Pay Equity vs Pay Equality: Key Differences and Impacts

In today’s workplace, understanding the difference between pay equity and pay equality is more critical than ever. With the gender pay gap still a pressing issue—where women earn only 84% of what men make, according to the U.S. Department of Labor—organizations must recognize the nuances of these terms to effectively address compensation disparities. The conversation around pay equity often surfaces during discussions about Equal Pay Day, which highlights how far into the next year women must work to earn what men earned the previous year. However, pay equity and pay equality are not just buzzwords; they represent vital concepts that can transform workplace culture and drive business success. By grasping these distinctions, companies can implement strategies that not only promote fairness but also enhance employee satisfaction and retention.

This article will explore the differences between pay equity and pay equality, illustrating why both are essential for creating a more equitable and inclusive work environment.

What Is Pay Equity?

Pay equity ensures that employees are fairly compensated for work of equal or comparable value, regardless of personal characteristics like gender or race. It aims to eliminate pay gaps by evaluating roles based on skills and responsibilities, ensuring equal pay for equal work or similar efforts.

An example of pay equity can be seen in the case of Adobe, a prominent technology company. In 2018, Adobe conducted a thorough internal pay equity audit and discovered that less than 5% of its global employees were affected by pay disparities. To address this issue, Adobe made necessary salary adjustments that accounted for less than 0.2% of its annual payroll costs. This proactive approach not only demonstrated Adobe's commitment to fair compensation but also set a precedent in the tech industry, encouraging other companies to evaluate their own pay structures.

What Is Pay Equality?

Pay equality refers to the practice of providing equal pay to all employees who perform the same job, regardless of gender, race, age, or other non-job-related factors. It ensures that individuals in identical roles, with the same qualifications, experience, and responsibilities, receive the same compensation.

The goal of pay equality is to prevent discrimination and create a level playing field where all employees are treated fairly and rewarded based solely on their work and contributions, rather than any personal characteristics. This principle is essential in promoting workplace fairness and equality.

A strong example of pay equality is Buffer, a social media management platform that prioritizes transparency in compensation. In response to public scrutiny over pay disparities, Buffer chose to openly share its salary data, allowing employees and the public to see how salaries were determined and any existing gaps.

By publishing their salary formula and actual salaries, Buffer fostered trust and accountability within the workforce. This initiative led to a re-evaluation of pay structures, resulting in adjustments that ensured equal pay for employees in similar roles, regardless of gender or other demographics. Consequently, Buffer improved employee satisfaction and retention, showcasing how transparency can effectively promote pay equality.

Pay Equity vs Pay Equality

Why Do Both Matter?

Pay equity and pay equality are both essential for creating a fair and inclusive workplace. While they address different aspects of compensation, they work together to promote fairness and eliminate discrimination. Focusing on one without the other may leave significant gaps in a company's compensation practices, leading to workplace dissatisfaction, legal risks, and retention challenges.

If a company only focuses on pay equality, they may ensure employees in identical roles receive equal pay, but they could still overlook the broader disparities that come from undervaluing different types of work. For example, jobs traditionally held by women or minorities might still be underpaid compared to similar roles that are dominated by men. This could lead to dissatisfaction and high turnover rates in those undervalued roles, despite pay equality within specific positions.

On the other hand, focusing only on pay equity could mean that employees in different but comparable roles are fairly compensated, but it could ignore the importance of ensuring that people in the exact same roles are paid equally. This can lead to legal challenges and internal conflict, as employees may feel they are being directly discriminated against if they find out someone with the same title and responsibilities is paid more.

Using both pay equity and pay equality is not only advisable but often essential. Both small and large companies benefit from combining these practices. Small businesses may focus more on pay equality at first since they typically have fewer employees and similar roles across the organization. However, as the company grows, addressing pay equity becomes important to ensure all roles are valued fairly, regardless of the specific job function. Large companies, with a variety of roles and departments, should prioritize both from the start. Ensuring pay equity across diverse job functions and ensuring equality within specific roles prevents systemic disparities and fosters an inclusive culture.

How to Calculate Pay Equity?

1. Gather Data

Collect comprehensive data on employee compensation across the organization. This should include salaries, bonuses, benefits, and other forms of compensation. Additionally, gather demographic information such as gender, race, job titles, and years of experience to analyze pay disparities accurately.

2. Analyze Job Roles

Identify and categorize jobs based on their responsibilities, skills, and requirements. Group similar roles to ensure fair comparisons. Use a job evaluation system to assess the relative value of different positions within the organization, taking into account factors like effort, responsibility, and working conditions.

3. Calculate Pay Ratios

Calculate pay ratios by comparing the compensation of different employee groups (e.g., based on gender, race, or job role) within the same job categories. This involves calculating the average pay for each group and determining any pay gaps that exist between them. For example, compare the average salaries of male and female employees in the same roles to identify any discrepancies.

4. Implement Adjustments and Monitor

Based on the analysis, identify any pay inequities and develop a plan to address them. This may involve adjusting salaries, reviewing pay structures, and implementing policies to ensure equitable compensation practices in the future. Regularly monitor pay equity to maintain fairness and address any emerging disparities. Conduct annual audits to ensure ongoing compliance and improvement.

Key Laws Impacting Pay Equity

Several key pieces of legislation shape the landscape of pay equity in the United States:

The Equal Pay Act of 1963 (EPA)

This law prohibits employers from discriminating against employees based on sex in their pay practices. It mandates that men and women receive equal pay for equal work, addressing pay discrimination based on gender identity and sexual orientation as well.

Title VII of the Civil Rights Act of 1964

Title VII prohibits discrimination in the workplace based on race, color, religion, sex, and national origin. It protects employees from adverse actions, including being paid less than others based on these protected characteristics.

Americans with Disabilities Act (ADA)

The ADA prohibits discrimination against employees with disabilities, ensuring they are not paid less based on their disability status. This includes protections for individuals with a history of disabilities and those regarded as having a disability.

State Equal Pay Laws

Over 40 states have enacted laws that expand upon the Equal Pay Act, protecting employees from pay discrimination based on additional characteristics such as race, ethnicity, and national origin. These state laws often provide broader protections and may impose stricter penalties for violations.

Pay Transparency Laws

Many states have introduced or are considering laws that require employers to disclose pay information. These laws often mandate that employers provide salary ranges in job postings and may require additional disclosures to current employees, promoting greater transparency in compensation practices.

Your Next Step: Create a Plan to Maintain Pay Equity

Once you’ve adjusted employee compensation to ensure fairness, the next step is to proactively address how to prevent future pay disparities. Tackling both pay equity and pay equality can seem daunting, but the benefits for your organization are significant. Research by McKinsey shows that organizations with greater diversity outperform their peers by 36%. Moreover, those with the least diversity are 27% more likely to underperform in profitability.

Diversity not only enhances innovation and teamwork but also improves decision-making, recruitment, and retention rates. Therefore, resolving pay equity and pay equality disparities is crucial for fostering a productive and engaged workforce.

Here are some actionable steps to get started:

1. Publish salary ranges in job postings to promote transparency and establish a standard for internal equity. Research shows that 80% of job seekers are unlikely to apply for roles without disclosed salary information.
2. Avoid asking candidates about their salary history, as this can perpetuate existing pay disparities. Instead, focus on compensating based on the value of the position, not past earnings.
3. Implement a structured salary negotiation process with clear, standardized criteria to minimize bias. This ensures raises and evaluations are based on objective measures, not subjective judgments.
4. Link raises and bonuses to quantifiable performance metrics tailored to each job role. This approach eliminates unintentional bias and ensures compensation reflects actual contributions, leading to higher employee satisfaction.
5. Begin by prioritizing pay equity to address wage gaps within your organization. This creates a solid foundation for achieving pay equality in the long term.

FAQs

Is it lawful to pay a man more than a woman for the same role?

Yes, it can be legal to pay a man more than a woman if the pay difference is based on legitimate, non-discriminatory factors such as experience, qualifications, or performance. However, paying differently based on gender is illegal under laws like the Equal Pay Act and Title VII of the Civil Rights Act..0

Can two employees in the same position receive different salaries?

Yes, two employees doing the same job can be paid differently if the employer can justify the pay disparity with legitimate factors unrelated to discrimination, such as experience, education, or performance. However, differences based solely on gender, race, or other protected characteristics are illegal.

Which profession has the largest gender pay gap?

According to a report by Lensa, the job with the largest gender pay gap is in securities, commodities, and financial services sales agents, where men earn approximately 56.84% more than women, with men averaging $1,891 per week compared to women's $1,054.

Final Word

Addressing pay equity and pay equality is crucial for building a fair and inclusive workplace. Pay equity focuses on ensuring that all employees are compensated fairly for their roles and responsibilities, while pay equality aims for uniform pay across the board. To effectively close the pay gap, start by establishing a solid foundation of pay equity before striving for pay equality.

Tanca hopes this article provides valuable insights into the distinctions between these concepts and offers practical steps to address pay disparities. By prioritizing fairness and transparency, you can create a more equitable and motivated workforce.