In recent years, fair pay practices and pay transparency have been and continue to be top of mind for employers and employees. Organizations are recognizing the importance of pay equity and how pay decisions impact the ability to attract and retain their workforce.

According to XpertHR’s 2023 Pay Equity and Transparency Study, 1,011 global HR business leaders and employees were surveyed. One of the key findings revealed that senior leaders believe pay equity still matters, but inequalities still exist in the workforce.

Senior leaders are beginning to recognize they must design and implement fair strategies to improve business outcomes. And now, with Act 203 in effect, Hawaii businesses are even more pressed to address and own pay equity initiatives.

The following are possible actions that key leaders can begin considering:

Treat Pay Equity as a Business Imperative
Pay Equity Audits
Promoting pay equity as an organizational strategy starts with conducting a pay equity audit. To get started, leadership will need to conduct a thorough job evaluation of all roles. This involves reviewing job descriptions, performance metrics, and salary information to identify disparities based on gender, race, ethnicity, age, or other characteristics. After collecting and studying these data, leaders should employ the services of an auditor (internal or external), or utilize pay equity technology such as Gapsquare to conduct a regression analysis. This analysis will identify pay differentials based on legitimate factors such as role complexity and value as well as job holder experience, education, and training.

Remediation
After the audit comes remediation which should begin with resolving pay equity gaps. Though less consequential and smaller gaps make the list for resolution, leaders should prioritize pay gaps that are mission-critical to the business. For these latter pay gaps, if they are large, leaders may need to build a business case for additional funding requisite to resolving gross inequities. This is especially true when there is pressure to share results near-term. If the budget is constrained, leaders may plan to raise affected employees' salaries incrementally over a couple of years until it achieves the target amount and parity is achieved. Also, unless driven by litigation, back pay is typically not part of the equation.

As a next step in the remediation process, leadership must fix operational gaps that led to the salary discrepancies in the first place. Operational resolutions could include correcting job classifications, modifying job descriptions, and rectifying incorrect salary records. Finally, leadership should regularly monitor and tweak hiring and internal mobility processes for alignment with pay equity targets. It is common for pay gaps to re-emerge as organizations experience employee turnover, reorganizations, changes in job duties, and personal bias. Spot-checking the compensation and rewards data annually and conducting a deep dive review every couple of years should be part of an organization's pay equity execution plan.

Ensure Managers Understand Pay Equity and Rally for It
Manager Education
XpertHR’s research shows that just 12 percent of employees say managers at their organizations are very effective at facilitating conversations about pay. Worse than that, almost a full quarter (22 percent) of employees say their managers have no conversations at all with them about pay. Lack of managerial understanding about the business importance of pay equity and getting past managers' discomfort to talk about pay equity with their employees are two of the greatest inhibitors of executing on a pay equity plan.

If managers are not aligned with pay equity being an organizational priority or do not trust how pay adjustments for their team members are being planned, then they will not generally follow through on supporting the process nor communicating changes and the reasons for the changes to their employees. Lack of communication between managers and employees erodes trust and exacerbates pay equity issues.

Conditions for pay equity remediation and success are set when leaders prepare managers with the context and insights for pay equity as a business strategy and answer their questions and concerns. In turn, managers feel informed, ready to have similar conversations with their direct reports, view pay equity as a business priority, and take responsibility for effective execution.

Manager Accountability
After managers are grounded in the "what" and "why" of the organization's plan to achieve pay equity, they should be held accountable for advancing progress. Leaders hold managers accountable by requiring them to:

• Define success metrics (e.g., team sentiment, employee engagement, turnover, etc.);
• Set clear pay equity goals and expectations;
• Hold regular check-ins with leadership and the C-suite to review progress;
• Engage employees for their input on team and organizational progress;
• Summarize employees' feedback for sharing with leadership; and
• Define specific calls to action to advance metric results closer to target performance.

Leaders should reward those managers whose performance is advancing the organization toward parity. By taking this data-driven (quantitative and qualitative) approach to manager accountability, leaders are ensuring that managers buy in to and are building an equitable workplace for all.

Measure Pay Equity Progress and Continuously Improve
Data-Driven Insights
The role of data and analytics is central to addressing inequity and moving toward parity. Boards are expecting leaders to tackle equity issues at the source, to find the root causes (whether in policies, operations, or behaviors) and fix them. The best outcomes can be achieved by leaders leveraging technology that analyzes data.

Pay equity technology drives efficiency, accuracy, validity, consistency, and defensibility at the intersections of gender, race, age, disability, and other factors. With such evidence-based information, leadership has assurance that gaps are true representations of reality, that pay adjustments are processed accurately, that pay decisions are fair for all, and that new pay inequity is not introduced.

It comes down to this: as with any business strategy, leadership decisions should not be based on a gut feeling but rather backed by data. Using data breeds leadership confidence in pay decisions, drives evidence-based leadership conversations around pay equity that reassures employees their managers are held accountable, and serves as a check against bias.

Pay Transparency
In creating and sustaining fair compensation strategies, organizations remove bias (conscious and unconscious) from the process. One proven way to eliminate bias is to be more transparent about pay and pay ranges. XpertHR’s research found that, on average, 75 percent of HR Leaders say that addressing pay transparency at their organization is a priority, but only 42 percent of employees agree. Leaders can show commitment to advancing fair pay practices by being open with employees about pay and broadcasting salary ranges.

Investing time now into analyzing pay equity issues (rather than waiting) may help to maintain business continuity, minimize employee complaints, increase a company’s employee value proposition, and attract and retain top talent. Encouraging leaders to view pay equity as a part of their business strategy, employers can hopefully experience greater employee engagement, continuity and stability.

If you have questions about Act 203, contact your HR consultant.