Benefits and Compensation, Diversity & Inclusion

Rethinking Equity: Pay Practices in 2023 and Beyond

In 1963, women made 59 cents to every dollar a man made. That year, in an effort to close the gender pay gap, the U.S. Congress passed the Equal Pay Act. The equal pay legislation outlaws compensation discrimination based on gender, mandating that a man and a woman doing equal work must receive equal pay. Since the wage discrimination law’s codification, the gender pay gap has slowly started to shrink.

Nevertheless, disparities between women’s and men’s earnings persist. In fact, women earn an average of 84 cents to every man’s dollar, according to Pew research. The explanations for this compensation gap range from intangible factors like unconscious bias to measurable factors like work experience. Regardless of the reasons, companies that want to attract and retain top talent must evaluate salaries and pledge to uphold pay equity.

The Trouble with Negotiations

Even companies committed to equal pay can run into equity challenges when negotiating salaries with incoming employees. Organizations must consider that men are more likely to negotiate higher salaries than women. This “ask gap” may initially result in pay differences, but these discrepancies compound over time. A $1,000 difference in salary may add up to over half a million dollars’ difference throughout a career.

A perception problem compounds this salary negotiation imbalance. Employers are more likely to perceive women who lean into salary negotiations as aggressive than they are of men pursuing similar salary negotiations. This can also result in women’s lower salaries.

I’ve experienced these salary negotiation issues firsthand at my software company, Language I/O. For instance, I hired a female employee at a salary that I believed to be fair based on her experience and qualifications. Months later, I hired a male employee with the same qualifications to do the same role; however, he negotiated for much higher compensation.

How did my company respond while maintaining our commitment to pay equity? Rather than limit the new hire’s salary, my team accepted his ask. Then, instead of paying him at a significantly higher rate than his colleague, we increased the female employee’s salary to match the new hire’s negotiated rate. We felt strongly that this was the right thing to do, both for our female employee and for our broader commitment to pay equity.

Reevaluate Salaries

Women are more likely than men to be in low-paying careers. There are a variety of reasons for this, one being that women frequently seek out careers that offer flexibility so they can attend to family responsibilities. Female employees are also more likely than male employees to have a career interruption after the birth of a child, affecting their work experience and, ultimately, their likelihood of getting hired with a competitive salary or their likelihood of getting hired period. 

Consequently, even in organizations where different genders earn the same salary for the same position, female employees’ average pay typically lags behind that of male employees. Organizations seeking pay equity should reevaluate how much certain positions earn. While male-dominated fields, such as software engineering, correlate with higher-paying positions, forward-thinking businesses must audit their salary breakdowns by gender and reconsider what female-dominated positions should earn.

Prepare for Pay Transparency

Organizations must be prepared to discuss pay, especially as the United States leans toward pay transparency. In fact, one-fifth of all employees will fall under transparency laws requiring companies to disclose salary ranges by 2023. As these pay transparency trends increase, so does the likelihood that employees will want to discuss their salaries. Organizational leadership must prepare for a new era of open compensation conversations and push a culture of compensation transparency, further decreasing the wage gap between genders.

While America has made progress in decreasing the wage gap since 1963’s Equal Pay Act, there is more work to be done. More than half (57%) of Americans believe gender equality has not gone far enough, and 45% say that actual gender equality will look like equal pay in the workplace. To achieve real gender parity, organizations must collectively commit to compensation fairness and transparency. And then the future will look more equitable.

Heather Shoemaker is CEO and founder of Language I/O, a language technology company that enables monolingual (e.g., English-only) support agents to communicate in real time with customers in more than 150 languages. With a background in software development and linguistics, Shoemaker is the mastermind behind Language I/O’s core technology, which eliminates expensive, time-consuming neural machine translation training in favor of dynamically selecting the NMT engine that best translates content while imposing company-specific terminology onto any engine integrated into the cloud solution.