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Equal Pay Act and the Pay History Question

The U.S. Equal Employment Opportunity Commission has recently made complaints over pay discrimination which has become a larger focus within their work. The Equal Pay Act requires organizations to pay equal wage amounts to employees in similar positions with similar experience, skills, and abilities. Additionally, several state and local governments are banning questions about a candidate’s pay history as this can tend to reinforce pay gaps that already exist. EctoHR has always believed that a candidate’s pay history is less relevant than the amount he or she is specifically targeting with a new employer and the applicable pay level the potential new employer is willing to pay.

The Equal Pay Act requires that employees be given equal pay for equal work in the same establishment, regardless of gender. The Act states that “The jobs need not be identical, but they must be substantially equal. It is job content, not job title, that determines whether jobs are substantially equal.”

In the past 18 months, many local and state governments have banned questions about a candidate’s pay history because this perpetuates the pay gaps that already exist between men and women, people of color, and other protected factors. Most people would agree that an employee who is grossly underpaid in his or her current job should not receive an employment offer that is less than other candidates with similar experience simply because he or she is undervalued by his or her current firm. EctoHR has always operated under the belief that a candidates’ current pay is not the primary factor in salary negotiation. The most important factors are the candidate’s requested or desired salary and the Company’s budget or salary range for the position.

If an organization has a concern over its pay structure and potential gaps between genders, a quick self-audit on Pay Discrepancies can be conducted by creating a blind spreadsheet, grouped by position type, that shows years of experience, any special skills, and any specific or varying job duties. The spreadsheet should have employee names removed so that hiring managers can critically review the data for any outliers and then move on to analyzing potential business reasons as to why there may be a gap. In some cases, employers may find that the gap is due to a legitimate business reason. In other cases, the gap is simply based on a lower than normal starting wage rate. Companies can subsequently implement a plan to correct the pay gap over a pre-planned period of time.

Understanding the Equal Pay Act and creating a self-audit is essential when working toward fairness between salaries. By creating a system that rewards employees for their skills, abilities and experience while avoiding any pay bias based on other factors, employers will be more successful in their recruiting and retention efforts. For more information on how EctoHR consults with clients on compensation and Equal Pay Act compliance, contact the EctoHR professionals at 810-534-0170.

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