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What’s the Difference Between Pay Equity and Equitable Pay?

Salary is a touchy subject, and it’s something that everyone - from the average employee to the well-known executive to celebrities - is curious about and treading lightly around. For those in the workforce helping to set salaries, keep employees happy and avoid lawsuits, it’s even more confusing and sensitive. Add to the mix the fact that the terms pay equity and equitable pay are thrown around in many different combinations and ways that are sometimes incorrect, often confusing and many times not helpful and you’ve got one big question mark on your hands. Today, we’ll set the record straight on what pay equity and equitable pay mean, how they relate to each other and how they’re different.

Pay equity

Pay equity is what most people probably think of when they consider the term fair pay. It has legal backing by way of the Fair Pay Act and the Equal Pay Act and means that employees are paid equally for equal work done, without regard for race or gender. Pay equity is a real issue for millions of employees. While PayScale’s gender report found that the commonly cited statistic that women make 78 cents on the dollar is not true, there are definitely industries where women make much less than men for the same work.

Pay equity doesn’t mean that two employees doing the same type of work must be paid the same. Businesses can pay different wages for the same type of work if the quality or quantity is different or if there’s a merit system in place. The types of differences this allows for include things like experience, education and individual performance.

Equitable pay

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Simply put, if pay equity is the legal backbone of fair pay, then equitable pay brings ethics to the issue. If you know you’re not discriminating based on race or sex, then go a step further and evaluate whether or not employees’ sexual orientation, friendship or relationship with their supervisor, or even personality, play into their pay. Is there favoritism going on or is a team member being unfairly overlooked because of something as simple as not dressing the part? Everyday in offices across the country, workers aren’t receiving equitable pay because of issues like this. The term equitable pay can also be used to discuss whether or not a company is paying its workforce as a whole fairly.

Setting the stage

Compensation practices have numerous components to them, including established salary ranges, performance evaluations, experience, education, average salaries and so much more. While it can be tricky to balance all those things and come up with a number that makes both your employee and company happy, one thing is for sure: you’ve got to set the stage correctly first. What good is a merit-based pay system if initial salary and cost-of-living increases aren’t determined fairly? Pay equity and equitable pay are the foundation for the rest of your compensation system and without them, all the other efforts are pointless.

Simplifying the process

Even in the best of circumstances, compensation can be confusing. We want to know what you or your company has done to help simplify the process and ensure both pay equity and equitable pay. Let us know in the comments below!

Jessica Miller-Merrell
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Thank you for this article, it was helpful the way you described pay equity and equitable pay.

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