Discussions about the gender pay gap inevitably leads to a host of reasons being debated for why the wage gap exists. Some will argue that companies are to blame – their reward practices reinforce a bias against women (Google was publicly shamed for their allegedly discrimination). Others will point their fingers at the government for not doing enough to legislate wages and introduce policies that ensure equality of pay. There are also those that blame motherhood, maternity leave, women avoiding high-pressure jobs or their reluctance to fight for higher salaries or promotions.
While all these issues contribute to the existing pay gap, they are not the root of the problem. They reflect a much bigger societal dilemma: men tend to do different jobs than women and the jobs that men do, pay more.
When you look inside the pay gap you see that the issue is not the salary.
Wage gap is undeniably a global issue. In most of the developed economies in the world, there is either some form of ‘equal pay for equal work’ legislation or some level of formal business reporting requirement. But neither legislation nor reporting seem to be doing much to close the wage gap which is only slowly and stubbornly narrowing. No wonder, year after year, we continue to read shrill headlines from around the world reminding us that men are paid an average of 20 percent more than women.
Thanks to Korn Ferry’s extensive pay database and the firm’s unique ability to use job evaluations to compare like with like, we can show that while the gender pay gap exists, it is significantly smaller than most headlines suggest. What our data highlights is that the wage gap cannot be justified by the reasons that conventional wisdom holds. As a demographic group, women get paid less than men but when the main factors that influence pay–job level, time in role, function, location, and performance are included—the issue is no longer that their wages are differentiated.
When you drill down the comparison, the gap gets smaller and smaller until it all almost disappears (this is a trend that we observed in all countries we studied). The real problem is that women still aren’t getting to the highest-paying jobs, functions, and industries, while men thrive in all three.
As can be seen from the table below, when we add ‘job families’ into the picture we see that women tend to work on clerical and operational jobs and in vocational areas such as administration, customer service, call-centre – areas associated with both instability and low wages.
What the data is telling us is: women remain significantly underrepresented in the most senior and highest paying job functions and are often overrepresented in lower paying industries and companies, compared to men. This shows that the real issue is job prevalence rather than different pay rates. To address the issue of pay gap, employers need to give women access to more career opportunities. Addressing equal pay for equal work in isolation alone will not solve the problem. Companies need to seek alignment in the areas of job equity, fairness of access and inclusion.
The aim is to stop a hiring practice that perpetuates the pay gap.
Certainly, some things have already started to shift. Unlike my mother’s generation, women today are told that they can be anything, and rightly so. They have always had the potential. But now women also have role models in a wide range of careers reinforcing the message that they should aim high; in politics, science, the arts, sports, military. They now also have the education to back them up – for the first time in history, more women than men are earning tertiary degrees. It’s time for organisations to calibrate their hiring practices to address their employment equity, tap into the underutilised female workforce and ensure that women (and all other underrepresented groups) rise up in the workplace hierarchy.
Given strong societal consensus for addressing gender pay equity issues and the growing body of research demonstrating that gender pay equity and inclusiveness generate a healthier work climate and bottom line, organisations have a great deal to gain by improving the fairness of their reward systems and talent management programs — essentially creating an employee value proposition that positions the company as a place where everyone can build careers and thrive, regardless of their differences.
Leveraging the expertise gained across our organisation, Korn Ferry has created an acronym that encapsulates the key phases for conducting and implementing a robust equity evaluation process. The process is designed to quantify the gaps, produce an efficient and effective plan to close those gaps and ensure a fair pay program that impacts and aligns with the organisation’s entire talent management programs.
The EQUAL formula to employment equity
The Korn Ferry EQUAL process
Establish parameters: determine what pockets or areas you need to consider at the organisational level (i.e. business units, locations), individual level (i.e. performance, tenure, qualifications) and function level as these can yield difference in average pay and differences in gender representation.
Quantify gap(s): the logical next step is to determine whether a gap actually exists. This is a complex step that may involve multiple iterations as more and more information becomes available to the analysis team. There are as many directions to take with quantifying pay gaps as there are variables to consider when measuring these gaps. For instance, in step 1, it may have been determined that all entry level engineers within an organization are equal and should thereby be categorized into the same group when analysing pay equity between males and females. However, upon talking to engineering leadership, you learn that there are different engineering classifications based on specialty area and that the engineering job family now needs to be split into separate sub-families. This split will now require a re-analysis of the information in order to determine whether prevalence and pay inequity exist for some engineering job families and not others. The point here, is that the Quantify step may evolve as you learn more about the way in which jobs are structured within the organisation (or should be structured).
Understand drivers: Consider how other talent programs may be impacting results. After an equity analysis has been conducted, it is imperative to identify the root cause of any discrepancies. Differentials between pay alone for different demographic groups could stem from any area within the talent supply chain. For instance, are starting salaries different between men and women from the get-go as male candidates are better at negotiating starting salaries than their female counterparts? Or, if males and females start at the same salary, could salary differences be resulting when it comes time for managers to promote or award merit increases to their employees? Or, could career advancement within the organization come at a faster rate for male associates than for female associates, thereby yielding larger and larger salary increases for men vs. women within the organization?
Action Planning: in this phase you will evaluate options for closing gaps and create a recommended plan for addressing the areas that are driving inequity. This will include a report with the required actions, program design, communication plan, etc.
We don’t talk about women directors getting bigger dollars. Isn’t it the same for everyone else. So the plan needs to be around, “How do we get women in bigger jobs”?, not, “How can we pay women more?”.
Lead change: here you need to make change management considerations in order to ensure that the action plan will yield impactful results. You will need buy-in from executives and senior managers to reinforce new behaviours required to drive your proposed solutions for employment equity; and bottom up engagement from all staff to ensure the plan is implemented.
It’s also important to consider that the EQUAL formula is not a one-time fix – it’s a process. Companies, and especially the HR team, need to manage the issue on a continual basis, be proactive and review it periodically (e.g. every three years). Long-term, the commitment from pay and job equity, fairness and transparency will create a culture of fairness that will impact all aspects of the talent supply chain and create an engaging climate and opportunities for all.