Nation & World

Why some workers are seeing unexpected raises

Employers need to go back to 'fundamentals'

Bloomberg

A pedestrian walks past Nike advertising in Shanghai, China, earlier this month.
Bloomberg A pedestrian walks past Nike advertising in Shanghai, China, earlier this month.

More and more companies are making broad pay adjustments after taking deep dives into worker pay data.

They are auditing their payrolls for gaps between men’s and women’s pay, tweaking salaries that aren’t competitive with other companies and making changes to compensation programs to help prevent potential bias.

Yet the evaluations also carry risks for employers — raising questions about unfair pay practices in the past, misconceptions about the adjustments or budget pressures as they fix inequalities they discover.

Nike became the latest example this past week when it said in a memo to employees that the company would adjust the pay of about 10 percent of its 74,000 workers and revamp its bonus system, noting its compensation program is designed to “support a culture in which employees feel included and empowered.”

The new bonus system, while still taking into account the performance of individuals, will be based on company performance and targets and reward people more consistently across different geographies or corporate roles — which could have the effect of reducing disparities or potential bias.

The move followed a “deeper analysis” of its pay system this year that came amid publicized complaints by women at Nike about inappropriate workplace behavior and a toxic boys’ club culture.

Nike spokesman Greg Rossiter told the Washington Post that the pay adjustments were about “ensuring Nike is competitive across all levels, geographies, functions and brands,” addressing external competitive realities.

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He cited Nike data that show there is virtually no gap between men’s and women’s pay and said, “We continue to monitor the data and adjust where appropriate, with 1:1 as our goal.”

A growing number of other companies have announced pay adjustments to address pay equity questions.

Salesforce CEO Marc Benioff has said the cloud computing giant made two $3 million investments to fix pay differences that were discovered after its own analyses. A Cisco Systems human resources executive said in 2017 that it had adjusted pay for two percent of its employees after an audit.

Corning now does pay analyses three to four times a year after it discovered a slight gap between the pay of male and female workers, and has made pay changes and shifted practices in response.

Meanwhile, Citigroup said this year it would make adjustments to help close gaps between women and U.S. minorities after finding women are paid, on average, 99 percent of what men are paid.

And Google said in March that it increased compensation for 228 “Googlers” that worked in job groups where it found “statistically significant pay differences.”

Social consciousness

Pay consultants and lawyers say companies are doing pay audits after pressure from activist shareholders, changes to state laws and a growing focus on the issue by the public.

Some also simply want to even out compensation gaps.

“A lot of what’s driving it is social consciousness, and the media attention that’s on this topic,” said Cheryl Pinarchick, a partner at the law firm Fisher Philips in Boston who has seen a big uptick of pay audits and adjustments in the past two years.

Natasha Lamb, a managing partner with Arjuna Capital, has pushed nearly two dozen companies in the finance, retail and technology industries to disclose their pay gap figures and commit to re-analyze them each year.

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She said Arjuna withdrew its proposal at Nike in April 2017 after the company pledged to release its numbers. Nike said in March that women were paid 99.6 percent of male employees’ pay in 2016.

That number was 99.9 percent in 2017, Rossiter said.

Lamb said she presumes many of the companies Arjuna targets make pay adjustments between when her proposal is received and when they disclose their number.

“We want them to publish the number, and if they need time to make some adjustments internally, that’s great,” she said. “That’s the point. We want salaries to be equitable.”

Nike’s Rossiter did not respond to a question about whether adjustments were made after Arjuna’s proposal, but said, “We always welcome conversations with our shareholders on a variety of matters, including those relating to pay practices.”

Meanwhile, a number of states have updated or passed new pay equity laws, banning employers from asking about salary history, ensuring workers can ask one another about pay or broadening how companies should think about the issue.

The state laws, said Gail Greenfield, a principal at the human resources consulting firm Mercer, are “a fairly major change,” and “I don’t see that that’s going to dissipate.”

Legal risks

But even as companies are doing more pay audits, the practice creates tension for companies. Some may not be sure they have the budget to close any gaps that are found.

Others may be hesitant to do the analyses because discovering — and then acknowledging — unfair pay in the past could present legal risks. A couple states, Massachusetts and Oregon, have even put in place protections for employers who evaluate their pay and can show they’re working to correct any problems, said Pinarchick, of Fisher Philips.

As a result, many companies that do the audits don’t say much about them.

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“You’re not hearing from too many companies publicly talking about pay equity,” Greenfield said.

While some have acknowledged disparities, what many do is roll the adjustments into a merit pay raise, she said.

“If someone usually would have gotten a 3 percent raise, maybe this year it’s 6 percent.”

Pinarchick agreed, saying others use phrases such as “internal benchmarking or external benchmarking. They’re talking about fairness, they’re talking about ‘updating compensation policies.’ They’re not coming out and saying ‘we found a problem and we’re fixing it.’”

Corning senior vice president of human resources Christine Pambianchi said she did not worry about those risks when the company embarked on its effort to close its small gender pay gap because they routinely analyze pay and were transparent about human resources practices with employees.

After finding in 2013 that women made 99.2 percent of what male employees earned — the company now reports zero pay gap — Corning began working with Mercer, and not only made salary adjustments but went hunting for what might explain the small gap.

They found two likely reasons. One was asking about salary history on job applications, a practice it has since ended.

Another was to rethink how Corning considers the promotion of administrative and technical workers, which are predominantly women at Corning, into professional-level jobs.

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Rather than treating them as a regular internal promotion with an average bump in pay, they began treating them as an outside hire, offering much larger corresponding raises when employees made that professional leap.

Arjuna’s Lamb says such efforts to unearth root causes, or broader changes to compensation structures, could help companies go beyond just putting a Band-aid on the problem.

Employers, she said, need to go “back to fundamentals so every year we don’t need to make up these gaps.”

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