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Maintaining Fair Pay in an Organization

Written by Salary.com Staff

February 3, 2017

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Deciding the compensation for each worker takes a lot of work. There are many factors that can affect its creation. But gender should not be a deciding factor for a worker to receive less than others. This is widely known as the gender pay gap.

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People within the compensation field know about the occurrence of gender pay gap. Studies show that in 2022, 17% of women receive less than men on average. This means that women earn an average of 82 cents for every dollar that men make. But the situation relating to compensation shows more than this. Pay gaps also happen because of race, religion, age, and disability status.

But in recent years, there are companies making moves to ensure they apply fair pay amongst their workers. For these firms to stay on top of their game, here are fair pay rules to keep in mind.

The Equal Pay Act of 1963

The rule was set up during John F. Kennedy’s administration in the 1960s. Supporters of this law include Esther Peterson. She was the head of the Women’s Bureau of the Department of Labor. There was also the then First Lady, Mrs. Eleanor Roosevelt, and Representatives Edith Green and Katherine St. George.

The law states that employers cannot give unequal rewards to women and men. This comes explicitly involving the same job that needs the same skills, effort, and tasks. It says when unequal pay should happen. This is possible depending on a worker’s merit, quality and quantity of work, and seniority.

Fair Labor Standards Act of 1938

This law is the first of its kind. It says that workers have the right to receive minimum wage pay. In addition, it says workers should have the right to receive overtime pay.

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Civil Rights Act of 1964

Following the laws on equal pay, the government passed the Civil Rights Act of 1964. This law bans employers from discriminating based on race, sex, religion, color, or origin. This applies to all aspects of employment including compensation.

How Can a Company Create a Fair Pay Plan?

After reviewing the rules on fair pay, companies should have enough knowledge to guide them into creating a fair pay plan. Here are pointers on how to create a fair pay plan.

Create a Work Outline

As with other plans, an outline of targets and goals is the first a company needs. The outline should show the responsibilities of every role and job post. This should also show the value of these functions. Knowing the value of every position will help in creating a general budget.

Effectively Manage Compensation

Most firms hire a compensation manager that will ensure the implementation of fair pay across all roles. But it can be a tough job to keep track of every role, especially for a large firm. As a result, the HR team usually manages this task.

Aside from assigning people to manage this task, the firm can also invest in compensation management software. This tool can help the team in making informed decisions in relation to fair pay.

Apply an Approach Using Market Data

To create a fair pay plan that is correct and dependable, companies need to use market data. This will guide firms in making informed decisions for their fair pay plan. Some of the aspects a firm should explore include location, company size, and industry.

Establish Pay Ranges

Using the outline and data from market research, companies can set up pay ranges. This applies to every position within the firm. Each pay grade depends on the level of responsibilities for each role, the coverage of authority, and the length of time a worker spends in that role. In addition, firms should plan for pay adjustments like raises and promotions.

Execute and Communicate

Finally, once the fair pay plan is complete, it is time to execute and communicate it across the company. It is best that leaders and compensation managers explain the plan to all the workers. They need to give clear instructions and proper guidance when communicating the fair pay plan.

The goal of this exchange is for workers to understand that the firm has their best interests at heart. Current workers and potential ones will appreciate this as they value a company that treats workers fairly.

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It is the goal of every employee and job seeker to join a company that upholds fairness. A firm that uses a fair pay plan for its workers shows they are the best place to work. This strategy will help with employee recruitment and retention.

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