Long gone are the days when employers could simply dole out salaries and pay rates without a plan to ensure that workers are compensated fairly regardless of their gender, race, age or other protected status.
The Equal Pay Act of 1963 mandates equal pay for equal work. Over the decades, most states have passed their own laws prohibiting wage discrimination. And some states and municipalities are taking it a step further by enacting salary history bans that prevent employers from asking job seekers about the wages they’ve earned at previous jobs. The goal is to ensure that salary offers align with a job candidates’ abilities and a job’s responsibilities, not past earnings that may be lower because of their gender or race.
Yet wage gaps persist, including in construction. According to the U.S. Bureau of Labor Statistics, female construction managers in 2020 earned 86% as much as their male counterparts. In the construction and extraction occupations, which includes electricians, brickmasons, carpenters and other laborers and trades, women earned 87% as much as men.
And these days, the consequences of flouting the laws are growing. The number of Equal Pay Act claims has shot up in recent years, according to the Equal Employment Opportunity Commission, and those numbers are expected to increase. What’s more, for construction companies that work on federal projects, experts forecast a “renewed focus” on pay discrepancy claims from the Office of Federal Contract Compliance Programs.
For these reasons, it might be time for construction companies to launch a pay equity audit. “It’s the cost of doing business, unfortunately,” said Elliot Dinkin, president and CEO of Cowden Associates, a business management consultancy. “Good times or bad times, people go after companies.”
What are pay equity audits?
Compensation practices can veer off track for any number of reasons. Women often negotiate less than men, so they may automatically join a company earning a lower rate even with the same experience. Across a company, hiring managers may have different levels of autonomy, and their supervisors may have different pay practices or philosophies.
“If there’s not a lot of standardization or formality around the process, you can start seeing a lot of disparities between roles and new hires,” said Jessica Lambrecht, founder and CEO of The Rise Journey, a human resources and organizational culture consultancy that offers pay equity audits.
Pay audits provide a holistic look at how companies are paying their workers. “The idea is that I’m paying the correct amount for the job or position, not who is filling it,” Dinkin said.
During a pay audit, companies look at the earnings of employees who have similar responsibilities, job titles, experience and education. From there, they identify any pay inconsistencies and determine if they can explain why there’s a difference and whether they’re in compliance with federal and state compensation laws. Then, they can take steps to resolve whatever discrepancies the audit turned up and develop policies to prevent them in the future.
Tips for conducting a pay equity audit
Pay audits can raise plenty of questions and stress in the workplace. “Especially in today’s climate, nobody wants to think that they made decisions that were discriminatory or unfair,” Lambrecht said.
Here are three ways to ease into a pay equity audit to curb some of that tension.
Look for outside help
Dinkin often recommends that companies turn to legal counsel to conduct the audit. When working with a lawyer, if an audit does uncover issues that need to be corrected, the information may be protected, thanks to attorney-client privilege. “If I find something in my proactive audit, I don’t want it to be discoverable by the federal government, Department of Labor or a lawsuit,” he said.
If you don’t go the legal route, Lambrecht recommends hiring a third party for the job unless you have a human resources professional on staff who is familiar with best compensation practices. “It’s a big task for someone, especially if they have not done one before,” she said. A neutral third party, who wasn’t involved in the original pay decisions, also can provide more integrity to the process.
Make it transparent
Transparency is key, Lambrecht said. Be upfront about what you’re looking for, what the potential outcomes will be and timelines, she said. Be sure to provide constant updates. “We’ve seen some teams that are really stressed out about the process and a lot of it could have been avoided,” she said.
Stay on top of it
Major pay equity audits that identify any issues and develop policies to prevent them in the future may only need to be done once. “The intention would be to make changes and create that guidance,” Lambrecht said.
But employers must still monitor pay to ensure they’re in compliance with pay discrimination laws. “Internal reviews should be done periodically, probably annually,” Dinkin said.
‘Right thing to do’
While the threat of legal claim may be all some companies need to take a harder look at how they pay their people, fair pay also is critical for hiring and retention, Dinkin and Lambrecht agreed. And in an extremely tight labor market where companies are competing for talent, evidence that employers have fair pay practices can only help with the hiring process. That’s especially true in an industry like construction that’s still struggling to bring more women on board.
“It’s the right thing to do,” Dinkin said. “So, if you’re looking through your risk lens, and you’re trying to make sure you attract, retain and motivate people, you really don’t want to have this aura out there that your pay practices look to be discriminatory.”