Research

The Gender Pay Gap: Ask Catalyst Express

Sep 20, 2021

The gender pay gap is a global challenge created by issues involving pay equity (equal pay for equal work) and the representation of women and men at each pay level across an organization. Both pay equity and increasing the representation of women in higher paying jobs need to be addressed to close the gap. While the gender pay gap and pay equity are related, they are not interchangeable. In other words, you can achieve pay equity, but unless you close the representation gap at all pay levels, you will continue to have a gender pay gap.

It’s important to address the gender pay gap because it continues to negatively impact women, particularly women from underrepresented racial and ethnic groups who experience the largest gap. Older women, the definition of which varies by country, also experience a greater gap. Some governments have introduced and passed legislation, such as pay transparency requirements, the prohibition of salary history disclosures, and wage or salary reporting by gender—all with varying degrees of success—to try to close the gender pay gap. While these efforts have been shown to narrow the gender pay gap, a holistic organizational approach is needed to close the gap and keep it closed.

Progress has been slow. It’s time to make good on the promise of and commitment to build inclusive workplaces where everyone is given an equal chance to succeed and earn equal pay for equal work.

Measuring for Change

Measuring for Change is a group of diversity, equity, and inclusion advocates, corporations, academics, and trade organizations that support the adoption and use of a set of key performance indicators (KPIs) to measure gender and other types of diversity in their organizations. The KPIs include:

  • Percentage of representation on an organization’s board.
  • Percentage of representation by employee category.
  • Pay equality: the ratio of compensation by employee category (i.e., equal pay for equal work).

One formula used by Measuring for Change to calculate pay equality is the following:

  • “Equal pay for equal work is the ratio of compensation expressed as a percentage and should be calculated based on the average total compensation (base, incentive, stock/options) and using an appropriate methodology for the groups measured. The formula is for each employee category, with pay equality = (the average total compensation of the underrepresented group / the average total compensation for the majority group) * 100.”

Catalyst Resources on The Pay Gap

Practices
  • Barilla: An Italian Family-Owned Company’s Journey to Global Inclusion Supporter Exclusive
    PAY EQUITY:
    “Barilla had identified gender pay equality as an area of focus as part of its commitment to increase gender equality overall. The company knew that as a first step it had to be able to identify any and all instances of unjustified gender pay gaps—that is, situations in which women with the same roles, number of years of experience, and overall performance ratings as male colleagues were paid less, or in some cases vice versa. After HR knew exactly which employees’ salaries needed to be corrected, the company committed to reduce the gap every year during the standard salary review process.”
    REPRESENTATION:
    “From 2013 to 2020, women’s representation increased in Barilla’s top band (direct reports to the CEO) from 8% to 28%. From 2014 to 2020, women’s representation also increased in the direct reports to the Global Leadership Team (Band 2) from 23% to 36%, while direct reports to senior leaders (Band 3) increased from 40% to 47%. During that period, representation of all women in leadership positions globally increased from 33% to 38%.”
  • Schneider Electric – Attracting and Retaining Women in Schneider Electric India Supporter Exclusive
    PAY EQUITY:
    “Another fundamental concern for Indian women is fair compensation. According to the World Economic Forum, as of 2017, women in India were earning just 62% of what their male colleagues earned for the same work. Schneider Electric India knew that to be truly inclusive it had to address pay equity, so the company implemented Schneider Electric’s global Pay Equity Framework to analyze, on an annual basis, employee compensation and address identified pay gaps. Schneider Electric’s deployment of its global Pay Equity Framework is one of their three commitments as a UN Women HeForShe IMPACT Champion and is also part of its commitment to the Schneider Sustainability Impact index, which is linked to employees’ variable pay. This pay review process is done separately from the annual merit review process, so that employees know that salary corrections are just that: corrections, unrelated to talent or performance.”
    REPRESENTATION:
    “Attracting and Retaining Women in Schneider Electric India has resulted in strong increases in representation: from 2015 to 2018, women’s representation across all levels at Schneider Electric India increased, despite an overall workforce shrinkage of 5%.”
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