SOCAP24: Going Deeper, Catalyzing Systems Change — Tracks and Curation Councils Released!

4 Ways Any Small Company Can Help Solve Pay Inequity

Emily Lonigro May 29, 2018

Pay discrimination is a big deal, and it continues to affect people of color, particularly women. While women account for almost half of the workforce, on average, they earn less than men. Research from the Institute for Women’s Policy Research indicates that, at the current pace, women won’t experience true pay equity until the year 2059. For women of color, the wait is even longer. Hispanic women will have to wait until 2233, and black women will wait until 2124.

Small business’s role in pay equity

Large corporations — with multiple employees in comparable roles and HR departments able to focus on inclusion and fairness in the hiring process — clearly have a role to play in solving this problem. But don’t underestimate the potential impact of addressing this issue within small enterprises.

The Power of Small Business

According to the US Small Business Administration, small businesses make up:

  • 99.7 percent of US employer firms
  • 64 percent of net new private-sector jobs
  • 49.2 percent of private-sector employment
  • 42.9 percent of private-sector payroll

  • 46 percent of private-sector output
  • 43 percent of high-tech employment
  • 98 percent of firms exporting goods
  • 33 percent of export value

Most of the American workforce is employed by small businesses, as we can see from the data above. And for those of us eager to participate in the fight to change the way companies behave, it’s our job to make small changes that can make a big impact and have the potential to transform the way business operates.

How to Reinforce Pay Equity

Below are four simple rules I use to promote equal pay in my small conscious company.

1. Never ask for a salary history.

When we hire someone new, it’s in our best interest to limit costs and maximize revenue, so we ask about a recruit’s previous salary. On the surface, it makes sense: If we can get a great employee who wants the job and they accept a low offer, we save a bunch of salary dollars. The problem is that women and people of color are typically paid less, so asking for that salary history only perpetuates the cycle of pay inequity.

In 2017, the governor of Illinois, where my business is located, vetoed HB 2462 — a bill banning questions about salary history. Specifically, HB 2462 would have made it illegal to screen applicants based on their wage or salary history or to require that an applicant’s prior wages satisfy any minimum or maximum criteria. If enacted, it would have prevented employers from requesting that an applicant disclose his or her prior wages or salary as a condition of being interviewed, being considered for employment, being hired, or receiving an offer of compensation.

Other states and cities have embraced this type of legislation, which works to level wage inequity. California, Delaware, Massachusetts, and Oregon all have statewide salary disclosure bans on the books, as do New York City and San Francisco.

Even if you do business in a state that doesn’t have a salary disclosure ban, you can still forgo asking about salary history and implement these other hiring policies. Pay could be so much more equitable in just a few years if we all used inclusive, transparent processes.

2. Do your research, and be upfront about the position and its requirements.

As an employer, it’s your job to price your projects, run an efficient company, and position yourself for growth. That’s a no-brainer. But it’s just as important to do your due diligence before deciding to hire for a new position.

Research comparable positions in your industry and region to gauge appropriate compensation — Glassdoor and are both great places to start. Look at the salaries holistically to see what is included in compensation packages. Salaries are just one component the total compensation package, so be upfront about that too. Take time to assess what you truly expect new hires to do and what resources you’ll equip them with to do their jobs. Be thoughtful about the requirements you think a person needs to be successful, and be honest with yourself and applicants about what you’re asking of them.

3. Publish the starting salary and compensation package in the job posting.

Those who have been disenfranchised or who need a job to support themselves or their families aren’t likely entering the hiring process ready to negotiate a great salary. What’s more likely is that they are going into the process thinking, “I need this job, so I’ll do whatever I have to do to get it.” These individuals may not feel empowered or have the skills to navigate the negotiation game. For many people, asking for more feels like they are risking not getting the job at all. They don’t have the luxury to play negotiation games, and you risk losing the opportunity to hire talented individuals who might be perfect for the position. Why should anyone play these games at all?

Be transparent. There’s no reason not to be. This is the first major interaction you will have with this potential employee, and how you play this can become part of your brand story for longer than just the time it takes to have the conversation. Communicate what you’re willing to offer. Develop a compensation package that is fair and equitable, and publish it in your job postings. It’s been my experience that you’ll attract the right people that way.

4. Make salary negotiation part of the conversation.

As mentioned above, not everyone possesses negotiation savvy. According to a 2016 survey by Glassdoor, 68 percent of women accepted a job offer and did not negotiate salary, and this trend spans racial boundaries. Women of every race and ethnicity are less likely to ask for a raise.

Instead of making it an unspoken rule that a select few will know how to maneuver, why not make negotiation a part of the process? Negotiation isn’t inherently bad, but it should be done in the open. We note on our job postings that salary is open to negotiation, based on performance and contributions to the company after 90 days.

Upon hiring someone new, set a timeline for review and communicate clearly what you are both committing to each other and how you’re going to measure it. What will it look like if you are both successful? It’s an exchange, after all — you are both making a commitment to each other and have to meet that. In your review, discuss your metrics, performance, and compensation plan for the future.

In conclusion

There’s no reason that even a small company can’t start doing these four things to promote pay equity, beginning with your next hire. If you’re interested in doing more, contact your local representative to voice your concerns. This is a hot topic, so legislation is likely to be in the works. The simplest thing you can do to make a real national change is to take a look at your own practices and make some changes there first.

Equity and Inclusion / Stakeholder Capitalism
Join the SOCAP Newsletter!