Terminology Around Pay: How to Make Sense of it All

There are a lot of hot phrases right now around pay. With all the different terminology, it is difficult to keep everything straight. Are the various phrases the same? Are they interchangeable? Do they refer to the same thing? It is difficult for those of us in the HR profession so just imagine the confusion between leadership and employees. It is important to partner with a trusted advisor to dig into the data, but it is just as important to be able to have a conversation with those that need to understand the terminology. Why? Because it is everywhere we look. A lot of people are using it, writing it, reading about it, and saying it. It is important because you do not know what you do not know. Should you be looking into any of the areas further? Should you be evaluating your current compensation strategy? If you do not have a strategy, is it time for you to put one into place that aligns with the organization’s compensation philosophy?

This is just a high-level overview of the terms we continue to read and talk about. This does not cover the details of best practices.

Pay Transparency

Pay transparency is the employer practice of disclosing information about employee compensation standards to others internally and externally. It is described as a spectrum on which employers can choose varying degrees of transparency based on state and local mandates or their own pay strategy.

Laws differ from state to state. Some require publishing pay ranges for all open positions while others require employers to provide the pay range by the time of the final interview or upon request by the applicant. Other states have opted to require businesses to file annual reports showing company wages broken out by race, gender, ethnicity, age, and other categories.

Pay Equity

Pay equity is the concept that equal work deserves equal pay no matter the person, race, gender identity, or age. Equal pay for equal work has been legislated since 1963 with the Equal Pay Act. This concept goes back to one of the most basic ideas of equality: If two people perform the same work, they should receive the same pay.

Pay Equality

The concept of equal access to opportunity. Ensuring barriers do not exist so that all employees can earn the same pay.

Gender Pay Gap

This occurs when two employees who are alike in every aspect except their gender are paid unequally.

Next Steps

Now that you know the terminology, what should you consider as the next steps?

• Know how the laws affect your organization.
• Create or review your compensation strategy to ensure you are adhering to pay practices that attract and retain strong talent and comply with the laws in states and localities.
• Conduct the appropriate analysis/study.
• Address pay disparities and put a strategy in place to ensure it does not become a problem in the future.
• Create a communication strategy addressing leadership and employee questions/concerns.

It is important for us all to remember that conversations and understanding of pay are ways for employers to build trust with employees, and boost engagement and productivity. That is an important takeaway because that is why it is important for us to understand the terminology and make sense of it all. Purple Ink would love to partner with you in the next steps and guide you in best business practices. Reach out to learn more.