How can companies ensure they’re continually working toward closing a persistent pay gap in diversity equity? The Great Resignation (what some call “The Great Contemplation”) has challenged companies, leadership teams, and boards to re-think compensation models and re-evaluate the meaning of “S” in ESG to focus on pay equity.

In a recent Salon, Maria Colacurcio, CEO of Syndio Solutions—which helps companies discover pay issues based on race or gender (or any other category), fix those issues, and maintain compliance—discussed how workplace equity may be the next frontier for future-thinking compensation committees.

Note that pay inequity and the pay gap are two similar but drastically different concepts. Pay equity refers to equal work for equal pay, ensuring no discrepancies based on attributes such as race or gender. This is particularly important for Black women, who often experience pay inequity for both being a woman and being Black. Pay equity is all about valuing people equally for their work contributions. And then there’s the pay gap—the difference in pay distribution and representation. Maria likened the pay gap to a triangle: there are people at the top (or the point of the triangle) who are making the most, but there are few of them; then there are people at the bottom who make the least, but there are many of them.

Together, pay equity and the pay gap comprise what is broadly known as workplace equity. Workplace equity focuses on equal pay, equal access to opportunity, equal access to advancement, and so on.

Looking back at workplace equity: how did we get here?

Jobs requiring similar education and responsibility, or even similar skills, may present systematic bias when they are divided by gender.

For example, the median earnings of IT tech managers (jobs typically held by men) are 27% higher than human resources managers (jobs typically held by women), according to the Bureau of Labor Statistics. At the other end of the spectrum, janitors (often men) earn 22% more than maids and house cleaners (often women).

These shocking statistics demand that companies look inward and ask: do they value some work less based on who is doing the work? How do they eradicate pay discrepancies from the start? What is considered promotable work versus non-promotable work—and how do certain roles or assignments give one person an upper hand (such as senior leadership visibility) over others?

Roadblocks to success in workplace equity

When thinking about roadblocks to equity, Maria pointed out that starting pay plays a crucial role. If there is a gap at the point of hire, it’s only going to widen over time, compounding the effect. This gap can snowball, contributing to a major wealth gap: fewer dollars in savings, fewer dollars that can be invested, fewer dollars for a nest egg.

Opportunity equity is the second piece of the roadblock. When women or people of color do not have equal access to jobs, promotions, and other opportunities—even as simple as the opportunity to collaborate on special projects—that can change their career and pay trajectory.

Proximity bias is another roadblock. In today’s world of hybrid and remote offices, who gets leadership visibility? And how does that visibility affect their opportunity for promotion?

How executives and boards can affect positive change 

• Evaluate your compensation commitments. Which are performative, and which are action-oriented? Rewarding based on performance means companies must have systems in place to carefully track and monitor metrics.
• Look to the data for answers. Are promotions or succession planning favoring one group of employees over another? Are all your high-performers representative of a certain gender or race? Data allows you to see these widespread trends or gaping holes. It also helps when it comes to aspirational goals like diversity hiring. You need to understand where you stand today to know where you’re headed, and what’s even within reach.
• Dig into your pay equity issues. Once a year audits no longer work. Leaders need to get closer to the hidden policies and behaviors that are reinforcing pay equity challenges. Pay equity requires consistent attention and analysis to detect root issues.
• Beware of mass pay averages. Leadership at the executive level needs to make the call—and draw a hard boundary—to potentially ignore industry or role pay averages to re-level compensation at their company. It’s up to the company’s leadership to make these difficult calls and to “own” these discrepancies. Leaders must think beyond market rate, and instead think more strategically and holistically about broad goals and value. This is risky and may require going to the board to justify expenses that fall dramatically outside of market rates; but over time, these decisions lead to an inherent level of trust and commitment across the team.
• Focus on total comp, not just cash comp. If companies are focused solely on base pay when evaluating workplace equity, they’re missing the broader (and more telling) picture. Maria noted that companies must “look at what we call the dirty little secrets and the dark hidden corners. The dark hidden corners are things like bonuses, incentives, pay, stock options, equity grants… You have to look at those things to get a true picture of whether you have gaps or not.” This includes spot bonuses—or one-time bonuses employees may receive after special projects or intense sprints of work. It even includes how sales territories are drawn—who are the most lucrative territories given to?

The opportunity in workplace equity for early-stage companies 

Companies need not wait until they are public to address these pay equity and opportunity equity challenges. From board composition and leadership team structure to compensation strategies and representation—there’s myriad ways to address workplace equity.

Much of it starts with making the right decisions from the start, at the time of hire. Hire the right individuals who make a positive impact on culture; pay fairly; recruit and retain the very best talent possible. These types of “out of the gate” decisions give ample opportunity to early-stage companies to do things right. Challenges tend to arise when new leadership needs to come in to replace outgoing founders and CEOs. In those cases, it’s often time for a clean-up—and a major workplace equity reset.

Bottom line: be prepared to take action 

Decisions—early stage and beyond—should be heavily dependent on data. Who is getting bonuses and when? Who is holding positions of power and for how long? How are compensation decisions being made? It’s a constant evaluation and re-evaluation (and even more re-evaluation), a constant asking of “why” and digging for the reasoning behind specific decisions—and, with persistent digging and data, companies are able to see major discrepancies and potential for bias.

Companies today must undergo a massive re-thinking. They must also be prepared to make the tough decisions necessary to enact change.

“Make sure you’re prepared to fix and prevent what you find…with a car, for example, if you haven’t looked under the hood in a while, you’re going to find rust. You’re going to have to do some sort of base-level maintenance before you can get into a regular cycle. You can’t just be aware of pay inequity—you have to be prepared to address it and resolve it,” explained Maria.

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