5 Steps to Analyze Pay Equity for Financial Services
How FinServ and FinTech Brands Can Fast-track Pay Equity
Pay Equity Is Within Your Control
Research shows that financial services organizations are farther behind on closing the pay gap than almost any other industry. This hurts not only because of the potential risk of expensive, brand-degrading lawsuits, but also because gender and racial pay equity are critical for attracting, engaging, and retaining top talent.
And the sooner you start, the less it will cost you.
"Because of the compounding effects that pay equity issues have over time, it will never be cheaper to fix than it is today. We estimate each year an organization waits to tackle the issue — or tries to tackle it but fails — will increase the cost to the organization by roughly half a million dollars …" (Gartner / Addressing Pay Equity, December 2019)
The good news is that pay equity is more within reach for financial services companies than ever before.
This guide will help you understand how to:
- Run an airtight pay equity analysis optimized for financial services
- Take action on your pay equity analysis results
- Proactively prevent inequity on an ongoing basis using pay equity software
The Goal: Equal Pay for Equal Work
You’ve probably heard the oft quoted statistic that women earn 81.6 cents for every dollar earned by a man. It’s even worse in the financial services industry, where the average hourly wage for male workers is $40, compared to $27 for female workers. That means women earn a mere 67.5 cents on every dollar earned by a man in the finance sector.
When you analyze the pay gap, you compare the average pay between two groups, such as all male employees to all female employees.
When you analyze pay equity, you zoom the lens in further to compare the pay of individuals in two groups of people doing substantially similar work to determine if there’s a statistically significant difference in their pay.
Are female bank tellers paid less than male bank tellers doing the same work? Or among your bank tellers, are employees of color being paid the same as white employees?
Steps to Find, Fix, and Prevent Pay Equity Issues
You know you want to work towards fair pay for all employees, but where do you start? What does a pay equity analysis look like? Who should be involved in the process?
Many financial services and FinTech organizations believe they can perform a pay equity analysis themselves, using their own analysts or data scientists. While bringing pay equity in-house is the exact right instinct, it’s important to remember that pay equity is not only a math problem, but a legal and human resources one as well. It’s by combining legislative expertise, data science mastery, and employee savvy that you’ll achieve your pay equity goals. Below we explain how.
These steps will help you assess whether you have statistically significant pay differences among employees performing similar roles.
1. Engage internal stakeholders
Pay equity is a commitment — and potentially sensitive. Ensure your senior leaders are on board and aligned on the organization’s pay equity plan and expectations. It’s also important to enlist support from your legal, compensation, IT/security, and Diversity & Inclusion (D&I) teams, who will play an important role in helping you execute short- and long-term goals.
2. Group employees doing substantially similar work
Pay equity is about equal pay for equal work, or more specifically: “comparable” or “substantially similar” work. To create groups of employees doing substantially similar work, consider skill, effort, responsibility, and working conditions.
For example, you may bundle most of your financial advisors (personal trust, alternate investments, and asset management) into the same grouping. However, you may separate out Wealth Management advisors due to a special skill set, or apply a specific job-related control (more on that in #3).
There is usually more than one possible grouping schema, so consider different options For instance, instead of including your Cyber Security employees in your Information Technology group, you may decide to move them to their own group, as their work is substantially different from the rest of the IT roles.
3. Control for job-related factors
Once you set your groupings, apply controls. A control reflects your pay policies and is used to justify differences in pay, even for individuals doing the same job.
While “groupings” focus on which employees should be compared to each other, “controls” focus on what’s different about those employees that would explain why some people are paid more than others.
But keep in mind: you can’t use controls for any old reason. According to regulations, they must be objective, job-related factors that directly measure characteristics of an employee or their role and that you’d use to differentiate pay. This may include hire date (seniority/tenure), location (city, state, facility), educational attainment, manager status, and years of relevant experience. But more importantly, controls should reflect your stated pay policies, which have been designed to achieve your business objectives.
To learn more about how to optimize pay policies, read our guide.
4. Watch out for subjective factors
Pay equity laws at the federal and state levels don’t merely protect one race, one gender, or certain ethnicities. The laws require that employees are paid without regard to these protected classes. This means that, with a few exceptions, employees don’t have to be in a historically disadvantaged group to bring forth a lawsuit.
Work with your legal counsel to determine which protected categories you want to analyze. This will depend on both location (which state laws apply to your employees) and business goals (how much you want to lean in to pay equity to align with your brand values.)
And take note: even if you’re planning to remediate salaries only based on gender, it’s valuable to also analyze race, ethnicity, and any other comparison you have in your HRIS data at the same time to understand broader inequities.
Once you complete your pay equity analysis, work with HR and the Compensation team to remediate salaries. And be transparent — with leadership, employees and (when you’re ready) the public.
When you communicate effectively about your pay equity actions, it has the power to boost retention, performance, and employee satisfaction; and it even enhances your brand with customers and prospective candidates.
“More than half (58%) of employees would consider switching jobs for more pay transparency, and for Gen-Z, the number jumps to 70% — a clear indicator of a greater need for transparency, especially for employers hoping to attract and retain young talent.” (Inc. / New Report: Pay Transparency May Be the Key to Keeping Your Employees in 2021, February 2021)
Sustainable Pay Equity: Prevent and Maintain
Who says pay equity only happens once a year? Leading FinServ and FinTech brands use always-on software to assess and address pay equity — any time they need to. Mid-year comp cycles, lay-offs, and M&A are all important events that trigger companies to take another look at pay equity.
The longer pay inequity sticks around, the wider the gaps tend to grow and the more costly they are to resolve. That’s why the most advanced brands assess pay equity 2-4 times a year. With this approach, they significantly decrease time out of compliance and lower overall remediation fees.
Interested in pay equity analysis software for your financial services organization?
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Syndio's mission is to empower employers to eradicate unlawful pay disparities due to gender, race, and ethnicity and make ongoing compensation decisions informed by fairness and equity data. Syndio customers drastically reduce legal risk, saving millions in ongoing remediation and create a positive brand reputation, which helps attract and retain top talent at every level of the business. Syndio is proud to partner with brands who are leading the way in equity and setting the standard for workplace fairness.