Gender Pay Equality

New research can help HR leaders shrink the gender pay gap

Despite great strides that have been taken legislatively and through public awareness campaigns to reduce the gender pay gap, there are ultimately a host of factors that continue to contribute to this issue. As employers work to provide equal pay to their associates, our new research from the ADP Research Institute^® (ADPRI) can help them take a closer look at the real data around the gender pay gap in order to better address the issue within their respective organizations.

Today, many companies focus internal studies of gender pay equity on base salary alone because it is easy to capture from an HR system of record. However, analyzing base salary alone doesn’t provide an accurate assessment of total compensation; one must also consider incentive pay. The ADPRI conducted a study and subsequent report titled Rethinking Gender Pay Inequity in a More Transparent World, which looked at pay equity through a unique examination of base salary and incentive pay, tracking exempt employees for six years.
 
For HR leaders, it’s important to look at both base compensation and incentive pay.  Since HR often negotiates performance-based earnings separately from salary, incentive compensation may be subject to greater hiring manager discretion and less oversight.  In addition, supervisors who oftentimes allocate merit increases and incentive awards simultaneously to their staff work off different playbooks with varying rules and constraints.  As a result, this can create an unexpectedly large gap in total earnings over time as workers move to positions of greater responsibility within the organization.

After evaluating the career paths of exempt new hires over a six-year period, the data confirmed that incentive pay, like bonuses, widen the pay gap between women and men by an average of $3,500.  Women in the study earned $15,000 less in base pay than men, but this disparity grew to $18,500 when we accounted for incentive pay. 
 
Looking closely at new hires by age and income, women ages 20 to 30 with a low starting base pay nearly matched their male counterparts; however, females earned less after six years with the same company.  When factoring in bonus pay, compensation was much worse for young women with a 21 percent less bonus-to-base ratio compared to men.  For new hires in the 40 to 50 age range, there was almost no base salary pay gap for all income groups and women kept up with male salaries over a six-year tenure.  But lower income workers fared worse for bonus pay.  In the $40,000 to $60,000 income range, male workers received an average bonus of 11.4 percent, whereas women received 8.5 percent—just 74 percent of male counterparts.
 
When looking at industry data, women in the information sector had a 7 percent higher bonus-to-base ratio than men.  But, women in the finance and real estate industries, those with the highest pay gap both with and without incentive pay, had a 21 percent lower bonus-to-base ratio than men.

While it is a common belief that women are paid less than men because they often leave work to serve as the primary caregiver to their children or for other personal reasons, there is little evidence that women across age groups were more likely to quit their jobs than men. After six years, only 11 percent of both male and female employees worked at the same employer—an overall average attrition rate of 15 percent annually.
 
The data show little difference in quit rates by gender.  In fact, age is a better way to examine attrition. For example, female workers ages 20 to 30 are 2 percent more likely to quit a job than males at the same company. Additionally, older 50+ workers have a 32 percent higher chance of staying with the same job than their counterparts.
 
To support both male and female caregivers who don’t want to leave the company, paid family leave policies are a good option. It is also widely believed that flexible work policies are a great tool to attract and retain a diverse workforce.

The reasons for pay inequity are complex and diverse; however, HR can begin to take some steps to help eliminate pay disparities. HR managers should:
 

 
These efforts together are the groundwork that can help to drive change in the gender pay gap.