What Small Employers Need to Know about Pay Equity

For over 50 years it has been illegal in the United States to compensate men and women performing the same jobs different salaries. What many small employers don’t realize is that The Equal Pay Act of 1963 encompasses the entire range of benefits and payments made to an employee including promotions, allowances, bonuses, pay increases and paid time off. While Pay Equity has long been seen as a big concern to big corporations with 500 or more employees, small businesses have a greater impact because of their sheer numbers. According to market research, small businesses make up 99.7 percent of the 6 million US employers and 90 percent have less than 20 employees.

Why Pay Equity Matters to Small Employers

Pay equity is gaining a lot of media attention. Since 2010, several states including California, Delaware, Illinois and Massachusetts, have expanded their gender-specific pay protections. Some even ban employers from asking about salary history to reduce the impact of past discrimination. The emerging focus on pay equity has also revealed those companieswho compensate their workers fairly and those who do not. It can be a defining moment when the ‘best and the brightest’ talent seek out companies who take greater social responsibility. Besides drawing the attention of talented applicants, pay equity practices can reduce turnover rate, improve employee productivity and increase employee trust. Here’s what small employers need to know about pay equity and how to get a handle on unbalanced compensation.

Small Employers Can Attract Top Talent with a Pay Equity Policy

Taking a cue from larger corporations, small employers can enact their own unique version of employee branding with a focus on pay equity. Embracing the pay equity issue rather than running from it can attract the ‘right’ applicants. A talented workforce is more likely to be drawn to where they are not only paid fairly but also drawn to an employer who has fair and equitable practices and promotes transparency.Besides the marketing efforts, total transparency about a position to a new hire is just as important. Small employers should research salaries in their industry, the role requirements and compensation packages for every open position. Compensation is not just about a paycheck but the entire package including PTO, bonuses and benefits. Small employers should really think through job requirements and the resources they can provide to employees to satisfactorily complete the tasks required of the position. Lastly, be honest with potential candidates about expectations. Small Employers can Retain Top Talent with Pay Equity

Beyond the hiring process, pay equity plays a part in small employers retaining top workers. If an employee finds out that they are being paid less than a colleague doing the same job, not only are they considering their next move, but a breach of trust has now occurred between employee and employer.  Pay inequity or unequal pay practices cannot only place small businesses at risk for litigation, but may have their best workers seeking employment with the competition. To mitigate risk and avoid the loss of top talent, a pay equity analysis can assist and correct any pay gaps that exist.

Small Employers should be Proactive about Pay Equity

Transparency may feel unnatural but it does attract the people most qualified for the position. Besides researching fair and equitable compensation packages for each role in their company, they should also be willing to publish the starting salary and compensation package for every job posting. Some small employers in advocacy of equity pay transparency negotiate openly, noting that salary is open for negotiation with a performance-based review after a certain number of days.

During the interview process, job expectations should be made clear. Since this is an exchange, small employers should consider establishing a review timeline that states what is expected from the new employee and what the new employee expects from them. With stated metrics, discuss the time and level of commitment expected from each other.  After all, both employee and employer have a vested interest in the success of any new hire.

If needed, small employers should create policy and guidelines about gender-free and bias-free recruiting and train those managers or leads that participate in the recruiting process. Avoid using pay history as the basis for a starting salary. It’s best to use the information from salary research, the job requirements and the position’s value to the company to make an equitable compensation offer.

Small employers should also conduct performance-based reviews, pay increases, promotions and bonuses consistently and fairly across the board, and those who handle reviews should be trained to reward employees based on skills and contributions. With these practices in mind, small employers can promote pay equity from within. All small employers should discuss the heighten emphasis on pay equity and what this means for their brand, their ability to meet compliance and how it influences their business growth.

The Lynch Law Firm employes Human Resources professionals to help balance practical and legal advise for small businesses.  Evaluating and creating pay issues within your workplace can be an affordable investment in your organization when you balance the time and perspetive of a team stacked with both legal and HR professionals. 


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