Investing in Equity: What will it cost your business to close the gender pay gap?

Since the publication of gender pay gaps earlier this year, there’s been a noticeable shift in how companies are looking at their own gender pay gap. It’s pleasing that for many, the conversation is shifting more on how to address it. We’re seeing better questions being asked by business leaders and HR teams, in terms of how do we fix it and what is the cost of doing so?

In this edition of our newsletter, we’ll focus on some of the common approaches to tackling the cost side of the equation and consider the right time to start embedding the changes in your organisation.

🟣 Approach #1: We’ll pay all women in our business more.

This is a common first thought when addressing the issue. We hear it quite a bit, and whilst well intended, an approach like this could be very damaging to a business on many fronts – and often it's just not possible for companies to materially increase their labour costs.

When seeing their gender pay gap — let's say, as an example, company X has a 20% overall gender pay gap — some leaders think the easiest and most straightforward approach is simply to pay all women in the business 20% more. Voila, the gender pay gap is resolved.

Not so fast. Taking a broad-stroke approach is not helpful to anyone. The gender pay gap that was published by the Workplace Gender Equality Agency (WGEA) in February was a company’s unadjusted gender pay gap. This means it’s an aggregate view that does not adjust for any factors that may explain or give context to what is going on. This could include a raft of factors that impact it, such as the myriad of different roles or levels within the business. It’s an overall gender pay gap figure; therefore, using the pay gap % to fix it (e.g, pay all women in the business 20% more) is not recommended!

An approach like this will likely negatively impact both men and women in your workplace. It is not a data-driven approach, the many factors and nuances that need to be considered – are not. So, before jumping into (well-intended) action mode, take a look at the next two approaches.

🟣 Approach #2: Determine the cost by conducting a Pay Equity Analysis.

Many of the companies we talk to are taking this approach. They are analysing gender pay gaps and pay equity across different levels, departments or divisions, pay grades, and locations, and some are considering intersectional data points such as age, ethnicity, or sexual orientation. They are also conducting like-for-like role analyses to understand any pay equity issues that could contribute to the gender pay gap.

Analysing your data through multiple lenses could paint a picture you may not have considered yet when it comes to understanding the root cause(s) of your gender pay gap. This is often a time-consuming task, which is why solutions like equidi help accelerate the process. Some companies will also want to factor in other data inputs to the analysis, such as experience level or performance ratings.

Once a robust analysis is complete, you can uncover the specific areas or roles to invest in to close the pay gap. As part of this, you will also need to determine where you want the pay gap to be so you can do the right calculations. Are you trying to close the gap to 0%, or what does your organisation determine is acceptable, and what is commercially palatable? This year, WGEA stated that the sweet spot for a gender pay gap is between 0% and +/- 5%.

At equidi , we recently heard from our customers that this product feature would add significant value, and we have delivered it. Now, our customers can see the cost to close a gender pay gap with the click of a button.

🟣 Approach #3: External market data overlay.

Overlaying your own internal data with external market data (remuneration benchmarks) offers the detail that will help you make smarter, data-driven remuneration decisions and help you close your gender pay gap.

It’s an important factor to consider because if you simply correct the gender pay gap or pay equity issues identified, it does not necessarily mean you are paying at the market rate for the role - even though you may be successful at closing the gender pay gap, the individual may still not be paid at the appropriate rate for the role.

To follow this approach, your company must have a defined philosophy on remuneration/compensation, as this will guide how you pay. For example, fixing a gender pay gap as a 50th percentile payer will be very different to fixing the pay gap as a 75th percentile payer (and this goes for any job banding or levelling approach, too – where compensation philosophy would be factored in). In this scenario, you will need to have completed approach two, so you have identified the pay equity issues that need attention. Benchmark data itself will not show the pay equity or gender pay gap issues that exist in your organisation.

When is the right time to make the changes?

There’s no time like the present…

The thing is, if you identify a pay equity issue, it could mean you do not have equal pay for equal work, and that should be addressed with a sense of urgency as it is a legal requirement, and the right thing to do.

The rise of the Pay Equity Review

Most companies handle these types of corrections either at their annual salary review or, as has become more common, a pay equity review—often conducted out of cycle and separate from the annual salary review.

Whichever path your organisation chooses, it is wise to have a pre-agreed budget to address it. You should be able to estimate the total cost of these changes from your pay equity analysis. The key here is being prepared, as these additional budgets often need remuneration committee or board approval, and it’s likely this has not been factored into previous review processes.

Leaders and HR or compensation/remuneration teams must be transparent about the cost of closing the gap. It may even take a few cycles to address, but what’s most important is to prevent these issues from occurring in the first place.

equidi's pay gap predictor functionality helps companies understand all of this before they make a remuneration/compensation-related decision - at the point of hire, upon promotions, or whether you're just sense-checking a pay scenario, our platform will help guide you to the right decision, so you don’t inherit or create another gender pay gap or pay equity issue.

Finally, the last thing worth noting is that the gender pay gap is not only about pay. It’s about creating an inclusive and supportive environment where women have equal opportunities to succeed and thrive in the workplace.

If you want to learn more about how equidi's award-winning platform can help your business close the gender pay gap then Book a Demo today!

See the change, be the change - Join our movement today!

The Gender Equity Movement 💎 is a collective of individuals, businesses and advocates committed to creating equity and reducing the gender pay gap. Sign up as a business ally, advocate or sponsor, and support the cause today!

equidi is a revolutionary tech platform set to level up the ledger on gender. With real-time insights into gender pay gaps, pay equity, and representation across your entire business. Our bespoke recommendations will guide your journey – we’ll help you set goals, track progress and lift performance everyday.