Arjuna Capital released its seventh annual Racial and Gender Pay Scorecard in March and the results highlighted where companies stand in their pay transparency efforts. The scorecard, which grades organizations on pay gap disclosures, underscores the need for many employers to work toward authentic pay equity.
Arjuna continues to expand the list of companies they evaluate. This year the list included the 100 largest U.S. companies by market capitalization as well as 28 engaged by investors. This nearly doubled the number of companies covered in the 2023 scorecard, which no doubt surprised many of those included.
Organizations are under heightened scrutiny to address disparities in pay and opportunities among employees. And Arjuna Capital, a sustainable investment firm, has turned up the heat on organizations in recent years by publicly disclosing data on gender and racial pay disparities. The goal of the project is to empower investors and stakeholders to make more informed decisions about where to allocate their resources.
Proactive Steps for Employers
Arjuna’s grade card is largely based on pay gap disclosures, with some impact from results such as:
- Adjusted and unadjusted pay gap disclosures
- Elements of compensation included in your analysis (base salary, bonus, and equity awards)
- The percentage of employees covered
- Publicly stated commitments to ongoing annual disclosures
In other words, even if your organization is currently working toward achieving pay equity and improving workplace equity, you will still score low if you haven’t publicly shared the results.
Just two of the 128 companies on the list received an “A+” grade, while 13 received an “A” grade. Target and Starbucks both earned perfect scores because of their “comprehensive disclosures of median and adjusted pay gaps” and “annual commitment to conduct and publish pay equity analyses.”
If you’re one of the 60+ employers that received a “D” or “F” grade, there are proactive solutions you can take to improve your standing and better prepare for next year.
- Conduct an intersectional pay equity audit. This can be streamlined with a pay equity software solution. Conduct an analysis at the intersection of gender, race/ethnicity, age, disability, and more in one statistical regression analysis. This will reveal pay disparities company wide by geography, department, and individual employees.
- Identify the unadjusted (or median) pay gap. Once a pay equity audit is done, you’ll be able to see both the raw (unadjusted) pay gap and the adjusted pay gap in your organization. For Arjuna’s purposes, organizations should be prepared to share their unadjusted pay gaps.
- Remediate unexplained pay disparities. Sharing unadjusted pay gaps — such as those required under the EU Pay Transparency Directive — is daunting if you are early on in your pay equity journey. Pay disparities that are unexplained by compensable factors such as career level, job function/family, performance rating, company tenure, position tenure, line of business, educational attainment, and geographic location will need to be solved. Software will expedite the process by targeting root causes of those unexplained pay disparities and providing efficient strategies to remediate them.
- Report on pay data. With a remediation strategy in place, you can confidently share pay data as required by legislation, as well as moving toward a transparency model that includes internal and external stakeholders. This will ensure your business is not only compliant, but on the cutting edge of building a truly equitable workplace.
Leverage Pay Equity Software Tools
If you are concerned with your standing in the pay equity landscape, it behooves you to leverage pay equity software to advance efforts. Landing an unfavorable grade from Arjuna Capital’s Racial and Gender Scorecard should embolden you to level up your workplace equity efforts.
A common pitfall for employers in their pay equity journey is relying on a once-a-year statistical analysis, typically during or after the annual salary planning cycle. While this is a good time to conduct such an analysis, we recommend monitoring pay equity year-round.
Various factors such as turnover, labor market dynamics, promotions, pay increases, etc. directly influence your organization’s pay equity. Evaluating it once a year is like trimming weeds — it temporarily solves the problem, but it doesn’t get to the root cause. Monitoring pay equity on an ongoing basis used to be an arduous task, but pay equity software simplifies this process.
Use Trusaic’s pay equity and opportunity equity solutions to understand, explain and resolve pay disparities:
- Ongoing pay equity: Ongoing monitoring of pay disparities ensures pay inequities won’t be exacerbated through standard compensation decisions. These include hiring, employee transfers, merit increases, bonuses, scheduled pay increases, and promotions.
- Identify barriers to professional growth: OpportunityParity™, a feature of Trusaic’s workplace equity analysis software, offers a complete solution for pinpointing and remedying equity concerns in your organization’s hiring, promotion, and retention processes.
- Communicate narratives and share salary ranges with confidence: Communicate the sources of your pay gaps, progress objectives, and corrective measures to employees and internal stakeholders with Trusaic’s Workplace Equity product suite. Show data-backed progress in your pay gaps over time.
- Salary range explainability: Use Salary Range Finder to establish and post competitive and equitable pay ranges to confidently comply with pay transparency laws.
- Mitigate risk of recurrent pay disparities: Ensure new hires receive fair pay offers with the use of external labor market data and internal pay equity analytics to reduce unplanned and expensive pay remediations.
Further, we offer a global pay data reporting solution to complete required reporting by compliance deadlines.
With Trusaic, you can move forward in your workplace equity journey with confidence and ensure you are on the path to receiving a coveted “A+.”
