How to Ensure Pay Equity for People of Color

Global HR

​Jackson National Life Insurance Co. last year agreed to pay $20.5 million to settle claims that it discriminated against Black female employees who were paid less than their white colleagues and were passed over for promotion in favor of less-qualified white males.

The settlement was the result of a lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC) on behalf of 21 employees in Jackson’s Denver and Nashville offices.

The company allegedly also tolerated a hostile work environment in which Black female employees were called “lazy” and “resident street walkers,” according to an agency statement.

“We hope that the results in this case will send an important message to the financial industry that race and sex harassment and refusing to promote and pay employees based on sex, race or national origin are illegal and will not be tolerated,” EEOC Phoenix District Office Regional Attorney Mary Jo O’Neill stated in a
press release at the time.

Company spokesman Patrick Rich said, “Jackson does not tolerate discrimination or harassment of any kind.” While noting that there was no finding of wrongdoing, he called the employee allegations “concerning” and “not consistent with who we strive to be.” 

“This experience provides an opportunity to reaffirm our commitment to our core values, enhance our policies and practices, and continue to make Jackson a great place to work,” he added.

The Jackson case is indicative of a larger, national issue that people of color face. For every $1 paid to white men, Black men earn 88 cents and Black women receive 76 cents, according to a recent
survey by PayScale, a U.S. compensation data and software company. 

Even when the data is adjusted to account for similar education and experience levels, Black men receive 98 cents and Black women receive 97 cents for every dollar paid to white men. Over a lifetime, these differences add up to hundreds of thousands of dollars.

“Our research into the racial wage gap shows us that racial bias is alive and well in the U.S. workforce,” wrote the authors of the PayScale report, The Racial Wage Gap Persists in 2020.

Last year’s protests against police brutality and systemic racism prompted more employers to pledge to work toward greater racial equity and fairness by scrutinizing their internal policies and practices, including their compensation methods.

“We’re at the tip of the iceberg,” and pay disparities are getting noticed, says Kellie McElhaney, founding director of the Center for Equity, Gender and Leadership and a distinguished teaching fellow at the Haas School of Business at the University of California, Berkeley. “If you’re not on it, you’re already behind.”

HR departments can play a critical role in advancing pay equity within their organizations.

“I see the human resources function as the exact right [position] to drive the conversation,” says Stephanie E. Lewis, a lawyer in the Greenville, S.C., office of Jackson Lewis. “Employers are really committed to pay equity. The racial justice movement has put a spotlight on how race impacts the pay gap.”

Deep Roots

Pay disparities reflect deeply rooted racism in U.S. society, experts say. 

Even as the U.S. Census Bureau projects a minority majority by 2050, white males generally dominate the upper echelons of the pay scale, leaving workers of color behind. 

Economic Policy Institute (EPI) studies show that “Black-white wage gaps are large and have gotten worse in the last 20 years,” EPI economist Elise Gould wrote in a
blog post last year. “Even Black workers with an advanced degree experience a significant wage gap compared with their white counterparts.” 

That slow progress and the United States’ bloody legacies prompt a fundamental question when the issue of pay equity and race is broached: How can the U.S. value the work of people of color if it doesn’t value people of color?

Social justice movements have parked the issue of racial equity on Main Street, jammed it into corporate board rooms, and pushed it onto state and federal legislative agendas. Business leaders show increased recognition that the pay equity issue intersects diversity, inclusion, transparency and opportunity gaps. New software can help measure and analyze the impact of their company practices. 

The new administration is expected to focus on workplace equity issues. President Joe Biden has indicated that closing wage gaps and ending paycheck discrimination will be priorities. 

Along with civil unrest, renewed calls for transparency are having an impact.

“Employers are committed to making sure that employees are paid equitably because it’s the right thing to do, because they’re getting shareholder pressure to do it and because the states are requiring them to do it,” says Cheryl Pinarchick, regional managing partner at Fisher Phillips law firm in Boston. “It’s going to take time, but it’s going to happen. We started with pay equity for women sort of coming out of the #MeToo movement. We’ve seen a huge social justice movement that has exploded, and I don’t see that slowing down.”

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Unconscious Bias

Experts point to bias as a leading cause of pay inequity. Not the hood-wearing, cross-burning prejudice witnessed at white power marches, but the unconscious bias everyone harbors. It shows up as stereotyping and snap judgments that surface when dealing with people we don’t know and favoritism and good feelings that emerge for those we’re familiar with. Workers of color can sense this type of prejudice.

“You’re
tolerating me, not accepting me,” says Bridgette Wilder, SHRM-CP, chief human resources officer at Albany State University in Georgia. She serves on the Society for Human Resource Management’s Special Expertise Panel for Ethics/Corporate Social Responsibility & Sustainability and on the Forbes Human Resources Council. “For example, if you’re having a party at your home and invite some work colleagues, do you ‘add’ me to the party list because it would look better to have some diverse colleagues, or do you ‘include’ me because I have something of value to add?” 

Wilder started out in business as a software specialist and was often the only Black person in the office. She didn’t give much thought to pay equity because “you just feel privileged to have an opportunity to be there,” she says, “and, from a cultural perspective, you’re told you don’t go in complaining. Just be glad you got a job.”

But thankfulness has its limits, as Wilder discovered when she joined a staffing firm’s HR team, focusing on client relations and recruiting talent for administrative and professional assignments. She says a flirtatious white male client asked her to send a “front-line secretary” who looked like what he imagined she looked like—a white woman with blonde or brunette hair and blue eyes. 

“Don’t send me a jungle monkey,” he said. Wilder told her white female boss about the racial slur, and the response was “Send him what he asked for.” That’s when Wilder knew it was time to leave. 

She says those formative years in 1970s Birmingham, Ala., quickly taught her that race and color “played a factor in how you were perceived, treated and paid.”

The Value Proposition

But the equity issue goes beyond money, experts say. Certainly, the differential is important, but how and why it happens can be the result of workplace intolerance, an unfriendly environment and a lack of advancement opportunities—obvious and covert factors that can cause people of color to doubt themselves and their abilities.

“It’s sort of a people-of-color tax; some call it a Black tax,” says Eric M. Ellis, president and CEO of Integrity Development, a diversity and inclusion consultancy in West Chester, Ohio. “Even in the consulting world, one of the things that hovers over your head is a constant questioning of worth and value.”

Ellis thought his fledgling business in metropolitan Cincinnati was doing fine—until he found out he likely wasn’t getting paid what his services were worth. “I was probably undercharging and always nervous about my fees,” he says. “About five years ago, a competitor of color let me know some of my white counterparts were charging three to five times more.”

Ellis, who eventually raised his fees, says it can be hard for people of color to know whether they’re being paid equitably. “You don’t know what you don’t know. It’s the same with women looking for a fair amount. We don’t even know we can negotiate, [so] part of the oppression is somebody might ask what you think you’re worth. You can say no to the smaller checks, but [then] you might not be working.”

A lack of opportunity, also known as the opportunity gap, can be as devastating to a career—and salary—as a confidence deficit or reporting daily to a toxic workplace. And it’s another factor that can widen the pay gap, suggests David Gabor, a partner with the Wagner Law Group in Boston.

“If I hire somebody who’s a person of color in an entry-level position and there’s no opportunity to advance to a [midlevel], upper-level or leadership position, then I’m not doing anybody any favors,” Gabor says. “I’m hurting the individual, I’m hurting the community, I’m hurting the business.”

On the other hand, by rewarding people for working hard and giving them a fair chance at promotion, “you’re sending a message to other people inside the company,” he says.

Susan Alban, chief people officer for Renegade Partners in Menlo Park, Calif., says, “Ultimately, fairness in pay is foundational to an employer’s relationship with its employees. Fixing it is imperative to eliminating systemic racism, sexism and mistreatment of other underrepresented or marginalized people.” 

Joyce Weru worked in several HR positions before deciding to become her own boss as an HR consultant. As a Black woman, she was tired of being relegated to the sidelines.

“My recommendations were completely overlooked,” says Weru, founder and CEO of Rise Above Coaching in Capital Heights, Md. “The microaggression was completely unacceptable. I was like a ghost in the room.” 

As a consultant, she still has to deal with the same behavior from some clients, though she feels that starting her own business was her best chance to close the pay gap. “It’s an uphill battle, always trying to explain and prove yourself,” says Weru, who came to the U.S. from Kenya as a teen in 2000. “There’s this unspoken stigma that we deserve less and should feel privileged to be in the U.S.”

Trouble Spots

In addition to overcoming the pressure most employees feel about mastering their jobs and fitting into the organization’s culture, many people of color are also trying to prove their worth—while tolerating constant slights by insensitive white colleagues. These spoken and unspoken insults are frustrating and weaken efforts to promote issues of diversity, equity and inclusion.

Larry Curley, a member of the Navajo Nation and a former tribal administrator, says his business relationships improved when he began wearing a suit and tie and cut his traditional hair bun. “They started listening because now I looked like them,” says Curley, now executive director of the National Indian Council on Aging.

Ramiro Cavazos experienced cultural bias firsthand shortly after becoming president and CEO of the United States Hispanic Chamber of Commerce, a national Latino organization representing more than 4 million Hispanic-owned businesses. He was networking at a Washington, D.C., event when he was introduced to an executive in the energy industry.

“I said, ‘Hey, nice to meet you,’ ” Cavazos recalls. “He asked me, ‘What’s your name?’ And I said, ‘Ramiro Cavazos.’ And without skipping a beat, he says, ‘Do you have an English name?’”

Cavazos is not the only person to have fielded a question like that. “Some people change their name on their resume so they can get in the door for the interview,” he notes.

He believes a more diverse body of decision-makers will make a difference. “If you put people in positions of power that reflect the community, they will do a better job representing that community,” he says. “If we don’t treat women equal to men, it creates a cascading effect of negatives for African-Americans, for Latinos, for Asians and for Native Americans because we’ve already affected 50 percent of the population by not providing equity.”

Closing the Gap

HR professionals play a unique role in resolving disparities in compensation, especially since closing the pay gap is essential in recruiting and retaining the best talent, enhances job satisfaction and increases loyalty.

More than half (56 percent) of organizations don’t have a formal process in place to address pay equity, and 70 percent don’t use salary structures to manage pay, according to Salary.com’s
2020 Pay Practices and Compensation Survey.

To address pay inequities, HR professionals and other experts suggest the following actions:

Get buy-in from the C-suite. When you meet with company leaders to present the problem, be specific about how inequity impacts the business and culture, recommends Albany State University’s Wilder. Then, provide a solution and show what the company’s return on investment will be if it addresses the inequity issue.

Conduct a pay audit. Examine your employee base and perform an analysis to help you understand the size of the pay gap and how it breaks along gender and racial lines, promotion, attrition, and performance, advises Alban at Renegade Partners. 

Create a system that constantly collects data on a timetable that works for your organization. If necessary, consult with an advisor or use software designed to conduct the analysis.

Work smart. Commit to multiple strategies to remedy the inequities and set aside about 2 percent of your budget for pay raises at the end of the audit, says Laura A. Mitchell, a lawyer with Jackson Lewis in Denver.

Stop asking for pay history. Past pay doesn’t reflect the value that candidates bring. Salary history can be influenced by many factors, such as poor negotiation skills, prior pay inequity and changes in career paths. Instead, focus on the value of the candidate’s skills and experience and how it compares to that of people in similar roles in the organization, Wilder says.

Look through a diversity, equity and inclusion lens. Scrutinize your diversity landscape from top to bottom to get an accurate picture of your organization’s diversity, equity and inclusion efforts. Assess racial, ethnic and gender representation in different job groups and at different levels, Wilder says. 

Measure the number of underrepresented employees in formal mentoring programs who get promoted. Determine whether your organization provides equal access to special projects and opportunities to learn on the job, she advises.

Find out if diverse groups of employees are included in high-visibility work, are exposed to top executives and managers, and are included in publicity about company achievements, Wilder recommends.

Practice transparency. While almost one-third of U.S. companies agree that a primary objective of pay equity programs is organizational trust, company leaders tend to share findings with senior leaders and people managers but not the larger workforce, according to a
2019 survey on pay equity practices conducted by total rewards association WorldatWork and pay consultancy Korn Ferry.

Talk about it. Get to the root cause of the inequity. Make discussions on bias—especially how to neutralize bias when setting salaries—part of your company culture and employee training.

Limit manager discretion. Managers are often given a lot of freedom or authority to make decisions about team members’ pay. Some employers are considering limiting or eliminating that discretion because it introduces bias into the equation. Training can also help. 

“Unconscious-bias training for managers can help them recognize how their own biases and experiences may be coloring their decision-making around hiring, opportunities for growth within the organization, compensation and promotions in ways that have unintended consequences,” Fisher Phillips’ Pinarchick says.

Whatever solutions are employed to bring pay parity to people of color, HR professionals will play a central role because of their expertise on people and company culture.

Notes Mike Boro, who focuses on HR compliance for PricewaterhouseCoopers in New York City: “HR can put in guardrails and guidance to make sure that the culture is positive and reinforcing the true values of the organization.”  

Michael A. Tucker is a freelance writer based in Alexandria, Va.

Pay Audits Are Key

Audits play an essential role in pay equity initiatives and compliance, says Elizabeth Wylie, a lawyer with Snell & Wilmer in Denver.

“In the absence of a thorough audit, an employer’s claims to support pay equity may ring hollow,” she says.

An audit affords employers the opportunity to examine and document various circumstances that may justify pay differentials. The cost of correcting pay inequities will likely be outweighed by the benefits of reducing litigation risk and increasing employee morale, Wylie says.

Allison Hoeinghaus, a managing director with consulting firm Alvarez & Marsal Taxand’s compensation and benefits practice in Dallas, suggests starting with a diagnostic review of payroll data to identify irregularities between gender or race. HR should work with internal and external legal counsel to protect attorney-client privilege arguments and shield the company from litigation if word gets out within the organization that an issue exists, she suggests. 

The first step for any successful pay audit is to identify goals. “In some cases, it may be that your company is trying to limit your legal risk,” says Cheryl Pinarchick, a lawyer with Fisher Phillips in Boston. “In other cases, your company may simply want to ensure that you’re paying employees equitably.”

Where pay differentials can’t be justified under federal and state law, employers should take steps to remedy the discrepancy. “In most instances, this will require the employer to make adjustments to compensation,” Pinarchick says.

While pay audits are a great tool, they shouldn’t be an employer’s only plan to combat pay inequities. “Corrective actions and preventive measures to avoid issues in the first place must be part of the holistic approach to pay equity,” Hoeinghaus says. “Also, these efforts should be coordinated more broadly with diversity and inclusion initiatives within an organization.”

On the federal level, Title VII of the Civil Rights Act of 1964 prohibits wage and other discrimination on the basis of race, color, sex, religion or national origin.

In recent years, many state and local governments have passed pay equity legislation. Pinarchick notes some trends:

  • States are limiting the lawful justifications for paying employees differently when the employees perform comparable work.
  • In addition to covering gender pay equity, states are expanding equal-pay laws to cover race, nationality and other protected categories.
  • Many state laws have pay transparency provisions that make it unlawful for employers to prohibit employees from discussing their pay.
  • Many states and cities prohibit employers from asking job applicants about their salary histories.

Colorado, Massachusetts, Oregon and Puerto Rico provide safe harbors against liability when pay audits are conducted according to the law and reasonable steps are taken to address any potentially unlawful pay disparities.

—Lisa Nagele-Piazza, J.D., SHRM-SCP

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