Overall, men earn more money than women--in the same job. That pay gap isn't disputed, nor is it disputed that that's not desirable. Québec's McGill University agreed, so they did something about it. After 13 years, Canada's version of Harvard is finally reporting that it successfully closed its gender pay gap.
Personally, I think they screwed up. Not because women should be paid less than men, but because they fell into the old trap of trying to equate jobs that are completely and wholly unrelated to each other as equal. For instance, The Wall Street Journal writes:
The program's goal was to ensure that pay for female-dominated professions was keeping pace with male-dominated ones of equal importance. If administrative assistants were considered as valuable as groundskeepers, the thinking went, the women who jotted down phone messages and kept appointment calendars should be compensated as well as the men working the lawns.
Valuable is not a code word for equal. The person who cleans the bathrooms is extremely valuable, and influences more of the day to day happiness of the average employee than does the CFO. Heck, the CFO can go on a month long vacation and no one will notice, but if the janitorial staff goes on vacation, the suffering will be felt in a matter of hours. But, I have yet to see any one claiming that janitorial staff should be paid the same as the Chief Financial Officers. Why? Because while the CFO's effectiveness isn't noticed the same way toilet paper free bathrooms are noticed, a good CFO can make a world of difference in the company's success and a bad one can result in the senior leadership team facing indictment. Any person in the office can step in and clean a toilet, but being a CFO requires special skills. Both are valuable, but in terms of company success, they are not equal. They are very different.
But, the thinking goes, administrative assistants are entry level employees, who aren't required to have years of experience and top levels of education, and grounds keepers are entry level employees who aren't required to have years of experience and top levels of education, so therefore, their salaries should be the same. Why? Their actual day to day work is extremely different. But one is dominated by men and the other by women, so we panic and think we need to balance that pay. The only balance we need is within the job function.
The reality is, we need to let the market determine the pay. When hiring administrative assistants, how many qualified applicants do you get? When hiring landscapers, how many qualified applicants do you get? What's the turnover rate? What's the success rate? Is it difficult to get people on board for the current salary? These are the questions that should be looked at when determining pay. If you have 300 applicants for every landscaping job, and two applicants for every admin job, you can confidently say that you can pay the landscapers less and the admins more. Or vice versa. (Personally, you'd have to pay me about 10 times as much to do landscaping as administrative work, but other people like to work outside.)
So, how do you ensure that you don't have a real pay gap? That you pay people the same for the same type and amount of work? Startups have the opportunity to not get caught in bad pay habits, and it won't take you 13 years to fix any problems you do find. Here's how.
1. Determine a pay rate before you interview. If you already know how much a position should pay before you get that first resume or first referral through networking, you won't be influenced by the candidate's gender when it comes to pay. The job pays $75,000 a year, regardless of who fills it.
2. Don't "fall in love" with a candidate. I'm not talking romance here (although you shouldn't do that either), but sometimes when a candidate has been selected, the hiring manager becomes so enamored with the candidate that all logic flies out the window at the negotiation stage. So, when you're carefully calculated salary rate is $15,000 below what this person asks for, suddenly it seems perfectly reasonable to pay that much because, we must get this person on board. If your candidate deserves a much higher salary than what you determined, you better be able to document clearly what it is that makes this person better than the job description.
3. Make job titles match actual jobs. I once got a call from an in house attorney wanting to know why employee A (female) made $25,000 less a year than employee B (male), when they had identical job titles. A little digging found that their jobs were entirely different and employee B had a law degree which was necessary for his tasks, while employee A didn't. Who in the heck gave them the same job title? Not me, but lots of you do. So, you had a situation where it looked like a big, raging, case of pay gap, but it was, in actuality, completely logical. Save yourself the hassle and use titles that make sense.
4. Document, document, document. If someone negotiates working two days a week from home in exchange for a slightly lower salary, document that--and not just to yourself. State it clearly and in writing to the employee, "In exchange for the ability to work from home two days a week, you are accepting a salary of $55,000 a year, rather than the posted salary of $60,000 a year." If that situation changes, you should change the salary. People often accept lower salaries based on the perks they get, and then a new manager comes in and takes away all the perks, but doesn't raise the salaries to match. Since women are more likely to valuable flexibility over men, you can see where this can lead you.
If two people with the same job title are doing wildly different amount of work, make sure that's documented as well. If person A is working 60 hours a week, and person B is pulling in 37.5 hours of work, it makes sense that person A should have the higher salary and bonus, but write down that reason. Document the disparity in hours worked and the disparity in productivity--even though they are both salaried exempt employees. (Non-exempt employees, of course, should have a similar hourly rate, but person A's paycheck will be much larger.)
5. Constantly evaluate your current staff salaries. Often, we forget to keep our current staff at market rates. You have to hire at market rates or you can't get anyone in, but your current staff will stay until they become unhappy. This tempts business owners to underpay current staff. Don't fall for that. Constantly evaluate.
6. Comply with all laws. When an employee takes advantage of the Family Medical Leave Act (FMLA), for instance, and is out of the office for 3 months, the temptation is there to "punish" the person for not doing as much work as co-workers. But, you can't legally punish someone for that time. So, when you do a performance appraisal, you have to look at the work they did in the time they were in the office, not that they did less than their co-workers. Since for start-ups, which tend to attract younger employees, most of your FMLA use will be for childbirth, you run the risk of creating a real gender pay gap if you give lower raises to women who had babies.