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New pay equity laws require proof of fair pay

Pay equity laws that require firms to collect and report data are making inroads in the U.S. One HR tech vendor is preparing to provide companies with tools that will help.

Some firms tout a commitment to pay equity as a way to attract talent, but pay equity is moving from a voluntary, competitive differentiator to the law. The increasing recognition of pay equity's importance and the legislative push to ensure it have prompted one HR vendor to upgrade its tools.

Many states have basic pay equity laws that prohibit wage discrimination, but California and Illinois are going a step further by adopting new pay equity reporting policies. They are requiring businesses with 100 or more employees to report data on pay, gender, race and ethnicity. The data also includes a disclosure about an employee's occupational category, such as manager, sales or technician.

These new pay equity laws are a response to pay gaps. Earlier this year, the U.S. Dept. of Labor found that women's annual earnings were 82 cents of every dollar earned by men, with an even wider gap for women of color. 

In California, the goal of the new pay reporting law, which was enacted last fall, is to "efficiently identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws," according to a California Dept. of Fair Housing and Employment document. The state's "strategic vision is a California free of discrimination." The Illinois law was signed in March. 

Payscale acquires Curo

The rise of pay equity laws is one of the reasons Payscale Inc., a compensation data provider, announced the acquisition of Curo Compensation Ltd. for an undisclosed amount this week. Curo is based in Edinburgh, Scotland. 

The U.K. already has some pay equity laws on the books, and Curo's tools helped companies meet those regulations. Now, similar laws are starting to be adopted in the U.S., said Scott Torrey, CEO of Seattle-based Payscale.

In California, they're not messing around.
Kelly DuFord WilliamsManaging partner and CEO, Slate Law Group

Pay equity today is used by some firms as a differentiator in hiring, Torrey said. "The more transparent you are, the better talent you can attract, and the more people feel they are being paid fairly," he said.

But Torrey sees the voluntary compliance era ending, and he expects to see more legislation along the lines of California's, where pay equity is "going to be required, and so you better get ahead of it."

Equal treatment

In California, "you're not allowed to treat similarly situated employees differently," said Kelly DuFord Williams, managing partner and CEO at Slate Law Group in San Diego. 

Williams said the state could enforce the new pay equity reporting policy through random audits and investigations of employer reports "that seem off," she said. "In California, they're not messing around."

Williams believes the requirement will help businesses overall by forcing them to take a closer look at their pay and prompt them to ask questions. "Can you justify why you are paying this person less than that person?" she said. 

Nationally, employers are already "working furiously" to prepare for the U.S. Securities & Exchange Commission's human capital reporting requirements, said Ben Eubanks, chief research officer at Lighthouse Research & Advisory. 

The SEC is interested in data including diversity statistics and pay equity. In the U.K., there are already regulations around pay equity, and Curo "had products in-house to solve for those specific problems," Eubanks said.

"This is a time like never before for employers to step up and make sure they are doing the right thing with every pay decision, every time," Eubanks said. 

Torrey said Payscale has an existing pay equity reporting system. Curo brings additional capabilities, including self-service that lets employers customize data and identify pay gaps, as well as tools that offer proposals for remediating pay gaps, he said. 

Patrick Thibodeau covers HCM and ERP technologies for TechTarget. He's worked for more than two decades as an enterprise IT reporter.

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