Why data analytics is the first step to closing the gender pay gap

 


Ahead of International Women’s Day next week, Tara O’Sullivan looks at how effective data analytics can be in helping an organization develop a plan to close its gender pay gap.

Research conducted by the Institute for Women’s Policy Research estimated that women wouldn’t receive equal pay until 2059. I think we can all acknowledge that’s just too long to wait.

Despite inordinately slow progress toward gender pay equity, some nations and employers have decided to take action to accelerate the process. Countries such as the UK, France, and Spain have introduced legislation making gender pay gap reporting a requirement for organizations of certain sizes, and we’re seeing more countries follow suit. While the gender pay gap is always a hot-button issue, this year, as we approach International Women’s Day on 8 March, it’s time to stop talking and start taking action. One of the themes this year is “How will you help forge a gender-equal world?”. Here’s my response: we need to leverage data to illustrate just how pervasive gender pay disparity really is.

This is an important step in the right direction and points to the crux of the problem – without data insights that provide transparency into an organization’s pay equity status, there’s no way to establish benchmarks. Without benchmarks, even the most well-meaning organizations will find it nearly impossible to develop a workable plan to remedy pay equity discrepancies.

How Salesforce approached the issue

US cloud-based software firm Salesforce provides an excellent example of an organization that developed a pay equity strategy based on data insights. When Cindy Robbins joined Salesforce as chief people officer in 2015, she suspected women in the company were receiving less pay than men, an assertion that shocked Marc Benioff, the company’s CEO. Salesforce had prided itself on holding equality as a core company value. Benioff empowered Robbins to look into the matter.

Cindy and her team developed a methodology that audited and analyzed the entire employee population to determine unexplained differences in pay. The audit revealed that even a company like Salesforce that prided itself on equality had significant pay equity discrepancies.

The company swiftly acted on these insights. To date (2019 figures), Salesforce has spent a total of $10.3 million to ensure equal pay for equal work.

Without question, a multibillion-dollar company like Salesforce has the deep pockets and resources to identify and remedy pay equity gaps. But in fact, every company, large or small and in every corner of the globe, has payroll data, which is the foundation for analyzing pay equity across the organization. That means there’s no excuse not to take the first step to see where your organization stands.

Payroll data and analytics

An organization’s payroll database can serve as the primary source of information to analyze payroll trends and insights across the company, including understanding pay equity. Unfortunately, many organizations lack the knowledge or the tools to analyze and run payroll reports to provide pay equity benchmarking insights. According to Salary.com’s 2020 Pay Practices and Compensation Survey, 56% of respondents said their organizations did not have a formal process to address pay equity, while 70% did not use salary structures to manage payments.  Another challenge is that organizations may not be capturing sufficient employee payroll data to assess pay equity accurately.

Without data insights that provide transparency into an organization’s pay equity status, there’s no way to establish benchmarks.”

As a first step, it’s essential to research the data capture options and reporting functions of your payroll systems. Many global organizations use multiple payroll platforms, which can be a challenge when seeking consistent data insights across the company. A consolidated global payroll system that is tightly integrated with human capital management (HCM) systems can provide aggregate insights and analysis. With the right payroll data inputs, analytics, and reporting capabilities, any organization can quickly assess and identify pay gaps.

As an example of what a gender pay gap report might look like, the screenshot below shows an analysis of gender and age over time. It’s interesting to see in this particular example how women have more generous salaries than men in the younger demographic, with men catching up and far surpassing women in compensation in later years when employees typically occupy more senior roles. This shows how nuanced the gender pay gap can be and how it’s influenced by many data factors beyond gender, including age, seniority, and roles to name just a few. Typically, at senior VP, SVP, managing director, and c-level positions the number of women declines sharply and they typically earn less than men in these leadership roles.

These are valuable insights that empower HR leaders and the c-suite to develop a plan to close the pay gap.

Another reporting example below illustrates global comparisons for gross and net pay with a data cut to show average gross pay distribution by age and gender. This data allows organizations to gain global insights into pay equity across all geographies. It’s important to take a global approach to first gain insights and then to move forward with a plan that addresses gender pay gaps everywhere in the world.

As the Salesforce example shows, good intentions and organizational values to support equity can be a starting point, but the proof is in the data. It’s easy for a firm to assume it is demonstrating a commitment to equity, but without robust payroll analytics, reporting and visualizations, it has no way of knowing how well it is doing or if significant gaps in pay equity exist.

Leveraging this data

Once gender pay gap reporting is implemented, organizations can develop an action plan to remedy the situation. This must involve more than simply adjusting salary structures and pay scales. Organizations should re-examine their talent acquisition, performance management, and learning and development programs to ensure women have an equal opportunity from day one. Leadership also needs to play an aggressive and proactive role and partner closely with HR to make it clear that the organization is deeply committed to achieving pay equity a timeline to get there.

Does your organization encourage and provide flexible working arrangements for working mothers to enable them to continue advancing in their careers? Are there certain departments or roles that are predominately male? If that’s the case, what are some proactive steps you can take to encourage more women to consider these roles and be positioned for success? These are just a few of the questions executive leadership and HR should begin to ask.

The benefits for organizations to work toward pay equity are clear. A meaningful and transparent commitment to diversity and inclusion, which encompasses pay equity, has become critical for attracting top talent and remaining competitive in today’s global economy. To ensure transparency, a growing number of countries are making gender pay gap reporting the law of the land. Legislation aside, working toward pay equity is the right thing to do.

I began this article by calling out one of the themes of this year’s International Women’s Day – How will you help forge a gender-equal world? What will you do? What will your organization do?

When it comes to gender pay equity, we have the data, analytics, and reporting technologies, and tools to get started. Why wait?

Women’s progress in the workplace is set to reverse due to the coronavirus pandemic, professional services firm PwC found in its analysis of developed countries. 

PwC said that the pandemic was set to push the progress towards gender equality in the workplace back to 2017 levels, in a report published Tuesday, ahead of International Women’s Day on March 8. 

This was according to PwC’s analysis of women’s economic empowerment, across 33 member countries of the Organisation for Economic Co-operation and Development, for its annual Women in Work index. The index measures women’s participation in the labor market and equality according to a weighted average in five categories. 

PwC applied OECD forecasts of the unemployment rate and labor force size for 2019, which was the latest data available, to its Women in Work index results in order to gauge the potential impact on these countries in 2020-22. It found that the gender equality index is expected to fall 2 points between 2019 and 2021, below the overall average score of 62 points in 2017.

In order to undo the pandemic’s damage to women’s position in the workplace by 2030, PwC projected that progress towards gender equality needed to be twice as fast as it was in the previous decade. 

Laura Hinton, chief people officer at PwC, said that these findings showed there was “absolutely no time to lose in addressing the very real impact of the pandemic on women.” 

Gender equality affects economic growth 

Research has shown that women in the global workforce have been disproportionately affected by the pandemic, in being more likely to work in the sectors hardest-hit by the crisis. A United Nations study also found that women have been taking on the brunt of extra childcare and domestic duties since the onset of the pandemic. 

Hinton said that governments and businesses both had parts to play in “addressing the gender inequalities in unpaid work, through promoting and championing schemes like shared parental leave, affordable childcare, and flexible working arrangements.” 

Larice Stielow, the senior economist at PwC, pointed out that losing women from the workforce “not only reverses progress towards gender equality, it also affects economic growth.” 

In its ranking of the 33 countries analyzed in the report, based on the 2019 data, PwC found Iceland and Sweden retained their place as the top-performing countries for women’s progress in the workplace. New Zealand moved into third place, thanks to progress in closing its gender pay gap and an increase in the number of its full-time female employees. 

In fact, PwC’s analysis showed that boosting women’s employment within the OECD — which spans 37 developed economies —  to match the rate in Sweden would increase gross domestic product by $6 trillion a year across this group of countries. Closing the gender pay gap would add $2 trillion to the OECD’s GDP each year.

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