Pay equity is a regular topic of conversation in 2020. But it wasn’t always that way. Without the impactful events of 2017, the state of pay equity wouldn’t be where it is today. 2017 was a groundbreaking year for gender equality. The social justice #metoo movement brought the issue of gender equality to the world stage - and pay equity was a part of that debate.
2017 was also the year that Google employees publicly shared data from a compensation spreadsheet, highlighting that women were being paid less than men at most job levels. It also revealed that wage disparity only widened at senior levels. The compensation data originally shared in 2015 by former employee Erika Barker, led the US government Labor Department to file a lawsuit. The lawsuit claimed that Google violated federal employment laws by paying female employees less than male employees. Google’s lawsuit is one of many examples of pay inequity in the tech industry. And the sector is often singled out for its weak record on gender pay equity. This is because gender disparity in the tech industry is easiest to spot due to limited female representation in the workforce. This has led to its nickname the “Boys Club of the West“.
Fast forward three years and the world has been hit by a pandemic, affecting societies and economies around the globe with a significant impact on business. Organizations of all sizes have had to juggle supply chain constraints, moving employees to remote work and all while facing increasing demands for their products and services. While unemployment grows, the majority of the tech sector is still recruiting.
Tech giants like Facebook, Amazon, and Apple are hiring rapidly. The same goes for a lot of companies in the video conferencing, gaming, and fitness software space as well. Now more than ever, organizations need to tune into their company culture, pay practices, and hiring processes in order to attract and retain top talent - and protect their brand reputation. Prioritizing pay equity analysis and using technology to easily keep insights up-to-date while your workforce changes is a key way to achieve this.
Breakdown of pay equity topics
Because of the many topics surrounding pay equity in the tech industry, we’ve broken pay equity down into bite-sized pieces. Here’s a taste of what’s to come in the next few thousand words. Feel free to jump ahead to what you’re most interested in!
- Entering the “Boys Club of the West”
- Realizing pay gaps are a turn off
- Creating a diverse workplace shouldn't be a PR strategy
- Understanding the impact of stock equity in the startup world
- Letting the data drive pay equity decisions
5.1 Performing a pay audit to gain insights
5.2 Being transparent with the entire team
5.3 Using innovative technology to simplify processes
- Getting results and achieving pay parity in the tech space
6.1 Pay equity in Silicon Valley and beyond
6.2 Pay equity in the UK
1. Entering the “Boys Club of the West”
As part of the 2019 Global Gender Gap Report, The World Economic Forum reported that among 52% of women, the perception of technology being a male industry remains. And almost a third (32%) believe gender bias is still a major hurdle in the recruitment process.
The hard reality is that the tech gender gap begins as early as school years and carries on throughout every stage of a girl and woman’s life. According to the National Girls Collaborative Project, just over 18% of computer science degrees were awarded to women in recent years. The computing industry's rate of US job creation is 3x the national average, but if the industry trends continue, the study estimates that women will still only hold 20% of computing jobs by 2025.
And it doesn’t just stop at jumping over the hurdle of getting into tech. According to Hired’s 2020 Wage Inequality in the Workforce Report, men were offered higher salaries than women were for the exact same role at the exact same company - 63% of the time. The report found that companies were offering women up to a monstrous 45% less starting pay for the same job. And that number varies by race. African American, Native American, and Hispanic women earn even less.
In terms of job title, project managers have the smallest gap at 4% or half the gap for software engineering, data science and design, which all have an 8% earning gap.
Digging into Hired’s report further, nearly 75% of women surveyed believe that gender identity can impact pay, with over half of the men surveyed also in agreement.
The key point to note here is how the majority believes gender influences earning potential. This is an industry problem that needs to be addressed in tech companies of all sizes.
2. Realizing pay gaps are turn offs
Research shows that both current and future employees do not want to work for companies with a poor record on fair pay. And that’s not just the case for female employees. Gender pay gaps are actually considered to be an unattractive quality in an organization by both men and women. A very strong majority, at 84% of women, said that negative attention around pay equity issues would also negatively impact their opinion of that company - with 50% of men in agreement.
If tech companies want to attract and retain top talent, they have to take the steps to remove pay gaps. And it doesn’t stop at gender equity.
A tech employee’s sexual orientation can also influence salary. SVP of People at Hired, Kelli Dragovich, noted that identifying as LGBTQ+ negatively affected salaries for men, but women who identified as LGBTQ+ made more money than other females in the company. She also looked at other factors affecting salaries including: race, LGBTQ+ status, age, etc., and found that many times the varying identities continued to widen the pay gap.
3. Creating a diverse workplace shouldn’t be a PR strategy
The lack of gender diversity in tech should have companies shaking their heads, but as mentioned, that’s just the tip of the iceberg. When Google released the tech industry’s first diversity report in 2014, it sparked a diversity and inclusion strategy with other tech giants - but with very little action. The numbers across the industry have barely moved over the last six years. The percentage of Black and Hispanic employees at major tech companies is especially low, making up just 1-3% of the tech workforce.
In terms of ethnicity pay gaps, the Bureau of Labor Statistics reported that in the first quarter of 2020, median weekly earnings of full-time workers were US$957. Among the major race and ethnicity groups, median weekly earnings of Blacks (US$775) and Hispanics (US$722) working full-time jobs were lower than those of Whites (US$979) and Asians (US$1221). By sex, median weekly earnings for Black men were US$823 or 75.1% of the median, and Women were US$857 or 80.4% of the $1066 median for men.
“The problem is that not much has really been done about it,” entrepreneur, investor and co-founder of Project Include, Ellen Pao says. “Companies are treating [diversity] as a PR crisis and strategy. It’s not an operational imperative to them so you don’t see much change. You see the constant problems coming up again and again.”
The recent Black Lives Matter movements worldwide should also be a wake-up call, creating an inflection point and call to action that will mirror the catalytic #metoo movement and drive employee bodies, companies, and governments to take action on diversity and pay equity for ethnic minorities. The uncomfortable fact is that wherever pay gaps exist, they indicate inequality in the workplace and a lack of opportunity for all employees to earn the same. The Equality and Human Rights Commission’s chairman David Issac stated, “We have a once-in-a-generation opportunity to tackle long-standing entrenched racial inequalities.”
Some of America’s largest companies are responding to the public pressures of donating to anti-racism campaigns and standing by the Black community, following the death of George Floyd, including gaming companies: Electronic Arts, pledging $1 million to groups including the Equal Justice Initiative and the NAACP Legal Defense & Educational Fund; Square Enix donating $250,000 and matching employee donations to Black Lives Matter; and Ubisoft contributing $100,000 to the NAACP and BLM. But organizations should also be looking within and “tending to their own garden”.
Aside from the fact that diversity has proven over and over again that it’s good for everyone - it also makes sense economically. Diverse companies are more profitable.
A McKinsey report showed firms that place in the “top quartile for racial or ethnic diversity” are 35% more likely to have higher financial returns. Additionally, a study by Intel and Dalberg found that the tech industry “could generate an additional $300 to $370 billion each year if the diversity of tech company workforces reflected that of the talent pool.”
Employers shouldn’t be waiting for ethnicity pay gap reporting to become mandatory. They should be committing to look at ways to improve equality across their organizations, so every person, regardless of their ethnicity or background, can fulfill their potential at work.
4. Understanding the impact of stock equity in the startup world
It’s well known that one big differentiating factor between startups and public companies is stock equity. Most times startup stock equity isn’t worth a lot to start, but at public companies, stock equity represents a large part of employee compensation.
Stock equity can double or triple a software engineer’s overall compensation in a technology company. And unlike salary, stock value can increase dramatically as seen by a Google employee who watched the stock price skyrocket or the first developer at a tech startup that was acquired with a big price tag. The real wealth in Silicon Valley, a large tech hub in the United States, is generated through equity. To ensure consistency, it’s important to not only understand base salary but total compensation, including equity and bonuses when it comes to evaluating pay equity.
5. Letting the data drive pay equity decisions
Despite some progress through the years, there is still a need for technology companies to internally address how their culture might be adversely affecting employees’ progression and pay equity. And this can only be done with data.
Pre-Coronavirus cataclysm, preventing litigation and fostering trust were the two primary drivers for action on pay equity by organizations. This is still true now. Why? Because workers are under stress at work, at home, and in our communities. And many are facing the unexpected reality of reduced income. At times of high stress and financial hardship, there is a risk that employees become more litigious from increasing concerns around fair treatment. There have still been some equal pay claim settlements going ahead despite the COVID-19 crisis.
But this isn’t just about fear of litigation. Increasingly, employers of choice are recognizing that promoting fair pay is critical for employee engagement, motivation, and trust. Doing pay equity audits will help tackle these concerns head on in order for organizations to understand where inequity occurs, as well as how to address the systemic obstacles that drive unequal pay.
Performing a pay audit to gain insights
Performing an internal pay audit to understand whether pay gaps exist involves examining your employee data for evidence of pay gaps between employees of different protected categories. Organizations can also compare similarly situated employees and consider what factors may influence pay. These compensable factors may include differences in: education, tenure, type of job role, location, and performance. These factors differ from company to company and relate to your compensation philosophies. The aim of an audit is to make a fair comparison between similar workers, and to see what pay gap remains after considering legitimate factors. This is what we call the adjusted gender pay gap.
By looking at unadjusted and adjusted pay gaps, companies gain a strong view of what’s causing pay differences in order to help resolve issues found in the talent pipeline. And when it comes to successfully tackling bias and closing those wage gaps, study after study shows that transparency wins.
For tech companies that are rapidly hiring, insights from a pay equity audit can quickly become outdated. And the bigger the company, the more frequently changes such as restructuring or acquisition occur. These ongoing changes mean performing an annual pay equity audit won’t cut it anymore. Analysis needs to be an iterative process to ensure insights remain fresh, and that pay equity progress isn’t derailed throughout the year or during periods of fast growth.
Being transparent with the entire team
With the impact of Coronavirus on businesses, the principles of pay transparency becomes even more important. By prioritizing inequity concerns and obstacles, companies can work towards a strong culture of trust with employees. This trust starts with leadership from the executive team and upper management. The last recession had a corrosive impact on employee perceptions of reward fairness and equity. With possible pay freezes, redundancies, and disclosures about bankers, on top of the pay equity challenge, we’re back to an environment where leadership must communicate more openly about how limited pay budgets are distributed. On top of communication, other strategies including: removing bias, having clear pay bands, including targets/quotas, and improving salary/employee review processes, will assist in growing transparency and trust around pay practices.
Using innovative pay equity software to simplify processes
As with other areas of business in the tech space, progressive leaders are looking to harness the converging technologies of the 4IR to help drive the cultural change required to wipe out bias. Designed to support the needs of HR professionals, pay equity technology is a self-serve, fully configurable software solution that provides detailed insights based on global pay equity analysis.
An intuitive, real-time software allows HR teams to perform their own pay audit - without the need to rely on expensive outside consultants and with limited support from technical staff - saving time and money. Using technology simplifies the analytics process in one place and puts companies in control of their own data - securely and safely.
Using technology also removes the complexity and time-consuming processes around performing analysis and audits, while ensuring data remains current and accurate.
6. Getting results and achieving pay parity in the tech space
Those companies who have taken proactive actions are the companies getting results.
Pay equity in Silicon Valley and beyond
In October 2018, software company Adobe announced that it had achieved gender pay parity in all of its global offices. The company also ensures pay parity between white and non-white employees.
Salesforce is another tech company that is serious about gender balance in the workplace. The company is transparent about its efforts - where it has improved, as well as acknowledging where it has fallen short. At the end of 2018, Salesforce had 31.6% women employees, with 22% women tech employees. Women also make up 22.3% of its leadership team. These numbers are far from gender parity. However, Salesforce has distinguished itself by putting together an ambitious plan to improve gender balance.
With IBM now being led by Ginni Rometty, the organization has made a strong effort to train, hire, and retain talented and diverse women. Today, women make up 29% of IBM’s workforce and 25% of management around the world.
Pay equity in the UK
Sage Software UK is a leader for equality. The Northern tech firm has a 0% pay difference between men and women. Plus in contrast to the majority of tech companies, Sage actually pays 17% higher bonuses to women employees.
Microsoft is also well on its way to gender pay parity with women earning a median average of 92p for every £1 that men earn. Their bonuses are only slightly smaller at 11.2% less than their male colleagues.
However, there’s still a ton of work to do - especially in the gaming industry. Some of the stereotypes about UK games development are sadly true when it comes to pay disparities. For the majority of gaming teams, there are few women and for those women that are working, they tend to be the lowest paid employees based on hourly rate and bonus pay. One gaming company is paying women employees a mean hourly rate that is 22.2% lower than male employees - earning the average woman at the company 78p for every £1 that the average male employee receives. Their bonus pay is also 55.6% lower than men on the mean, and 60% lower on the median.
In gaming industry terms, Electronic Arts UK does well when it comes to gender diversity and pay equity. Women make up 42% of the lower pay quartile, 31% of the lower middle, 20% of the upper middle and 25% of the top pay quartiles. Although EA has been criticized for some of their corporate practices, they do have a history of diversity and inclusion projects. The gaming company is also part of the upper end of the tech pay gap, with women earning a median average of 85p an hour for every £1 that men earn. But women employees’ bonuses are 45 per cent lower than those of their male peers. This still puts Electronic Arts UK in a better position than a worryingly large number of other male dominated tech industry peers.
Without doubt, pay equity has become a societal, economic, and political issue. And the reality is, most companies have a pay equity challenge but don’t know the extent of it. Now is the time for teams to prove their commitment to fair pay, minimize legal risks, and protect their brand - to join the ranks of those progressive technology companies leading the way to success.
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