Tips to Manage Pay Equity Risk in Hiring and Onboarding Anticipating new leadership in our administrative agencies, 2021 will likely bring an increased focus on pay equity enforcement. Notwithstanding performance and qualificationbased pay differences, starting salary discrepancies often drive pay inequity. As your risk management partner, we offer you the following three strategies to avoid pay equity concerns at the level of hiring and onboarding. Tip #1: Develop and implement a policy of basing starting salary on qualifications, and either eliminate or devalue questions regarding salary history, particularly where an applicant’s salary history is inconsistent with market rates. In many jurisdictions across the nation, questions about salary history are considered patently discriminatory and, thus, not permissible. Even if you are not located in such a jurisdiction, however, using salary history as a basis for starting salary presents significant risk management concerns, particularly where an applicant’s salary history is less than the market value of the applicant’s skillset and position in the company. For example, if an employee of one sex (male or female) is paid less than another employee of the opposite sex, and the only meaningful difference between the two is salary history, it is possible that a court or agency could view this pay practice as merely perpetuating sex discrimination. Tip #2: As early as possible, develop an accurate job description that establishes the knowledge, skills, effort, responsibility, and working conditions for the position. To protect your business-based reason for pay decisions, develop a job description that details the business-based non-discriminatory requirements for a particular position. In several pay equity cases, the Equal Employment Opportunity Commission (EEOC) compared pay across different positions, finding that the positions essentially required the same (or substantially similar) knowledge, skill, effort, responsibility, and working conditions. For maximum legal defensibility, detail all the above to differentiate positions before you even begin the hiring process. Tip #3: Identify specific factors that your company relies upon when setting starting salaries and consider whether salary scales or bands may work for your company. To reiterate, starting salary is often the entry point for pay equity claims. Because of the loss of institutional memory, changes in leadership, or documentation failures (and, sometimes, all three), employers and HR leaders may have difficulty articulating why one employee is paid less than or greater than another. To preserve the company’s credibility and protect its corporate decision-making, consider adopting one set standard for starting salaries.
Particularly in the case of larger organizations, it may make sense to pay according to salary scales or bands to standardize starting salaries. BONUS TIP: Consider a pay equity audit going into 2021. For maximum risk management and legal defensibility of your pay practices, consider a pay equity audit going into 2021. To preserve the confidentiality of your process, engage outside counsel to develop a communications strategy.