How Gender Pay Gap Affects Your Business

6 min read
How Gender Pay Gap Affects Your Business

Every woman needs to know when she's being discriminated against, and what the reasons are, why she isn't getting equal pay, so we can close that pay gap.

Valerie Jarrett

In an era when gender inequality in the workplace is in the limelight, the gender pay gap is an equally relevant topic. It is the effect of many dynamics. As a result, different groups of women experience pay gaps due to myriad reasons. To mention a few- things such as racial bias, experiences, age, disability, maternity, other career breaks, and access to education come into play.

What is the Gender Pay Gap?

The gender pay gap is the average difference between hourly wages for men and women. It is calculated by considering several parameters applied to the total number of employed members of both genders in an organization. Generally, women are considered to be paid less.

In a country like India, the reasons for the gender pay gap are a little more complicated for a variety of reasons. According to a recent survey in 2019, the gender pay gap spans across the key industries in the country. IT services showed a clear pay gap of 26% in favor of men, and in the manufacturing sector, they earn 24% more than women.

As a result, it reduces women’s lifetime earnings and also affects their pensions - one of the main causes of poverty that women face in their later life.

A Little About Its History

It’s important to recognize that the struggle for equal pay has been ongoing for more than a century. The struggle for equal pay has been taken up by women workers since the late 19th century.

During World War I, women took on men’s jobs while the men were deployed in the armed forces. When they realized that they were expected to do exactly the same work as men but for lower wages, they raised the issue of equal pay through several strikes during that period. That resulted in a settlement of a bonus in pay equal to that paid to men workers.

The issue of equal pay was again raised during World War II, and became an increasingly articulated demand by trade unions and women’s organizations from the 1950s onwards.

And The Current Scenario

According to the latest Monster Salary Index (MSI) 2019, the current gender pay gap in India stood at 19 percent where men earned Rs 46.19 more in comparison to women.

54 years have passed since the United States passed the Equal Pay Act in 1970. According to data taken from the US Census Bureau, in 2019, women still earn 79 cents for every dollar earned by men. Again on average, black women in the U.S. are paid 39% less than white men and 21% less than white women.

The gender pay gap among all employees fell from 17.8% in 2018 to 17.3% in 2019, and continues to decline as per the Annual Survey of Hours and Earnings (ASHE) in the UK.

Causes Of The Gender Pay Gap

Direct discrimination based on sexual orientation

Occupational segregation, though it explains just a limited part of the entire concept of gender pay gap, is direct and inevitable. Most often women earn less than men, simply because they are paid less because of their gender.

Undervaluation of skills while doing comparable jobs

Pay scales for jobs, which can be predominantly done by women is comparatively lower than the men’s dominant jobs of equal value.

Like for example women working as cooks, caretakers or cleaners often tend to be paid less than similar-level jobs which are traditionally done by men- such as collectors, street cleaners, road workers.

Assumptions that commitment suffers

Women may be sometimes perceived as less committed. With their status as wives or mothers, organizations question their commitment to work. As a result, if hired, they are offered low starting salaries and are promoted at lower rates than men.

Society considers jobs to be gendered

Men and women still tend to opt for different types of jobs, and each of them are accorded different values. For example, teaching in primary schools is still seen as a woman's job.

The cost of not considering equal pay is clear in companies as they have to pay up in other big ways. Some of them are discussed below.

Here’s How Gender Pay Gap Can Affect Your Business

Performance

A survey conducted by the Peterson Institute for International Economics in 2016, found that companies with at least 30% of women in senior management had a 15% higher profit. Women, who are considered “top performers” at work are often less likely than men to receive a promotion. Despite similar experience levels, they have 21% less chance than their male colleagues to reach the first level of management.

Employees who feel important and fairly compensated are more satisfied and more invested in their work. A female worker who feels undervalued because of the pay gap is most likely to underperform. Since there is hardly an incentive for her to go the extra mile, it affects her productiveness. In the long run, this impact of the gender pay gap is felt in the entire productivity of the organization.

Employee morale

The gender pay gap has the most obvious impact on employee trust and morale. It involves the attitude and perception towards the job, work environment, team members, managers and the organization as a whole. So evidently, it affects the workplace too, in multiple ways. Young women are especially demotivated by inequality and tend to feel less proud to work for an employer with a gender pay gap.

Retention

When employees realize a gender wage gap, it has a direct negative effect on employee retention. She’s likely to consider other employment opportunities with a better pay structure if she is being paid less than her male counterparts for similar work.

Finding a similar talent for your organization can be a real challenge. The same becomes more difficult if you already have a reputation of unequal wages. In the US, 67 percent of job seekers report being unwilling to apply for jobs at any company that practices wage discrimination.

In order to retain them and avoid wasting money on unwanted turnover, pay your female power equally and fairly.

Branding

Today, gender gaps are more than a social or legal issue. It's an issue that can affect your ability to save your identity. Your brand name might need to pay for the inequality that you practice in the workplace.

For whatsoever reasons, gender inequality has been a hot topic in the media. A case of unequal pay for women in the workplace can go viral, with disastrous results to your company’s branding and reputation.

Glassdoor comments, bad publicity in social media can tank your image making it difficult to attract good hires in the future. It can also affect your product sales and revenue in the long run.

Non-inclusive workforce

Companies must take bolder steps to create inclusive cultures so that women feel supported without being discriminated against. The gender pay gap is a complex issue in workplace diversity and inclusion. Depending on the capabilities, if you increase the proportion of females in senior roles in the coming years, you are expected to reduce the pay gap and prioritize an inclusive progress over time.

You should focus on equal pay through job evaluation methodologies. Your remuneration policies and processes should consider in-depth checks and controls to ensure that your employees performing equivalent roles are rewarded fairly, regardless of their gender.

Here Are Some Actionable Tips You Can Use On Closing The Gender Pay Gap:

Review your employee annual earnings

It is the most logical place to start with. It should be easy for you if you use an HR software which helps you to segment salaries by a number of factors including gender. Identify the trend and the salary outline. Immediately raise the compensation of any female employee who is underpaid compared to an equivalent male colleague who does the same job.

However while reviewing, you are expected to look beyond salaries- such as benefits, bonuses, and overtime given to each employee.

Balance the men-women earning opportunities

Generally, the tops positions in any organization are male-dominated. If you see fewer women in the higher seats of your organization, it’s time to take up a dynamic promotion system. You should review the balance of men and women in the different levels of your company.

It may take many years to achieve a gender balance at management and executive levels. Setting a guideline or quotas or following a timeline can help in promoting women to higher positions.

Look at your hiring process

You should avoid using her past salary to determine what you can offer. If you recruit a female employee based on her previous wage, the new hire can end up with unfair pay. And this inequality might follow her throughout her career.

Don’t force negotiation

Many people, especially females might not find it comfortable negotiating with the hiring manager. As a result they end up accepting an offer that’s less than what the employer was willing to pay.

Share your salary plan

Let your employees know your salary plan. This will remove any confusion and help them come clean about income disparity.

Design an inclusive culture

Welcome people with all backgrounds and help them feel to be a part of your companyExample Domainhttps://www.example.com. Celebrating equal payday can help to raise the required awareness. With no gender pay gap, every female and male will feel valued and dedicate themselves to their workplace.

Conclusion

Gender Pay Gap has lived on for too long and this practice should be scrapped altogether. The sooner we’ll be able to eliminate it, the quicker we can create a pay equitable workplace.

   This article is written by Susmita Sarma, a digital marketer at Vantage Circle. She was involved with media relations before shifting her interest in research and creative writing. Apart from being a classical music buff, she keeps a keen interest in anchoring and cooking.