Speaking of pay plans, have you ever investigated whether individualized pay plans may cause the dealership a pay equity problem? This is usually not an issue with salespeople paid under a plan for the entire sales force. Managers are a different story, however. Because of different job requirements, different experience levels, unique skill levels, competition for strong performance history, and other factors, manager pay plans are often individualized. So how can the problem arise?
You have heard of pay equity: men and women should be paid equally for equal work. For years, proponents of further action have argued that women make 77 cents for every dollar that men make, contending this is sufficient evidence of discrimination. Defenders of the free market system for wages claim there are reasons this statistic is incorrect and misleading.
Regardless of who is correct about pay equity theory, your business must operate in the real world. And in that world, having a legal position that will allow you to prevail in a lawsuit after spending hundreds of thousands of dollars in attorneys’ fees and costs is less important than avoiding becoming a defendant in a discrimination lawsuit in the first place. So how can you avoid a discrimination lawsuit over pay equity?
To begin with, pay equity concerns are not limited to whether women are paid as well as men. Members of any protected class can challenge pay practices if they feel they are victims of discrimination. Today, however, because of the publicity about and impact of the #MeToo movement, your primary focus should be on whether you can show pay equity of women employees to men convincingly. How do you do that?
- Remember pay equity when hiring. When hiring a new employee, determine where he or she will fit in your comparative earnings picture. How does a new female employee compare to male employees of similar job functions, qualifications, skill level, experience, and job history?
- If there is a difference in earning ability for the new employee, explain why. Many factors can explain earnings differences. If the new employee’s pay plan will cause significantly different earnings from other employees, make notes in the new employee’s personnel file explaining why.
- Analyze your management salaries. Have your pay plans resulted in facial differences between male and female managers?
- If there are facial differences, explain the reasons. There may be reasons for the differences. If so, make notes in personnel files explaining them.
- If you cannot explain the differences, solve the problems. If you cannot explain the differences, develop a plan to solve the problems. The resolution under the law cannot be to reduce the salaries of male managers. The solution should be to bring female manager earnings into line. Develop a plan to erase a deficit, and the method for doing that may vary depending on the circumstances.