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Guide to Gender Pay Equity for Smaller Employers

Are men and women being paid the same salaries for doing the same work within your organization? According to Forbes, 92% of employers believe they are paying staff fairly, while only 65% of employees believe the same. In a highly competitive talent market this difference might keep you up at night. Most guides for identifying and acting on gender pay issues assume your company has 500+ employees, plenty of salary data to crunch, and some skill with statistical analysis tools. But the reality is that out of the approximately 6 million businesses operating in the US, 90% have fewer than 20 employees. Small and medium-sized businesses account for 50% of the total employment in the US. Smaller employers face unique challenges when it comes to finding and addressing gender pay issues in the workplace:

  • Cost impact of parental leave
  • Difficulty implementing flexible work schedules
  • Limited or no HR support
  • Lack of bandwidth and budget for manager training
  • Limited ability to collect and analyze salary data

Despite the challenges, attention to fair pay is tremendously important for smaller employers from a business, social responsibility, and compliance standpoint. Promoting equal pay practices improves employee efficiency and productivity, helps attract the best employees, reduces turnover, and increases employee commitment. Here is a three-step approach to tackling gender pay equity for smaller employers.

Step One: Understand the Issue

The Equal Pay Act of 1963 and later Title VII of the Civil Rights Act of 1964 together tell us that employers must pay equal wages to men and women who perform jobs that require substantially equal skill, effort, responsibility, and working conditions. An employer cannot deny women equal pay for equal work which broadly includes access to transfers, promotions, pay increases, and benefits. Gender stereotypes and biases – conscious or unconscious – influence managers and HR people alike. Women are generally perceived as thoughtful, caring, and willing to compromise while men are perceived as ambitious, assertive, and self-reliant. These biases can lead to women receiving fewer promotion opportunities, being passed over for training, and not being given central roles on large projects. Unintentional gender bias can lead to pay inequity throughout the employee life cycle especially during:

  • Recruiting and Hiring – Research shows that men and women take different approaches during salary negotiation. Negotiation is often viewed as an assertive masculine behavior. Women are reluctant to attempt salary negotiations because of anticipated backlash from the company. Women who express masculine behaviors are often viewed negatively, assertiveness can be seen as aggressive or demanding. Also, companies which gather prior candidate pay and adjust starting offers up and down based on that information can be inadvertently continuing gender pay gaps job after job. Even the composition of the hiring team can unconsciously impact the number of men or women your business hires. If an interview team is comprised exclusively of male interviewers, they may be more likely to find common ground with male candidates.
  • Work Schedules – Women are disproportionately expected to handle childcare and household matters compared to their male counterparts. This means women are more likely to need part-time arrangements, telecommute options, flexible working hours, and request leaves of absence for themselves or to care of family members. Employees seeking these kinds of arrangements are sometimes viewed as less ambitious than other employees, are given less responsibility at work, and are considered less often for promotion into senior management. Financially, women returning from leaves of absence, maternity being the most common leave in the US, often experience lags in their salary growth because of absence during annual performance and merit cycles.
  • Opportunities for Advancement – Women make up only 29% of senior level management in the US and only 2% of CEOs. There are fewer women than men in the leadership pipeline, receiving mentorship from existing leaders, or being offered career development plans.

Step Two: Find the cause

You don’t need a compensation analyst on staff to analyze pay gaps. Use this simplified approach:

  • Download a report including name, gender, and base annual salary for all your employees in excel from your HRIS system (or build one in excel from your payroll records)
  • Arrange employees in groups by similar role. Title might not be enough if your organization doesn’t have standardized titles. Look for employees who perform similar work and group those
  • Compare the salary of employees in the same, or similar jobs and identify any instances where employees are paid differently and are also different genders

Expect to find differences in how people in the same role are paid, don’t panic or pretend those differences don’t exist. A pay difference doesn’t necessarily mean there is a gender pay issue. Focus on figuring out why the differences exist, investigate the largest gaps first. Here are some things to consider:

  • Did the male employee negotiate more firmly than the female employee during recruiting?
  • Is your company missing job descriptions or a formal recruiting process and leaned heavily on the candidate’s prior pay information rather than established salary ranges for the position?
  • Are performance ratings for male and female employees in the same role similar, yet they are paid differently?
  • Are female employees regularly being rated lower than male employees by certain managers, or across your organization?
  • Are female employees being paid at their pre-leave salary when returning from work, even though they are achieving the same performance results as male colleagues in similar roles?
  • Are male employees asking for pay increases more regularly than female employees?
  • Are male employees being formally or informally mentored with greater frequency than female employees?

Step Three: Take action

Creating an action plan within your organization can correct and prevent gender pay issues. The best approach to building your business case is to collect and list gender pay differences that cannot be explained, and those that can be explained but are not justified because of the influence of some factor from step two. Discuss this list with appropriate managers and senior leadership to determine how the gaps you’ve identified can be corrected in line with the budget and overall business strategy.

The most proactive things you can do to prevent gender pay inequity going forward are:

  • Create a written policy and guidelines about bias-free recruiting. Ensure interviewing teams are diverse. Avoid basing starting pay decisions on a candidate’s prior salary (if known), and instead on the value of that job within your organization.
  • Talk to managers about fairness and consistency in the performance review process. Make pay decisions based on skill and contribution.
  • Create and follow a consistent, transparent process for promotions, transfers, and pay increases.

Megan Coen – Executive HR Consultant, VP

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

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Navigating Romance in the Workplace

The majority of working adults spend more time with their co-workers than they do with their own families and friends.  Accordingly, it is no surprise that employees sometimes become romantically involved. According to a new poll from the Society for Human Resource Management, 33% of U.S. adults are, or have been, involved in a workplace romance.

Sometimes those pairings lead to happy endings.  A CareerBuilder survey of 809 working adults in the United States found that almost one-third of office romances resulted in marriage.  However, it should be noted that not all office relationships end well.  While there are certainly instances where workplaces romances are acceptable, there are times when relationships are wholly inappropriate.  The most notable example of an inappropriate workplace relationship is one where a subordinate is romantically involved with a superior.  The same CareerBuilder study found that 35% of female workers and 25% of male workers had dated someone at a higher professional level than themselves, and in some cases, their bosses.   This creates the potential for intimidation, retaliation or sexual-harassment claims, as well as real or perceived favoritism.

Importance of Disclosure

Many employers now require employees to disclose personal work-based relationships, including those with contractors, suppliers, customers or clients.   Known as “love contracts” these documents outline a code of conduct, and they require employees to disclose their status as a couple.  It is important to keep in mind that while disclosure of voluntary relationships is good practice, these so-called “love contracts” are not a cure all.  Often, employees will simply hide relationships from the company altogether.

While employers can deter workplace romances by adopting and enforcing anti-fraternization policies, they should realize that zero-tolerance policies are unrealistic.  However, a SHRM survey found that 28% of employees involved in a workplace romance never disclosed it to their employer. Among those who did disclose a relationship, 32% said their company was supportive, and 29% said the employer was indifferent.

Implications

Employers should look at their current policies and ensure they are doing all they can to provide a safe environment for employees where unwanted sexual advances are prohibited. This includes focusing on training to recognize, report and prevent harassment in the workplace.  It’s critical to have policies in writing, and such policies should be laid out in the same section as rules regarding sexual harassment. Not only will a proactive approach help your organization avoid a number of pitfalls, but it will also help avoid any awkward circumstances that may arise. For example, established rules about public displays of affection won’t just prevent employees from acting inappropriately in the break room/public areas, they’ll also prevent the perception that you made the rule in response to a specific PDA incident.

Workplace romances turned bad can become sexual harassment lawsuits; it only takes one reckless action from a spurned lover for a seemingly innocent situation to require legal attention.

Best Practices for Employers

  • Have a “dating and personal relationships policy” in place.
  • Encourage employees to disclose voluntary relationships.
  • Closely monitor romantic relationships that already exist.
  • Specifically prohibit Manager-Subordinate relationships.
  • Ensure that policies are applied consistently.
  • Communicate regularly.
  • Consider using a disclosure agreement.

Workplaces romances are bound to happen, regardless of the rules.  However, employers can avoid drama and potential legal repercussions by proactively setting specific guidelines and clearly communicating them to all employees.

Meredith Delia – HR Consultant

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

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When is it Time to Leave a PEO?

Author: Saul Macias, MBA, PHR

When you were smaller, partnering with a professional employer organization (PEO) made sense. It shifted some tasks and liabilities off your shoulders and allowed you to afford to offer good health benefits to your employees. Most of all, outsourcing your human resources, benefits, and payroll gave you space to concentrate on growing your business.

Though co-employment had a role in the growth of your organization, many employers arrive at a point where it is appropriate to exit. Here are some key considerations as you decide whether to initiate that transition away from your PEO:

Benefits: Lots has changed in the world of benefits in the past couple of years. Offering benefits in-house would give you the autonomy to design, choose and manage your health and retirement benefits. The desire for greater flexibility in employee benefits can be a key driver to part ways from a PEO. (A lack of knowledge in this area, however, can often delay a PEO exit).

Service: As you grow, your business and your employees’ needs become more complex. In the midst of that complexity, you may find that your PEO lacks the expertise to drive and support your HR, benefits and payroll to meet your unique and evolving needs. Furthermore, a lack of onsite support or expertise to help you cover a multi-state or international expansion can be most challenging under a PEO model.

Cost /Scale: The average employer in a PEO has 15 employees. According to the Society of Human Resources Management (SHRM), the average HR professional supervises approximately 70 employees. Somewhere between 70 and 100 employees the economics may merit managing your benefits, payroll and HR in-house. But what will it take to build a team that can handle this role?

Co-employment: Under a PEO, one key area of managing your employees is done by a different company whose culture and identity could be very different from yours.

Once you have decided to exit, how do you make it happen?

PEO Transition:  Working with an experienced partner like ABD can help you analyze and manage the critical transition away from your PEO. Our team of multi-disciplined experts can help you plan, select the best technology platform, build the required work flows, and transition into your new program while keeping daily operations running smoothly. We can also help you hire an internal team or uncover new options that offer more flexibility than a PEO, but still allow you to outsource some or all of your human resources function. Contact us today to explore the possibilities.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services