Pay equity vs. pay equality: knowing the difference

Published: 13 June 2024 | by Natasha K. A. Wiebusch, Brightmine Marketing Content Manager

Companies that excel in pay equity see higher profits, improved customer satisfaction and higher talent success rates, according to the Josh Bersin Company’s recent Definitive Guide to Pay Equity research. Unfortunately, despite the clear benefits, progress has been slow.

Now, more than 60 years after the passage of the Equal Pay Act of 1963, the pay gap between men and women remains ever present…and stubborn. As of March 2024, women make 84% of what men make in a year, according to the US Department of Labor.

But in the years since the pandemic, employees have seen a welcome change. In the absence of federal action (Congress failed to pass the Fair Paycheck Act for the fourth time in 2023), several states have passed pay transparency laws to supplement existing pay equity laws. And in the race to attract and retain talent, employers have renewed their commitments to eradicate pay inequity.

Employers across the US have implemented pay equity strategies to ensure not only gender pay equity, but also fair pay across other demographics. A key piece of these strategies is understanding the difference between pay equity and pay equality. In this article, we explain what the difference is and why it’s important.

What is pay equality?

Pay equality is the concept of providing equal pay for equal work. It means employees should be paid the same amount for doing comparable work regardless of their sex, gender, race or other characteristics.

Pay equality is at the center of pay discrimination. That is, if an organization is paying a man and a woman differently for doing substantially the same job, they could be violating the Equal Pay Act.

Organizations can pay employees more based on their qualifications (e.g., experience, education or skills). However, all else being equal, pay discrepancies based on sex result in illegal unequal pay, leading to a significant risk for organizations.

What is pay equity?

Pay equity is the concept of ensuring equitable pay among all employees regardless of sex, gender, race or other characteristics. Pay equity practices seek to reduce disparities among employees of diverse backgrounds.

Unlike pay equality, pay equity is not solely focused on comparing pay among employees doing the same job. It also accounts for societal barriers, biases and stereotypes that contribute to disparities in pay.

For example, an organization may experience pay inequity if it has an over-representation of women in lower paying job roles. Though there is no instance of pay discrimination, the unequal representation of women causes a gender pay disparity.

Why knowing the difference is important

Understanding pay equity vs pay equality is important because it helps you shape a holistic pay equity strategy. If you understand the nuances of these terms, you can build a strategy that ensures equal pay and equitable opportunities and growth for all employees.

Creating a pay equity strategy also requires HR and other leaders to communicate efforts to the wider organization. Here, it’s extremely important that communications are clear about what key terms, such pay equity, mean to the organization.

For example, if you announce a pay equity initiative without more information, employees may believe this is limited to eliminating pay discrimination. With proper onboarding and explanation, employees can come to fully understand that pay equity involves more than pay equality.

Achieving pay equity

Achieving pay equity in your organization is a long-term strategy. It requires finding the right information; ensuring HR, business leaders and managers are on the same page; and creating sustainable solutions. The following recommendations can help you get started:

Conduct a pay equity analysis

Analyzing pay equity in your organization will require a pay equity audit. Audits involve collecting pay data alongside employee demographic information to identify patterns, trends and disparities.

Specifically, an in-depth audit enables an analysis that identifies wage gaps caused by pay inequality and other disparities. For example, an audit may identify opportunity gaps — which contribute to wage gaps — in specific departments or leadership roles.

With the right pay equity solution, conducting an audit for pay equity can provide your organization with the information you need to remediate existing and future disparities. And the visibility over your pay data will help you create a fair compensation strategy moving forward.

Know the laws that govern pay equity

Employers must also comply with a network of pay equity legislation that prohibits pay discrimination or requires employers to disclose pay information:

The Equal Pay Act of 1963 (EPA)

The Equal Pay Act prohibits employers from discriminating on the basis of sex in their pay practices. This includes discrimination based on sexual orientation and gender identity. That is, employers in the United States must pay employees equally for equal work.

Title VII of the Civil Rights Act of 1964

Title VII prohibits workplace discrimination on the basis of race, color, religion, sex and national origin (referred to together as “protected classes”). Specifically, it prohibits employers from committing an “adverse employment action” against an employee based on a protected class. An adverse employment action includes paying an employee less than other employees.

Americans with Disabilities Act (ADA)

The ADA prohibits employers from discriminating against employees based on disability. Similar to Title VII, this includes paying an employee less based on their disability. Here, it’s important to understand what the definition of a disability is under the ADA. An employee has a disability under the ADA if they:

• Have a physical or mental impairment that substantially limits one or more major life activity.
• Have a record of such an impairment, even if they do not currently have a disability
• Do not have a disability but are regarded as having a disability.

The ADA also prohibits discrimination against a person for being associated with a person with a disability.

State equal pay laws

Over 40 states have passed equal pay laws to supplement the Equal Pay Act. These laws often protect employees against pay discrimination based on other protected classes, such as race or national origin.

Pay transparency laws

Many states have either passed or are considering laws that require employers to share information about their pay practices. Pay transparency laws, as they’re widely referred to, specifically require employers to disclose pay ranges in their job advertisements. Some have additional requirements, such as disclosing pay ranges to current employees.

In addition to having a basic understanding of these laws, consult with legal counsel to ensure the organization’s practices and policies are in compliance. Remember that conversations with legal counsel are protected by attorney-client privilege.

Implement strategies that improve pay equality and equity

To improve pay equity holistically, build a strategy that addresses both pay equality and (more broadly) pay equity.

Pay equality efforts are actions that reduce disparities in pay among employees doing the same or substantially the same work. They include:

• Regularly auditing pay to identify unequal pay or outliers.
• Creating structured processes to ensure performance reviews are objective.
• Establishing clear salary ranges.
• Practicing pay transparency.

Pay equity strategies, which go beyond ensuring equal pay, include:

• Improving candidate pools, thereby increasing their size and diversity.
• Ensuring job descriptions are inclusive and free of gendered language.
• Evaluating pay in job roles that may be historically underpaid.
• Establishing formalized mentorship programs to support career progression.
• Other efforts focused on improving diversity, equity and inclusion (DEI).

Train managers on pay equity concepts and responsibilities

Managers play a central role in ensuring pay equity in the organization. First, they help set the tone for the organization’s culture, making their buy-in essential to gaining support for fair pay practices from employees. They are also leaders in the organization’s strategic initiatives, often charged with setting priorities and managing budgets.

In addition to setting the tone of the organization, managers make key decisions that impact pay equity. They influence key moments in an employee’s journey, from initial salaries and raises to promotions and opportunities.

Because they are so intimately involved in decisions that impact an employee’s pay and growth in the organization, managers must be prepared to communicate about and advocate for fair pay. At the outset, managers should understand:

• The difference between pay equity and pay equality.
• What pay discrimination is and how it manifests.
• The importance of pay equity.

Managers must also know its business benefits. Beyond supporting a diverse and inclusive work environment, this includes increased ROI, productivity and revenue, and decreased turnover.

Managers must also understand their pay equity responsibilities. If leaders aren’t held accountable at important moments, such as performance reviews, organizations run the risk of undermining their pay equity strategy.

Measure your progress

As you continue on your journey to achieving pay equity, be sure monitor your progress through data. By leveraging continuous pay data, you can monitor wage gaps, pay practices and people decisions that impact pay.

You’ll also want to review key metrics, such as:

• Promotion rates by demographic.
• Average salary increase and performance review scores.
• Participation rates in mentorship programs.
• DEI-related recruitment and hiring metrics.

These metrics, when analyzed together with pay data, will help you measure how successful your equity efforts (beyond pay adjustments) have been. Most importantly, it will help you make necessary adjustments.

A final word

Pay equality is a top priority for employers. As one piece of the pay equity puzzle, employers must be able to address it to make real progress on pay equity.

And as organizations continue on their greater pay equity journey, it’s important to remember that each journey is unique. Pay equity leaders and business stakeholders must consider their culture, people strategy and budget constraints — which may change over time. To get pay equity right, leaders will need to find the right fair compensation practices for their employees and their business.

Brightmine provides quality analytics and reliable data to transform your organization’s approach to pay equality and pay equity. Find out more here.