Why is equitable pay important?

For a cursory overview of a company’s commitment to diversity, equity, and inclusion, take a look at their paychecks.

And not just the amount each person earns, but who gets to work there in the first place. See a chasm? That’s where equitable pay comes in.

Executives, directors, and managers all earn a salary based on their qualifications and experiences. Most of us do. But what about leaders from underrepresented groups, such as women, Black, and Latinx/Hispanic executives? Research shows the wage gap for women continues to persist regardless of industry, occupation, or education level.

Equitable pay is a necessary outcome of diversity, equity, and inclusion work. To get there, we’ll need to incorporate diverse hiring practices, engage in inclusive decision-making, and create equitable organizations for employee development.

The fundamentals of equitable pay

First, let’s outline a couple key terms:

Equitable pay. Also referred to as equitable compensation, equitable pay is defined by ADP as “the concept of compensating employees who have similar job functions with comparably equal pay, regardless of their gender, race, ethnicity, or other status.”

Wage gap. The National Women's Law Center defines wage gap as “the additional money a woman would have to make for every dollar made by a man in order to have equal annual earnings.” Wage gap and gender pay gap are typically interchangeable terms, stemming from 1996 when Equal Pay Day was first observed to highlight the differences in pay between men and women.

Despite legislation like the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964, equitable pay continues to be an aspiration rather than a reality for most employees of color. The latest research from the National Partnership for Women and Families identifies a dearth of fair and equitable compensation for women of all backgrounds, including Black, Latina, Native American, and Asian American women. What’s more, the data show “the wage gap for mothers is larger than for women overall.”

While the benefits of fair and equitable compensation may seem obvious, there are also underlying cultural, organizational, and interpersonal advantages to achieving equitable pay.

The value of fair and equitable compensation

Closing the equitable pay gap matters for individuals, households, and society as a whole. Data shows that if the annual gender wage gap was eliminated, women would have more money for child care, tuition, health insurance, groceries, rent, or birth control. The knock-on effects of equitable compensation are profound, and not just for individuals. Businesses can also benefit greatly from integrating equitable pay into their organizations.

Here are just a few of the ways in which equitable pay can be a business boon:

Strengthen recruiting and hiring efforts

Pay parity can help your organization recruit and hire new talent. With salary disclosure requirements on the rise, being forthright about your organization’s commitment to fair and equitable compensation can help you stand out in a tight labor market. In fact, more than three-fourths of respondents in an ADP survey of 32,000 workers across 17 countries said they would consider seeking new employment if they discovered “the lack of a diversity, equity and inclusion (DE&I) policy within their company.” An equitable pay structure is just one of many tools that could showcase and advance your organization’s commitment to DE&I.

Fortify your existing workforce

Implementing equitable pay into your organization can support your team’s overall resilience and morale. For example, imagine discovering that another team member is earning more for the same work. (Remember, people talk. Current and former employees are free to speak about their salary.) Job dissatisfaction, performance decline, and even turnover are all possible outcomes. In fact, ADP’s 2022 People at Work report found that “76 percent of employees would consider seeking new employment if they discovered an unfair gender pay gap.”

Organizations can reduce pay-related turnover by opting for a fair and equitable compensation structure that empowers employees. In turn, you’ll have an advantage in strengthening your workforce and retaining top talent.

Comply with regulations, prevent lawsuits

The Equal Pay Act of 1963 and Title VII of prevents discrimination on the basis of sex, race, color, religion, and national origin. On top of this, some states have enacted their own equitable pay laws, with some taking it a step further and adding pay transparency laws to the books. While the regulations and risks may vary by location or industry, “employers generally have flexibility in determining pay provided they don’t discriminate based on race, ethnicity, or gender,” according to Bloomberg Law. However, companies put themselves at risk if they routinely run pay equity analyses and don’t “address any disparities” uncovered. Organizations could “face the risk of pay discrimination suits or, if they are federal contractors, a fine from the US Department of Labor."

Champion equitable pay, diversity with AboveBoard

Equitable pay is one of many markers pointing to an organization’s commitment to diversity, equity, and inclusion. And it’s a powerful one with far-reaching implications. But how do we collectively become a business, a culture, or a society that values fair and equitable compensation? At AboveBoard, we believe diversifying the global executive workforce has the power to drive this kind of change. Our executive platform and community is centered on access and transparency, opening up opportunities for both marginalized executives and companies seeking to diversify their leadership teams. Ready to take the next step toward an equitable workplace? Partner with AboveBoard today.