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 organisation 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.

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.

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 organisations of certain sizes, and we’re seeing more countries follow suit.

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 organisation’s pay equity status, there’s no way to establish benchmarks. Without benchmarks, even the most well-meaning organisations 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 organisation 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 analysed 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 analysing pay equity across the organisation. That means there’s no excuse not to take the first step to see where your organisation stands.

Payroll data and analytics

An organisation’s payroll database can serve as the primary source of information to analyse payroll trends and insights across the company, including understanding pay equity. Unfortunately, many organisations lack the knowledge or the tools to analyse 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 organisations did not have a formal process to address pay equity, while 70% did not use salary structures to manage pay.  Another challenge is that organisations may not be capturing sufficient employee payroll data to assess pay equity accurately.

Without data insights that provide transparency into an organisation’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 organisations 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 organisation 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 organisations 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 organisational 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 visualisations, 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, organisations can develop an action plan to remedy the situation. This must involve more than simply adjusting salary structures and pay scales. Organisations should re-examine their talent acquisition, performance management, and learning and development programmes 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 organisation is deeply committed to achieving pay equity  a timeline to get there.

Does your organisation 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 organisations 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 organisation do?

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

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