What You Need to Know about the New Federal Rules to Close the Pay Gap

executive-order-2016Earlier this year, President Obama announced a new executive order requiring companies with more than 100 employees to report their salaries, along with their sex, race, ethnicity and job group, to the federal government. It’s understandable if the news left you underwhelmed or the significance escaped you. “Remember that politicians campaign in poetry, but govern in prose,” says Victoria Pynchon, co-founder of She Negotiates Consulting and Training. “There’s not much poetry in an executive order that only requires reporting, but it acknowledges the existence of the pay gap, something many people do not believe exists. It’s an important first step.”

“The hope is that when companies are confronted with the data they will move independently to fix the problem,” adds Jay Newton-Small, author of Broad Influence: How Women Are Changing the Way America Works. “The order would also give women and minorities grounds to sue if they suspect, looking at the numbers, that they are underpaid.”

The regulation is an expansion of an already existing requirement for government contractors and “is part of a broader effort by the Obama Administration to work on pay equity issues,” points out Alison Quirk, executive vice president and chief human resources and citizenship officer at State Street. “It’s a complex issue, and while it’s fair to say we’ve seen some improvement in the area of pay equity, there’s still work to be done.”

Here’s more of what these thought leaders say government, employers and individuals can do to address pay equity issues.

GOVERNMENT

Pynchon: “This regulation is the lightest touch possible. It says, ‘we’re not going to fix this by fiat; we’re going to trust government contractors to address the problem when they are forced to make it public.’ History has demonstrated that significant medical cost savings are achieved when legislators simply debate government regulation of health care. That’s not just shame [as Jay Newton-Small notes below], it’s also a defensive maneuver to prove to government that industry can be trusted to self-regulate and thereby avoid government control.”

Newton-Small: “There are several countries that have addressed this issue successfully, which we could look to as models. The best I found was Australia’s Male Champions for Change, a public-private partnership founded six years ago. The government publically challenged the largest companies in Australia to transparently report how many women they were recruiting, training and retaining—not to mention paying. President Obama could take his executive order one step further and issue a public challenge to companies to set goals and prove they’re meeting them. In Australia, having such a high profile program has helped shame companies not meeting their goals and given PR boosts to those that have. Something similar could easily be done here in the U.S.”

EMPLOYERS

Quirk: “To start, employers can join initiatives such as the one led by the Boston Women’s Workforce Council, called the 100% Talent Compact. Signatories agree to do three things: assess their own data to see if wage gaps exist, take steps to address those gaps and provide data through an anonymous, secure process to aid in assessing progress for the city as a whole in eliminating the wage gap.”

Pynchon: “As a former corporate litigator and trial lawyer, I can predict that the risk management and legal departments tasked with compliance will see alarming pay gaps much like those that followed the hacking of SONY computers—the public disclosures from that event revealed shocking pay gaps between male and female leading actors. Demands by high-profile women quickly followed and I’m certain a few lawsuits will arise out of the debacle. I’d recommend to government contractors who are similarly exposed that they pay particular attention to management’s gendered excuses for the inequities that come to light. If the reasons proffered are subjective—‘she just didn’t seem as motivated when she returned from maternity leave’—that’s evidence of implicit bias seeping into their compensation structure. This gives them the opportunity to root the evil of bias out of their corporate culture before someone sues them for gender discrimination.”

INDIVIDUALS

Quirk: “I believe very strongly that this is a talent management issue. Whether or not employers take up the mantle, individual managers can certainly make a difference. I always say that managers have ‘a thousand moments of truth’ every day. They make decisions about who to hire, who to promote, who gets a pay raise or bonus, who gets coaching and feedback…the list goes on. Understanding that we all have unconscious biases, managers must try to look objectively at their teams and isolate the factors that truly matter in their work unit.”

Newton-Small: “Call out your employers. Two female employees at Salesforce challenged their CEO, Marc Benioff, and he accepted the challenge, believing he didn’t have a problem—like most CEOs in America. He found disparities amongst his 17,000-person workforce, and he increased wages by $3 million annually. It’s only by shining a light that problems come to the fore and can be fixed. And in this instance, all it took was two women to make a difference.”

Pynchon: “I urge all women in all job categories and all industries, public and private, to learn their true market value. Research your job classification at glassdoor.com, payscale.com or salary.com. Robert Half reports, which are likely more reliable than the self reports at the other sites, are also available online. Approach your employer with the revenues you drive or efficiencies you create. Then negotiate for market compensation. But please do not do so blindly. There are many helpful resources online for women now, and, of course, I recommend the free resources we’ve posted at She Negotiates. If you’re in the six-figure realm, you really ought to hire a consultant. We help women get raises between 20 to 40%, not because we’re geniuses, but because that’s the pay gap. We’re just helping women close it one by one.”


▶ Read more from the March 2016 newsletter.