No real gender pay gap here - we have equal pay for equal work.
The last few weeks have been truly groundbreaking for so many reasons – however, the one that I truly believe will be the catalyst for change is a material increase in awareness of the gender pay gap and the public discourse that followed Workplace Gender Equality Agency (WGEA) making the pay gaps transparent from Australia’s biggest and most iconic companies.
This should be a mainstream issue addressed by our political leaders and followed by the media. It affects every one of us, and will continue to affect generations unless we act.
As we watched companies respond and detail their own circumstances via their Employer Statements, one of the most common lines was, “We have equal pay for all roles in our company.” To help businesses understand that pay equity does not mean there is no gender pay gap and to help readers better understand what companies are saying, I wanted to unpack a little more about equal pay and the myth of no ‘real’ gender pay gap.
In this article, I’ll look at equal pay from the perspective of two key decision-making points (and there are many more - but let's keep it simple for now):
Point of Hire
Annual People Cycles (salary reviews & bonus cycles)
I'll also consider, at a basic level, a highly structured pay environment (think awards, EBAs, etc.) versus an unstructured or semistructured environment (salary bands, levels, job grades, or external benchmarks—with room for management discretion in final decision-making).
Equal pay for equal roles can be relatively straightforward in a highly structured environment. Let's say you have an EBA or an award instrument where a one-size-fits-all approach works. Everyone joining your business starts on $xx an hour or $xx annual salary. It's easy. There are no obvious pay equity issues; it’s a gender-agnostic approach to equal pay for equal work. On the WGEA Occupational Category List, these clusters may fall into the Technicians & Trades, Labourers, Clerical & Admin and are what I'll refer to as a highly structured approach to remuneration practices.
Now, let’s take most organisations, which, in addition to the above, may have other occupational categories like management roles, the all-inclusive mish-mash of professional occupations, sales employees, and many more. By their very nature, and often outside of direction from an Award (or similar), it can prove a difficult exercise to apply a like-for-like approach to a less prescriptive pay environment. This is not to say there is no structure, strategy or philosophy in place; rather, there are often many discretionary factorsat play, and human decision-making points involved.
Using this example, I will illustrate that despite ‘equal pay for equal roles, ’ a gender pay gap can – and often still does occur from a remuneration or compensation perspective.
Point of Hire
Let’s say you’re recruiting a new software engineer to help you develop a new app or website for your business in whatever field you are in — construction, government, technology, hospitality, health care.
A software engineer role often fits the bill of a less structured and more discretionary approach. Therefore, we are not working in a world where salaries and benefits are mandated, standardised across industries, or clearly articulated. Despite the additional flexibility it offers employers, it also carries with it complexity and discretion, both enemies of eradicating the gender pay gap.
When determining an appropriate salary for our software engineer, companies will typically consider a salary range, level, or job grade for each role. They may also use external market benchmarks (aligned to the company's market positioning, mid-market payers [P50] or top quartile payers [P75]). Below are examples of either approach.
Example Salary Band Approach
Example Individual Benchmark Approach
Fast forward to the point of hire - and the hiring manager (usually, but not always, in consultation with a member of the People & Culture or Talent teams) then considers individual characteristics or factors that may impact where in the band that specific candidate sits. These factors can include, but are not limited to:
years or type of experience
level of education
previous salary (and/or salary expectations)
management responsibility
All of these factors (and many others) may contribute to the software engineer's final salary offer.
As you can see, in this approach, the broad range of other attributes that an organisation may rely on to reach a pay decision can significantly impact decision-making on like-for-like roles, leading to the risk of gender pay gaps, often stemming from unconscious bias.
Let's look at an example here:
YourCo is hiring a new Account Manager. At the end of the recruitment process, George and Stella are the two preferred candidates. The internal budget and benchmark range for the role have been agreed at $100k—$110k.
Both candidates were asked what their current salary was as part of the process.
George stated $100k but reiterated that he won’t take this new role for any less than $110k.
Stella stated she was on $90k.
The final hiring decision has been made, and the company is set on Stella as the preferred candiate. The hiring manager extends the offer to her – and it’s $95k. The hiring manager is pleased with the result and that they have saved the company somewhere between $5-$15k on this placement.
So, what’s the problem here? Aren’t we supposed to save the company money?
The better question is, at what cost? Decisions like this are made every day in organisations, and whilst seemingly innocent and well intended, they contribute to, and exacerbate the gender pay gap and pay equity.
According to KPMG, sex discrimination (including indirect form - such as unconsious bias) contribute to 38% of gender pay gaps. A staggering figure that, unfortunately, is all too common. With clear data & insights, this can be prevented from the onset. At equidi, we make this simple with our pay gap predictor functionality - so you can sense check your numbers before the hiring decision is made.
Below is a summary of our suggested do less of and do more of when it comes to salary setting to avoid the gender pay gap trap at the point of hire.
Summary - Do more, Do less
Annual People Cycles – Salary Reviews & Bonuses
When we hear companies talk about equal pay in like-for-like roles, the annual people cycles of salary or remuneration reviews and short-term incentive plans (bonus payments) can quickly unravel all those good intentions.
Let’s take two employees—Mary and Paul. Both are Call Centre Managers, earning $95k as a base salary. In this organisation, salaries are reviewed, and bonuses are decided and paid as an outcome of the annual performance review cycle.
The annual performance review cycle runs:
Paul gets a very high performance rating, and his manager's feedback is that he is a top performer because of the hours he put in, and that he is always available.
Mary gets an average rating. The feedback is that technically, she is as good a performer as Paul, but she leaves on time most days to pick up her kids from afterschool care and sometimes isn't available after hours.
Let's look at how this classic equal pay dynamic plays out from a total remuneration perspective:
Mary and Paul Gender Pay Gap Example
This is how easily a gender pay gap can emerge - and that is why the gender pay gap is not as simple as equal pay for equal work - it is a measure of diversity. Organisations that state they have equal pay for equal work across their whole company should consider these factors in their pay gap analysis - or better still use a platform like equidi that does all this for you with a click of a button.
Equal Pay for Equal Work?
When it comes to like-for-like or equal pay for equal work, does your organisation factor in (and proactively do something about) scenarios like those we have run through? Or is equal pay for equal work simply a matter of bringing in everyone on the same starting base salary?
If you are not considering examples like these (and there are so many more I could share), you’re missing out on understanding the root cause of your gender pay gap or, worse still, not acknowledging it. As a minimum, you should use the following gender pay gap data points to analyse:
Bonus payments
Long-term incentive plans
Overtime distribution
Salary review participants and your policy as to who is, and is not, included
Parental leave superannuation payments – do you pay it, and who is eligible?
Of course, all of these analytics are available in real-time within the equidi platform. We help our customers truly understand their gender pay gaps, leaving them with something much more meaningful to say than “We pay equally in all of our roles.”
How good would it feel to say we have gone beyond pay equity and taken steps that have closed our gender pay gap. Now, that's a future we can all look forward to.
See the change, be the change - Join our movement today!
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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. With bespoke recommendations to guide the journey – we’ll help you set goals, track progress and lift performance everyday.
