Compensating Your Employees Fairly A Guide to Internal Pay Equity
Compensation fairness is a universal preoccupation in today’s workplace, from whispers around the water cooler to kabuki in the C-suite. Gender discrimination takes center stage in discussions of internal pay equity, but many other protected characteristi
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Contents About the Author �������������������������������������������������������������������������������������������������� ix Acknowledgments�������������������������������������������������������������������������������������������������� xi Chapter 1:
Why Equity in Compensation Matters���������������������������������� 1
Chapter 2: Types of Discrimination in Compensation�����������������������������19 Chapter 3:
Multiple Regression Analysis�������������������������������������������������39
Chapter 4: The Data���������������������������������������������������������������������������������89 Chapter 5: Regression Models of Equal Pay �����������������������������������������119 Chapter 6: Other Tests of Equal Pay�����������������������������������������������������141 Chapter 7:
Analysis Follow-Up���������������������������������������������������������������177
Chapter 8: The Changing Landscape of Pay Equity Enforcement �����209 Chapter 9:
Causes of the Gender Pay Gap�������������������������������������������237
Chapter 10: Litigation Avoidance and Proactive Self-Analysis �������������259 Appendix: The Basics of Statistical Inference �������������������������������������275 Index ����������������������������������������������������������������������������������������������������������������������� 283
CHAPTER
1 Why Equity in Compensation Matters Do you compensate your employees fairly? Answering that question is not as simple as you might think. There are a variety of ways it could be interpreted. The question could pertain to the policies and procedures used to make compensation decisions. It could be asking about the actual compensation outcomes. Or it could relate to how each employee feels about the compensation decision-making process, his or her actual compensation outcome, what information was communicated about the decision-making process and compensation outcome, and how that information was communicated. One way to approach the concept of fairness is from an organizational justice perspective. Organizational justice theorists argue that fairness, at its core, has four dimensions: 1. Distributive justice. 2. Procedural justice. 3. Interactional justice. 4. Informational justice.
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Chapter 1 | Why Equity in Compensation Matters Distributive justice is the perceived fairness of the actual outcome. When we talk about equity and fairness of bonus payments, merit increases in base salary, or the size of promotional increases, we are talking about distributive justice. Distributive justice answers the question, “Did I receive what I should have received?” When we talk about intentional discrimination in pay, we are typically discussing distributive justice: whether the money was distributed among the employees equitably, given the compensation policies and practices.1 Procedural justice is the perceived fairness of the policies and procedures used to arrive at the actual outcomes. Procedural justice includes the criteria used to determine bonus payments, how merit increase
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