A Better Way for Companies to Address Pay Gaps | Harvard Business Review

Talent Management

Pay equity—equal pay for team members performing “similar” job duties while factoring in variables such as experience, job performance, and tenure— remains a critical concern for many organizations. To enhance pay equity, several states and localities have implemented legislation stressing pay transparency in job advertisements, where employers disclose the wage scale or salary range. While these initiatives signify progress, this new article emphasizes how a structured pay equity analysis can help to close pay gaps. Unlike approaches focusing solely on underpaid employees, a pay equity analysis considers qualifications and responsibilities, addressing systematic biases and pinpointing specific areas within a company’s salary structure causing pay gaps; the article details this process. I posit that another factor contributing to pay inequities lies in performance management (PM) practices. Given that many organizations tie pay rewards to performance ratings or other indicators of performance, ineffective PM practices can significantly impact pay equity. One example lies in the goal-setting process, where goals may not be uniformly challenging across team members, resulting in lenient evaluations for some and stricter ones for others. Addressing pay equity requires organizations to analyze how their PM practices either support or detract from equitable compensation.