At the start of the year we wrote an optimistic blog about pay equity in the new decade. We likened 2020 to the roaring twenties and we hoped that the coming decade would offer a similar period of economic and social transition - particularly for gender equality - as it did a century ago.
Little did we know that a pandemic would sweep across the world and bring the global economy to a virtual standstill. The Coronavirus (COVID-19) is being described as a “Black Swan” event. It was unpredictable. It’s rare. And its impact is severe and widespread.
Economic forecasters are predicting the financial consequences of the COVID-19 crisis may be comparable to another event in the 1920s: the Great Depression. Some forecasters have also expressed concerns that the crisis will have a disproportionately negative effect on women - impacting pay equity and gender equality in the workplace.
Many of you are likely in the process of making the difficult decision to reduce salaries, and lay off or furlough employees. There are steps you can take during this time to reduce the economic effects on women and prevent this “Black Swan” from derailing your company’s progress on pay equity.
In this blog, we share five ways you can address pay equity during the COVID-19 crisis.
Consider pay equity when making pay adjustments
Many employers are putting in place pay freezes and salary reductions as they look to align staff costs with reduced business activity and revenue. So far, we’re seeing an average of 20 percent pay reductions. Reductions are normally scaled in line with seniority/top earners. The general expectations are that market rates will drop overall by 15 percent.
Re-levelling staff salaries also provides an opportunity to address equal pay. So when going through the job levelling process, ensure you are considering pay equity. This will ensure despite the crisis you remain true to the reward principle of fair pay and are compliant with pay equity legislation. Which brings us to our next point.
Build trust by staying true to the principle of fair pay
In the 2008 recession, there was a corrosive impact on employee perception of pay fairness and equity. This was a result of pay freezes and disclosures about excessive banker and executive pay. Employers had to work extremely hard to regain employee trust in reward systems. One of the ways employers regained trust was through communication and pay transparency. Fast forward to the current crisis and the same will be true now.
But many employers struggle with pay transparency, mainly because they are not sure their systems are fair. Doing a pay equity audit will help you to tackle this concern head on and ensure you can build a strong culture of trust with your employees – something they need right now.
Keep pay equity legislation and the risk of litigation top of mind
We are all under stress at work, at home and in our communities. Many are facing the unexpected reality of reduced income or losing their job. At times of high stress and financial hardship there is a risk of employees being more litigious as concern about fair treatment is exacerbated. We’ve still seen some equal pay claim settlements going ahead despite the COVID-19 crisis.
On March 16 Cisco agreed to pay $4.75 million to resolve a U.S. Department of Labor claim that the San Jose networking giant had paid white and male employees more than women, black and Latino employees in similar roles.
In the UK, Reading Borough Council paid out £15m for women council workers who were paid less than men.
The decisions to make pay reductions and layoffs are being made to ensure companies survive the crisis. It’s still important to assess pay gaps and pay disparities during this time because if decisions are not equitable, they will put you at risk down the line. And the cost could be enough to put you out of business.
Consider the impact of downsizing on genders/protected category groups
We’ve all had to react fast to this crisis. For some employers this has meant putting in place furlough or headcount reduction programs. It’s still important to consider equality issues during selection and consultation processes to ensure that critical decisions made are not influenced by unconscious bias.
We know a significant reason pay gaps exist is due to representation issues across the talent lifecycle. Decisions made during recruitment, hiring, and promotion and headcount reduction are all at risk of unintended bias. So make sure you are monitoring gender and protected category status numbers at this time.
Update your pay equity analysis data
Salary adjustment and workforce restructuring decisions to reduce the impact of COVID-19 on your businesses are likely to have a significant impact on pay equity analysis.
Sadly it is the sectors more heavily dominated by women (particularity at lower levels) like retail, hospitality, and airlines that are most impacted. Whatever sector you are in your employee demographics will shift significantly over the next 12 months. This may have an impact on your analysis. This is even more reason to do a detailed pay equity audit to highlight areas of risk at a country, business group or job level.
While a lot has changed since we first drew parallels to the 2020s and 1920s just a few months ago, we’re still trying to feel optimistic. We believe that employers can use this crisis as an opportunity to review and refine their pay practices and close the pay gap forever.
Do you have a pay equity analysis solution?
CURO’s Pay Equity software analyzes pay equity gaps so you can create an equal and inclusive workplace and prove your commitment to fair pay. Contact us to learn more.