.

Pay equity is becoming an increasingly hot issue, with Lily Ledbetter having been signed into law recently and the Paycheck Fairness Act still on deck in the Senate.  And many of the approaches touted for assessing the degree to which pay differences are influenced by protected class membership rely on internal-relative-comparison methods which strongly resemble traditional factor-based job evaluation.

Does this mean that the tide is about to turn?  Will pay equity pressure serve to unseat market-based job evaluation from the top spot and put factor-based job evaluation in its place?

Stay tuned, I guess.

Image: Creative Commons Photo "Measuring Time" by aussiegall

Life After Ledbetter

The Lily Ledbetter Fair Pay Act of 2009 was signed into law by President Obama on January 29.

After some reading and research over the past few days, here's my quick summary and initial thoughts on what this new law means for HR and reward professionals.

The Act overturns the Supreme Court's ruling in Ledbetter vs. Goodyear Tire & Rubber, which held that employees must file a discrimination claim within 6 months of the act of discrimination.  The new law's main purpose is to extend that statute of limitations so that the clock doesn't begin ticking, in effect, until 180 days (300 days*) after an employee receives either a final paycheck or a final benefit payment (e.g., pension check) that can be traced back to a discriminatory decision or practice.  The net impact of the new law is to effectively remove any time limits on pay discrimination claims - a claim can now be brought years, even many years, after the discriminatory action allegedly took place.

What does this mean for HR and reward professionals?

To state the obvious, our first step should be to ensure that there are no problems to begin with.  All pay-related decisions - and this includes but is not limited to job evaluation, performance appraisal, merit and other salary increases, market salary adjustments, promotions, etc. - must be made based on clear and objective guidelines which are consistently applied.  Job titling, definition and documentation must be accurate and up-to-date.  Supervisors and managers must be trained and held accountable for the important role they play in all these regards, and for clear and meticulous communication with employees.   

These are the things that should have been happening all along, of course.  What changes now is our responsibility for documentation and recordkeeping.  With the possibility of a lookback for discrimination claims that could go back years - even decades - we must assume that neither the HR or reward professional nor the decision making manager involved will be around to rely on for personal recollection or documents if a pay related decision is challenged.  Instead, it will be imperative to establish formal and comprehensive recordkeeping practices, as far backward as can be managed and certainly going forward from today.

*If the discrimination charge is filed in a state with its own equal employment opportunity agency.

Postscript:  Here is a link to a CNNMoney article highlighting, in particular, what the Ledbetter Fair Pay Act means to small businesses, who may not have or be in a position to afford the access to legal and human resource talent that big businesses have to help them with compliance.  The list of recommended steps near the end are particularly good.  Hat tip to Laurie Ruettimann for the link.

Pay Transparency: (Not) The Solution to Pay Discrimination

In this week's Balancing Act column in The Miami Herald, Cindy Krischer Goodman quotes me and others in her examination of fair pay legislation.  One of her key points: That salary secrecy contributes to pay discrimination.  She quotes financial analyst Suze Orman who is a big proponent of open discussion of salaries and who believes that access to salary information would empower and protect employees.

It sounds good in theory, I admit.  I don't believe it would work out quite so smoothly or easily in real life practice, however.  John Hollon, Editor at Workforce Management/author of The Business of Management blog, and I had a recent exchange on this topic, which he posts on here.  I find myself agreeing with John's take (as a longtime manager) on the issue, which is "nobody wins when workers know what everybody else makes."

One of the biggest problems with this "transparency doctrine" is that comparing salaries and drawing conclusions about their fairness requires a measure of independence and objectivity.  I have had many, many one-on-one conversations with employees about their pay over the course of my compensation career, and this experience has convinced me of a basic truth:  We simply cannot be completely objective about the value of our jobs and the work we perform.  Nor can we be completely objective when comparing our jobs, our work and our pay to others.  Can you say inherent conflict of interest?

Somebody would need to convince me of how the positive consequences of open access to salary information would outweigh the potential negatives - as John puts it, "bad feelings, bad blood and bad karma."

What's more, employees themselves hold a bit of a double standard in this regard.  According to recent research by Ceridian, while 46% of employees are interested in learning the salaries of colleagues, 89% are reluctant to have their own salary information shared with those colleagues.  That tells me that there is a privacy issue at stake as well.

I don't mean to get employers off the hook for transparency, though.  While I am not in favor of sharing the what (employees make), I am a big proponent of sharing the how and the why:

• The How is about the mechanics of pay in your organization; how jobs are valued, how increases are determined, etc.

• The Why is about your organization's pay strategy, the objectives management is seeking to achieve and the rationale underlying the pay program.  This includes questions like how the organization defines its competitive market for talent and the way in which performance influences an employee's pay.

To empower employees, to assure them that they are being treated fairly and to make clear the standards to which they should hold us accountable in that fair pay treatment, we must provide them with the information they need to put their pay situation in as objective a context as possible.  As I've said before, without this proactive communication employees are left with no choice but to draw their own conclusions about the organization's intent and practices.

A Fair Business Case for Different Pay Treatment?

Recent debates about the respective roles of free market and government regulation in pay determination brought to mind the story of a company I worked with several years ago.

This company was a highly entrepreneurial, fast growing and profitable niche healthcare provider.  A large portion of their workforce served in one role - a role both central and critical to their core service.  Let's call this job Certified Healthcare Technician (or CHT).  At the time that I was involved with them, this company was at the forefront of a boom of sorts in this particular medical niche.  Because of this boom and the limited supply of CHTs in their particular specialty, attracting and retaining talent in this important role was becoming very difficult.  In addition, this company had particularly rigorous performance standards for its CHTs, standards that they believed to be critical to the company's success.  This posed a challenge for recruiting and retention, because CHTs had the choice of working in other, less demanding environments for nearly the same wages.

After deliberation, management landed on a unique, two-tiered compensation strategy:  Compensation for CHTs would be positioned at the 100th percentile of the local market, while compensation for all other company jobs would be positioned just above market median (50th percentile).  Note to the statistically inclined: we had a number of discussions about what, exactly, constitutes the 100th percentile;  but essentially what management agreed to was a commitment to be the highest payer in the local market.  Period.  If someone brought in verifiable evidence that another local employer was paying more for the position, they agreed to either match or exceed it.

This was made completely transparent to the entire workforce.  Senior management's message, in rolling out the new philosophy and program, boiled down to this:  Filling this role with qualified, high performing employees is critical to our mission.  If we aren't sufficiently staffed in this position, we cannot open our doors for business.  Want to be paid at this level?  Fantastic!  We offer full tuition reimbursement for the 18 month certification program - please see Human Resources about enrolling today!

My take?  I thought this was a solid and smart move on the company's part, built on a strong business case and executed in an honest and transparent way.  Like any other strategy, naturally, it would have to be examined annually in order to see whether it still fit and to adjust it as the situation demanded.

Interesting twist, though - and here's what made me think about it.  The CHT population at that time was predominantly female.  My recollection puts it somewhere in the neighborhood of a 70%/30% gender ratio.

What if the CHT was a male-dominated job; for conversation's sake, let's say with a gender ratio of 99%/1%?  Would I feel differently about the wisdom and fairness of that compensation strategy and the pay differentials it created?  Would you?

Could this strategy be construed as discriminatory, particularly in light of "possibly soon to come" pay fairness legislation?  Certainly there were other jobs at this employer that were "comparable" to the CHT in education and experience requirements, in level of decision making and problem solving, etc.

I'd like to say no...  What's your take?