• Between one and two-thirds of today’s racial pay gap can be attributed to “unobservable” factors such as discrimination.
• Offering workers pay accessibility and immediacy is one easy-to-implement way to introduce a more modern, fair, and equitable pay experience.

For several decades, there’s been much said, written, and legislated concerning the gender pay gap, which compares the median full-time earnings of men and women. However, until recently, the issue of the racial wealth gap – which measures racial disparities in economic security and wealth accumulation – has been largely unaddressed. Over the last few decades, the racial pay gap has worsened:

• In 1979, the average Black worker in the U.S. working full-time, year-round, earned 81.9 cents on the dollar to the average White worker working the same, reflecting a racial pay gap of 18.1%.
• In 2019, the average Black worker earned 73.5 cents on the dollar of the average White worker ̶ a pay gap of 26.5%.

Narrowing the gap is no easy task, given that between one and two-thirds of today’s racial pay gap can’t be attributed to known causes but rather “unobservable” factors such as discrimination. While a handful of states have added the protected class of race in recent amendments to strengthen their state law versions of the federal Equal Pay Act, much work still needs to be done.

How to Build More Pay Equity Into Your Employee Experience

Advancing gender and racial equity is fundamental to every individual’s economic security. While more groups and organizations are advocating for policy change, the wheels of legislation can be incredibly slow at implementing changes. In the meantime, organizations can step up for minority groups to ensure that a racial and gender pay gap doesn’t exist within them.

Here are some steps companies can take to close the wage gap and ensure they follow equal pay practices:

• Be more precise when it comes to hiring for “cultural fit.” Ensure your hiring managers are clear on what that means for your organization. For example, do prospective hires need to be people-centric, collaborative, and prepared to take the initiative? By making the criteria more transparent, you’ll eliminate unconscious bias from the hiring process and set minority groups and women up for success.
• Stop asking for salary histories – a practice linked to perpetuating the wage gap and pay discrimination. Many states have enacted either state or city-wide laws prohibiting asking about salary history. While this is a good start, the practice isn’t yet illegal at the federal level.
• Begin eliminating occupational segmentation by evaluating the positions (and pay) that employees from minority groups and women hold in your organization. Are they overrepresented in low-paying jobs and underrepresented in high-paying jobs? If so, you have an obligation to change this.
• Regularly conduct internal pay equity audits to establish how individuals are compensated compared to colleagues doing similar work or with a similar level of responsibility. Pay equity audits analyze how individual compensation relates to job level, age, race, gender, years of experience and tenure, and academic or other job-relevant credentials. If you uncover inequities, take corrective action.
• Commit to high transparency around pay rates and adhere to it. This transparency can include making certain information public, such as the process for determining salaries, salary bands for all levels, and the gender and racial pay gaps at your organization.

The Role of Modern Pay Experience in Addressing Racial Inequity

While closing the wage gap and addressing other forms of pay inequity are imperatives, they require time and effort before meaningful results are observed. However, there is an easy-to-implement lever at employers’ disposal that can go a long way to achieving pay inequity by ensuring that everyone is afforded the option of pay accessibility and immediacy: on-demand pay.

On-demand pay, also known as earned wage access (EWA), is a diverse and inclusive payroll model. It allows workers to collect their wages as they earn them. When your employees have access to some or all of their earned wages, they can pay bills on time and better manage their monthly expenses without turning to credit cards or expensive payday loans.

On-demand pay won’t cost you anything and can be swiftly and seamlessly integrated into your digital payroll process. The best on-demand pay software will manage the instant flow of funds, so you needn’t worry about payroll miscalculations, keeping track of cash flows, or handling deductions. This makes an on-demand pay strategy a fair, transparent, and practical option for employers and employees.

Best Practices for Creating an Equitable Pay Experience

When implementing an on-demand pay strategy, consider the following factors:

Align Your EWA Benefit to Your Employees’ Needs

Before you roll out an on-demand pay solution, formalize how much funds can be accessed and how often your employees can withdraw their wages. Ideally, set your parameters after running an internal survey to gauge their needs.

Choose the Right Provider

Look for an EWA provider  that meets your ease of deployment needs and offers the features your employees are looking for. For example, consider choosing a provider with low access fees or that offers complimentary financial wellness tools and resources as part of their solution.

Closing Thoughts

Closing a racial pay gap that’s been frozen for decades will come through a combination of legislation and proactive corporate action. Follow the approaches outlined in this article to put your organization on track to becoming a pay equity leader.

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