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Payroll

Can Pay Transparency Erase the Gender Pay Gap?

A related PayScale survey found that employees have their own bias, as most tend to believe their workplace does a better job than other companies at providing equal opportunities for men and women.

Jan. 23, 2020

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New research shows the pay gap vanishes for most jobs when companies adopt more transparent pay practices. The report, called Does Pay Transparency Close the Gender Wage Gap, was commissioned by PayScale, Inc., a provider of compensation data and software.

The research focused on whether increased pay transparency could mitigate the unconscious bias of managers and HR leaders who set compensation. In addition, a related PayScale survey found that employees have their own bias, as most tend to believe their workplace does a better job than other companies at providing equal opportunities for men and women.

“This latest research shows just how powerful transparent pay practices can be for organizations,” said PayScale CEO Scott Torrey. “When employers use real market data and talk openly with employees about their pay, it serves to challenge the underlying bias that can impact decisions about compensation. Most employers want to ensure they’re paying fairly, so we encourage HR departments and senior leaders to adopt transparent pay practices as an important step toward achieving this goal.”

In this study, PayScale examined the ‘controlled’ pay gap, a comparison of pay for men and women doing the same job in the same geographic location, same experience, education, etc. This approach shows women earn 98 cents for every dollar earned by men. When a two percent difference in pay is compounded over the course of a career, it adds up to a woman taking home significantly less pay than her male peers. However, when employees said they have a transparent pay process at their company, women were estimated to earn between $1 and $1.01 for every dollar earned by men — effectively erasing the gender pay gap.

While transparent pay policies neutralized the gender pay gap between men and women doing the same job across most jobs, a few areas in the talent market proved to be more resistant to achieve pay equality:

  • The gender pay gap persists at the director and executive level – Transparent pay discussions appear to have the largest impact for individual contributors, supervisor and managers. By contrast, female directors and executives still faced discriminatory pay penalties for their gender, however, the gender pay gap is diminished with transparent pay practices.
  • All industries benefit from a transparent pay process, but some benefit more than others. While all industries show a marked reduction in the gender pay gap with respondents who work in a pay transparent organization, the wage gap did not completely disappear in a few select industries including Accommodation and Food Services, Retail and Customer Service, and Transportation and Warehousing.
  • Male dominated occupations still showed a gender pay gap – Jobs that continued to reflect a pay gap even in organizations with transparent pay practices were most prevalent in Food Preparation and Serving, Installation, Maintenance and Repair jobs, Production occupations, Protective Services and Sales.

Related PayScale research on the gender pay gap, entitled Equal Opportunity in the Workplace: Their Problem, Not Ours, shows that employees themselves are reluctant to believe they work for a company that does not provide the same opportunities for women as for men. More specifically, the research shows that 63 percent of men and 34 percent of women felt there were equal opportunities in most workplaces. However, more employees, 76 percent of men and 52 percent of women, felt there were equal opportunities for advancement in their own workplace. This research shows that employees also have a bias about their own career advancement relating to gender pay which can also be addressed with more open practices around career pathing and compensation.

PayScale recommends training managers and HR departments have open and ongoing conversations with employees about compensation, using real time market data to show how their pay was determined. For more information about the report Does Pay Transparency Close the Gender Wage Gap?, visit http://payscale.com/data/pay-transparency.