Pay Equity Audits
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
It’s becoming clear that pay transparency is not a passing trend. Pay transparency is the practice of an employer openly communicating pay-related information through established methods to current and prospective employees. In 2021, Colorado was the first jurisdiction to enact pay transparency laws. Since then, more states and localities have enacted such laws; by the start of 2023, a fifth of all U.S. workers were covered under pay transparency laws. The nationwide normalization of pay transparency is leading employers to prioritize pay equity. Additionally, the recent dramatic increase in equal pay litigation, sometimes resulting in multimillion-dollar settlements, has more employers addressing pay equity issues.
Despite this increased focus, many employers may not know where to begin when implementing pay equity measures. For most employers, utilizing pay equity audits is the likely answer. These audits can be a powerful tool for employers to evaluate and ensure they comply with federal, state and local pay equity laws.
This article provides a broad overview of pay equity and discusses the importance of pay equity audits.
What Is Pay Equity?
Pay equity is the practice of compensating employees the same when they perform the same or similar job duties while accounting for factors such as experience, job performance and tenure. This practice takes into account all forms of compensation, such as salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses and other benefits.
Employees’ right to be free from discrimination in their compensation is protected under several federal laws, including the Equal Pay Act of 1963 (EPA), Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 and the Americans with Disabilities Act of 1990. For example, the EPA requires that men and women be given equal pay for equal work in the same establishment. The jobs need not be identical, but they must be substantially similar. It is job content, not job titles, that determines whether jobs are substantially similar. Specifically, the EPA provides that employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility and that are performed under similar working conditions within the same establishment.
Why Is Pay Equity Important?
Ensuring employees are paid equitably can help increase organizational efficiency, productivity and profitability. Employers who prioritize pay equity may experience the following benefits:
- Improved workforce productivity and morale
- Increased organizational commitment
- Reduced employee turnover
- Increased attraction of key talent
- Decreased risks of discrimination or pay inequity lawsuits
- Greater compliance with equal pay laws and regulations
What Is a Pay Equity Audit?
A pay equity audit is the process of analyzing compensation data of employees doing similar work within an organization. It can be an effective tool for providing employers with information to identify pay disparities among workers. Performing pay equity audits can help employers determine if any pay discrepancies are based on legitimate, nondiscriminatory reasons, such as seniority or education. If pay discrepancies cannot be explained by nondiscriminatory reasons, the audit allows employers to correct them.
The purpose of pay equity audits goes beyond just identifying whether pay disparities exist but helps explain why they exist. This can include reviewing specific pay decisions and policies. Such audits can help employers evaluate and improve their compensation practices, address pay gaps and limit potential legal risks. In some states, conducting a self-audit of pay practices can protect employers against legal claims based on pay inequities.
Benefits of Pay Equity Audits
Pay equity audits can help organizations identify and correct pay discrepancies, reducing potential legal risks. They can also increase employee morale and productivity. Ensuring employees are paid equitably for their work helps strengthen an organization’s culture. Employee morale, turnover and retention rates, and performance often improve when workers feel valued. Paying employees the same when they perform the same or similar jobs is a key component of helping workers feel valued, which can lead to generally more committed and productive employees. In turn, this helps drive organizational productivity and profitability.
Additionally, pay equity audits can help employers develop better workplace policies and procedures related to compensation. This can include establishing consistent starting pay ranges, factors for merit increases and promotions, as well as other incentives. Audit results can also inform an employer’s training efforts to ensure fair pay decisions are made throughout the organization.
Risks of Pay Equity Audits
While an organization’s intentions behind conducting pay equity audits are often noble—determining whether pay disparities are lawful and, if not, correcting them—audit results can be extremely damaging if disclosed. Inadvertent disclosure of audit results or analysis can harm an organization’s reputation and expose it to lawsuits or other legal action.
To protect against these potential risks, many employers utilize the attorney-client privilege or work product doctrine when conducting pay equity audits. Employers can do this by engaging legal counsel to initiate and lead the audit. Employers can also determine how best to communicate pay equity audit results to their employees and incorporate those results into organizational pay practices.
Takeaway
Conducting pay equity audits can be an effective way to ensure employees are paid equitably for the work they do. However, these audits are often only the first step for addressing pay equity issues in the workplace.
For more workplace resources, contact RISQ Consulting today.
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Financial Safety Nets for Employees
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Money is a top stressor for employees, and a looming recession has reinforced that fact. Employers are uniquely poised to help support employees with much-desired financial guidance and resources. When employees experience less financial stress, employers may see greater employee productivity and morale and lower absenteeism. Those positive feelings can also translate into a strong employee retention rate and help employers attract top talent. Economic recovery will take some time, but voluntary benefits could help decrease employees’ financial stress.
More employers are looking for ways to help employees save for unexpected financial emergencies. This article explores ways that employers can offer financial safety nets for employees.
Employer Considerations
The reality is that many Americans worry about covering living expenses and unexpected expenses. In fact, 57% of U.S. adults are unable to afford a $1,000 emergency expense, according to Bankrate’s Annual Emergency Fund Report. Lacking sufficient funds to pay for a major medical emergency or other urgent needs can jeopardize an employee’s food and housing security for several years.
A financial safety net will mean different things to employees, depending on their age and personal financial goals. The following common employee benefits can offer valuable financial protection:
- Life insurance—Employer-sponsored coverage can be offered in a variety of ways. Employers may offer a term policy, permanent coverage or both. Though life insurance is an important asset for future financial security, many employees don’t realize its importance. Teaching employees about the value of life insurance may increase loyalty to the organization as they better appreciate this benefit.
- Disability insurance—Disability insurance has become an increasingly valuable part of a comprehensive employee benefits package and can fill gaps in financial protection offered by other programs, such as Social Security. While employees appreciate the peace of mind they receive as their income replacement benefits are being paid, employers can use the resources offered by insurers to manage time and productivity losses and find the most effective ways to return employees to work.
- Retirement accounts—Whether employees are close to retirement or have decades left in the workforce, saving for retirement is a key component of their financial security. Offering a 401(k) account or other retirement benefits as part of employee benefits packages can increase employee loyalty, especially if employers offer a contribution match. Good retirement benefits are also a great recruitment and retention tool. However, benefits are only helpful if employees are aware of and understand them.
- Financial planning or coaching—Employee assistance programs support workers facing various challenges, including financial ones, by offering resources and counseling. Employees with access to financial education and tools are more likely to increase their savings and make progress toward their financial goals. Furthermore, employees with a plan or access to help are less likely to feel stressed or overwhelmed by their financial situations.
- Emergency savings fund—An emergency savings fund helps offer peace of mind and resources employees may use instead of their retirement savings or other accounts. Employers can offer guidance for starting an emergency savings fund regardless of how much employees may have for an initial investment. Many employees may believe they don’t have enough money to build one, but employer-provided education and guidance can help them understand that even a small amount of cash can help start an emergency savings fund. An alternative approach for employers may be to offer an employer-sponsored emergency savings account alongside traditional benefits. Although an emergency savings account is a top benefit wish of many employees, very few employers offer them. Still, by helping employees build emergency savings funds, employers can boost their workers’ confidence in navigating finances and increase happiness in the workplace.
- Student loan debt assistance—Student loan debt weighs heavy on many employees in the United States, but some employers are trying to help by offering student loan debt assistance. Employers can offer various forms of support beyond loan repayments, such as student loan payment counseling, third-party low-interest or interest-free educational loans, debt consolidation, and refinancing services.
Summary
Ultimately, having a financial safety net can translate into peace of mind for employees. As more employers consider ways to help employees save for unexpected financial emergencies, they can offer employee benefits that help workers achieve their financial goals and save more of their hard-earned money for both expected and unexpected expenses.
Contact RISQ Consulting for additional resources.
- Published in Blog
Pay Transparency
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Pay transparency is when an employer openly communicates pay-related information through established practices to current or prospective employees. Employers can provide this information through various channels, such as online job sites, job postings or during an interview. As a result of changing labor markets, more and more employees are demanding pay transparency. Further, some jurisdictions are now requiring employers to share pay information, meaning that this trend is impacting more and more employers.
This article discusses rules surrounding pay transparency across the country and workers’ growing demand for it. This article also explains employer advantages and strategies to implement pay transparency practices in an organization.
Pay Transparency Across the Nation
As demands for pay transparency increase, some states have passed legislation requiring organizations to be transparent. In recent years, California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington have all passed pay transparency laws. Some cities, including New York City, Jersey City and Cincinnati, have also passed such laws.
Employers should be aware that pay transparency laws vary depending on the jurisdiction. Some jurisdictions only require employers to provide pay ranges if the candidate requests it, while others require employers to disclose it upfront, as evidenced by the recent California law requiring employers with 15 or more employees to include pay scale information in all job postings, including job postings on third-party sites, starting Jan. 1, 2023.
Employee Demand for Pay Transparency
The tight labor market has led employees to make new demands, such as remote working arrangements, enhanced benefits and more—among them is pay transparency. Pay-related websites, such as Glassdoor, have helped normalize pay transparency as an integral part of an individual’s employment search and facilitate employee-driven conversations about pay. Employees value transparency because it holds employers accountable for providing similar wages for similar roles, builds trust and helps employees easily see if they are being compensated fairly.
Visier’s 2022 Pay Transparency Pulse Report found the most important factor potential employees consider when deciding whether to apply for a job is their estimated compensation. Further, 11% of candidates will not apply or interview for a role without knowing the salary band, and 50% have completely abandoned an application or interview process because the pay did not meet their expectations once the employer revealed it. Salary information is important to job applicants because they want fair pay—competitive with the marketplace and in line with what they contributed—and to avoid applying and interviewing for jobs they ultimately won’t accept due to insufficient pay. Applicants also see pay transparency as a way to develop trust with their potential employer at the outset of the employment relationship.
- Published in Blog
Show Us the Money!
By Jennifer Outcelt, Creative Content Architect
I’ve seen a fair number of job listings in the 10 years I’ve been in the work force. Luckily, I’ve been stable and happy at my current job for almost 7 years, but I’ve watched as friends and family around me beat down that well worn path towards a new vocation. One thing I am always surprised by is the lack of some very important information within the job listings I’ve seen. What’s that, you ask? Well, what would be the most important information to YOU? Salary, I presume. Or at least it’s in your top three.
When my husband left the military and started his own job hunt, we looked for jobs that checked a few key boxes; Do you want to do this job? Are you able to do this job? Is the salary enough for this job to be worth it? While a “Yep” on the first two questions was promising, if the last question was a “Nope” then the job was disqualified from the running. The conundrum though, was that a “Yep” or a “Nope” was not always easy to come by. Hardly any of the postings listed a salary! We were able to tell that he needed to be able to lift a box of papers… but not how much he would make each year?!
There is a crazy low percentage (12%) of US job postings that regard salary as a crucial piece of information for potential job seekers. There are several reasons why Employers opt out of upfront salary disclosure, but are the perceived benefits really hurting them in the long run? I came across a great article on CNN that breaks down the salary posting debate. Give it a read, then think about the job posting that put you in the job you have now. Would it have made a difference? Maybe the entirety of the US workforce should be chanting, “Show Us the Money!”
https://www.cnn.com/2022/02/09/success/salary-ranges-pay-transparency/index.html
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Proposed Overtime Rule Expected in October 2022
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
In its recent spring regulatory agenda, the U.S. Department of Labor (DOL) announced its plans to issue a proposed overtime rule in October 2022. According to the agency’s regulatory agenda, this proposed rule is expected to address how to implement the exemption of executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements.
The DOL provided a similar notice last fall but has yet to specify what changes it may be considering. In recent years, some experts note that the agency has contemplated modifying the duties test and salary thresholds for exempt employees.
What Will the Proposed Overtime Rule Address?
This proposed overtime rule could provide clarity for classifying exempt employees and increasing their salary levels under the FLSA. Some experts believe the DOL could even create automatic annual or periodic increases to exempt employees’ salary levels by linking them to the consumer price index, allowing exempt employees’ salary thresholds to adjust without formal rule-making. The current annual salary threshold for exempt employees is $35,568.
The DOL has held several calls with industry stakeholders and recently conducted multiple regional listening sessions to gather information. Still, there’s no firm date for when the agency will release the proposed overtime rule. Changes to minimum wage and overtime requirements under the FLSA could impact compliance costs and litigation risks for employers.
What’s Next?
Regulatory agendas outline a federal agency’s goals for the upcoming months. Although these agendas aren’t set in stone, they give insight into the current administration’s priorities and activities.
Once the DOL publishes a proposed rule in the Federal Register, there will be time designated for the public comment. Subsequently, the agency will review comments and determine whether to move forward with a final rule.
Even after the DOL publishes the proposed overtime rule, it will likely be some time before this rule becomes final, if ever. Employers are not obligated to change how they classify or pay employees until the DOL’s proposed rule becomes final. However, potentially impacted employers will want to follow the DOL’s rule-making process closely.
We will keep you apprised of any notable updates. For more resources on FLSA regulations, contact RISQ Consulting today.
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