{"id":7197,"date":"2024-11-26T13:06:20","date_gmt":"2024-11-26T18:06:20","guid":{"rendered":"https:\/\/primepay.com\/?post_type=learn&p=7197"},"modified":"2026-02-18T11:30:34","modified_gmt":"2026-02-18T16:30:34","slug":"pay-equity","status":"publish","type":"learn","link":"https:\/\/primepay.com\/learn\/payroll\/pay-equity\/","title":{"rendered":"Understanding Pay Equity and Why It\u2019s Important"},"content":{"rendered":"\n

Seventy percent<\/a> of companies admit they\u2019re \u201cmediocre or below\u201d regarding pay equity. That\u2019s an issue, especially for organizations that say they\u2019re prioritizing people-focused initiatives, transparency, and DEIB. <\/p>\n\n\n\n

The good news is that leaders from the same study acknowledged these shortcomings and plan to build a more equitable environment for their employees.<\/p>\n\n\n\n

But before committing to a pay equity analysis or remediation, leaders must first understand the ins and outs of pay equity laws and compliance.<\/p>\n\n\n\n

That\u2019s because fair pay isn\u2019t just a moral initiative (although treating people equally and with respect should be engrained in company culture). It\u2019s also a legal one: pay equity laws ensure you\u2019re not accidentally (or intentionally) discriminating against specific groups. <\/p>\n\n\n\n

Once that foundational knowledge is in place, HR and Finance leaders can work together to audit pay practices and make any necessary changes to create an inclusive and fair workplace.<\/p>\n\n\n\n

What is Pay Equity?<\/h2>\n\n\n\n

Pay equity means ensuring everyone gets fair pay for similar work, regardless of gender, race, or background. It’s not just the right thing to do; it’s a must-do to prevent discrimination and build a welcoming workplace. Alternatively, ignoring pay equity laws can lead to dire consequences that range from decreased employee trust to discrimination lawsuits.<\/p>\n\n\n\n

While there are many protected classes, gender and race are two main areas organizations should focus on when it comes to rectifying unequal pay.<\/p>\n\n\n\n

The Gender Pay Gap<\/h3>\n\n\n\n

We\u2019ve all heard of the gender pay gap, where women earn less than men. Unfortunately, this concept isn\u2019t an idea of the past. In 2021, white women earned 82%<\/a> of what men earned, and this figure is even lower for women of color. And because these losses compound, women make anywhere from $400K to $1+M<\/a> less than men in their 40-year career. <\/p>\n\n\n\n

Let those numbers sink in. <\/p>\n\n\n\n

One way to combat the gender pay gap is to grant salaries based on skills and experience. Additionally, to truly lean into building an equitable environment, organizations should also examine programs, such as parental leave, to combat social biases and pressures, and other initiatives, such as female representation in leadership positions.<\/p>\n\n\n\n

\"gender<\/figure>\n\n\n\n

As <\/em>HBR<\/em><\/a> notes, the pay gap widens for certain female employees, including executives, women with children, and women with higher degrees. <\/em><\/p>\n\n\n\n

Pay Equity for People of Color<\/h3>\n\n\n\n

There\u2019s no way to sugar-coat it. Unfortunately, people of color face striking wage disparities<\/a>. For example:<\/p>\n\n\n\n