According to 2017 legislation, this April marks the deadline for all UK companies with over 250 employees to release their wage data to the public. The #PayMeToo movement is well underway, and while it’s past due, it’s finally making visible progress. Without similar legislation keeping US businesses transparent, we’re here to offer some insights and solutions to the pervasive and long-overlooked gender wage gap.
In light of National Equal Pay Day, Zenefits examined data from over 1,000 employees and owners of Small and Mid-Sized Businesses (SMBs), defined as having 11-500 employees. The results of this nationwide survey found an alarming 34% gap in pay between men and women — about 18% greater than the national average. Women working at companies with fewer than 500 employees are self-reporting earnings that are 66 cents —vs a national average for women of 80 cents— on the dollar to men’s average pay.
Perhaps even more alarming than the gender wage gap, however, is the extreme discrepancy in perception between what the owners and HR leaders of SMBs feel they are providing (in terms of compensation and workplace experience) versus what employees feel they are getting. This is a large contributing factor to the wage gap.
It seems the better that small business employers think they are doing, the worse their employees judge their efforts. An overwhelming majority of employers believe their employees are satisfied with the company efforts at compensation, hiring, development, diversity, and culture. However, less than half of employees agree. In summary, employers think they are doing twice as satisfactory a job as their employees think they’re doing.
There is also a negative correlation between perceived success of equal pay and the reality of equal wage data. This means the better ratings employers gave themselves regarding fair pay of their employees, the worse they were actually doing in terms of equal wages.
For example, in the Midwest, 91% of small business owners give themselves a good rating for practicing equal pay practices. In reality, this region has the widest pay disparity in the country at 43%.
The perpetuation of this wage gap happens for multiple reasons, but one of the largest problems is outlined in the graph below. Without funds to access large, robust sets of benchmarking data, small and midsize businesses often use a variety of unreliable sources and systems of guesswork that can leave room for inherent biases:
The good news is that almost a quarter of the participating companies use external, and therefore more objective, data for determining salaries.
However, one-third of the respondents primarily use the new hires current salary to determine their offer. Though this has been a long-standing practice, it only perpetuates the current wage gap. Furthermore, as of 2018, asking an applicant his or her current salary is actually illegal in some states and cities across the US.
As of January 2018, four states have passed state laws banning employers from asking about current salary or pay history. These states have also been joined by a number of cities which have instituted rules to keep employers from asking the same question. Additionally, the territory of Puerto Rico joined this group in March 2018.
The reason? For those who have been long underpaid, there will be no objective standard to correct compensation, and this typically results in a minimal increase from the already-behind salary base.
These discrepancies are then muddled by the lack of internal communication regarding compensation, leading to further dissatisfied workers.
Want to learn more about developing legislation in your state? Download our eBook to get the full look into the gender wage gap, the new laws surrounding the problem, and 4 straightforward steps to fix the problem in your company: