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6 Practical ways your employer can fix the pay gap

Does your organisation have a gender pay gap? Here's how you can help fix it.

11.11.2020

November 16th marked Equal Pay Day. It's from this day until the end of the year that women work for free. While equal pay has become a priority for many companies, the gap isn’t getting smaller.

According to the Institute for Women’s Policy Research (IWPR), if the pay gap continues to narrow at the same pace it has over the past 50 years, women will not reach pay parity until 2059. For women of color, this date is even further into the future: The IWPR estimates that black women will wait until 2119 for equal pay and Hispanic women will have to wait until 2224.

Many companies are surprised to find that they have gender pay gaps

This is more normal than we like to acknowledge. According to SSB (Norway), this is most prominent in finance, where women earn 69% of men. According to CORE, women working full time in Norway earn 88% of men. CORE also states that 45% of the gender gap is linked to different career patterns, where men tend to occupy the best-paid positions at the top of the wage hierarchy, while women typically are more concentrated in staff.

Men also tend to be overrepresented in operational positions with profit and loss responsibilities that typically also include the largest bonuses, etc. However, 55% of the pay gap can only be explained by gender.

Similar gaps persist to a lesser or larger degree in the rest of the world. The effect of parenthood on the careers of high-achieving women relative to high-achieving men is much larger. The child earnings penalty for mothers in professions with a nonlinear wage structure, MBAs and lawyers, is around 30% 10 years after childbirth.

6 ways to fix the pay gap

  • Make sure to measure the pay gap in your organisation
  • Set aside a “pay gap fund” that corrects the pay gap between genders.
  • Many companies ask candidates about the salary in their previous job and base the starting salary on this. If women are paid less than men from the beginning, the pay gap will follow and increase for each level. A way to avoid this following error is to not ask candidates about their previous salary, but have set salaries for positions and subsequent development- and be transparent about it.
  • Actively encourage and recruit women into better-paid career tracks.
  • Some companies do not include employees on parental leave when considering promotions and salary. As women tend to have longer parental leave than men, this disfavors and can discourage women. We recommend to include employees on parental leave in salary negotiations and promotions. The average employee will be on parental leave only 1 - 3 times during a lifetime. In the long run, an encouraged and motivated employee is far more profitable than the short time saving of postponing an increase/promotion when the employee is on parental leave.
  • Carefully consider what bonuses are based on, and if some of these criteria might indirectly favor certain groups.
  • Be transparent about wages and criteria for promotions in the company to allow for more accountability and fairness. Keep the criteria and evaluations objective.

The steps above are in no way impossible to overcome but it requires dedication. If you can make even modest headway identifying the frictions that women and minorities may face in managing their careers, you can gain a step up on the competition.

That can help prevent other gender/ethnic pay gaps from arising down the road, boost the company's reputation, help recruit the best talent, and position all your employees to maximize their contributions. This process is ongoing and without end.

How does your salary compare? Try out our Salary Comparison tool.

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