Understanding Pay Equity: Insights from Dr. Brian Marentette

Today we are recording our first session of two with Dr. Brian Marentette. He's from Berkshire Associates. He's the Director of People Insights there. Brian's going to, well, he's going to be teaching us. This first episode is just about pay equity basics, and so Mike and I will be asking Brian lots of questions, and we hope this is a beneficial time for you. Brian, would you like to tell us a few things about yourself? Brian Marentette, PhD: Sure. Thank you for having me.

First of all, it's an honor to be here. I am a former member of the Biddle team. Through two different stints with Biddle but recently we were acquired and joined the Berkshire Associates group. So I know the Biddle folks well, and it's nice to be back. Speaking with you, but yeah, Brian Marentette here.

I'm an IO psychologist that specializes in a number of different areas across the HR space and EEO compliance doing sort of TestGenius type work as well with testing and validation, but also other statistical analyses surrounding personnel decisions in the workplace. So hiring, promotion, termination, and compensation, which is what we'll talk about. today with pay equity. Nice to be here. Wonderful. Wonderful. Thank you.

So my thought for today is that we would do the reporter questions, the what, who, why, when, and how of pay equity. And why don't we just start with a definition? What exactly does pay equity mean? Brian Marentette, PhD: Yeah, great. So it's a term that's thrown around a lot. And there's probably several definitions out there. Fundamental common thing that you'll see is equal pay for equal work. That doesn't mean same pay for same work.

It's a relative term in that it's considering individual's attributes, their characteristics that they're bringing to the table, the characteristics of the work that they're performing and then considering pay after we take those factors into account. So can you elaborate a little bit more? You said it doesn't mean same. So that kind of brings a question mark in my mind. Brian Marentette, PhD: Sure. So assume Mike and I are doing the same job. All right.

We're both we're not going to be the president of test genius, but we're a consultant doing the same job. And I was just hired a year ago, fresh out of grad school. And Mike was hired 10 years ago and he has had several other jobs as well. In the consulting space, he brings a different level of expertise and experience knowledge to the table. If we were paid the same pay for the same work, that would mean we're making the same. Amount of money, regardless of any of those other factors.

And that's where the pay equity concept comes into play is that we should not really be paid the same. That's actually not equitable. I don't think Mike would be happy if he's making the same amount as me as a newbie. And so he has compensated more and you'd see that in raw numbers. And it would appear that there's a disparity there, but behind the scenes, the equity piece would explain that there's other factors. That contribute to that. So once we factor those things in.

We actually are making equal pay for the equal work that we're performing. Now, my work isn't going to be equal to Mike's. And that's where some of the more complicated statistical analyses come into play. But the concept there is that pay equity factors in these other relevant pieces of information that might influence somebody's pay.

How does that come into play as well in terms of determining pay equity or in terms of the analysis for pay equity, or is that something that occurs outside or is it not even something that gets considered? Brian Marentette, PhD: No, good question. That is, that comes up with almost every single client that we work with. Many organizations out there claim to be a pay per for pay for performance model. So they pay people more for better performance.

And oftentimes that is quantified through performance ratings. That is a legitimate factor that could be considered in somebody's compensation I will tell you more often than not regardless of how strong a client pushes, me to use those ratings, they actually have a very weak relationship to pay.

There might be some sort of individual cases where your star performer indeed has the highest ratings across the board and they are making the most, your lowest performer might have the lowest ratings and the lowest pay, but all the noise in the middle doesn't usually track very cleanly. But performance would be one of those factors that could be an influencing pay certainly. And that's an interesting point.

We hear very often when there's conversations either internally or externally about job performance ratings very often it's a gift. That everybody gets one time a year, somebody says you're spectacular and that could really throw a wrench into these things. So there are other metrics available as well. If you're doing an assembly job, you're making widgets.

If you you could be, you could look at the attendance or lateness or, maybe there's a whole host of other, uh, metrics that might be available. Do those ever get factored into the work that you're doing or get considered as criteria? Brian Marentette, PhD: In some cases, yes. In situations where you have those objective quantifiable outputs. Yes, they often do factor in and that's usually on like variable compensation, so non base pay commissions, incentives yeah.

So in, these days, there's not a lot of jobs that actually make widgets where people can quantify the number of products they're producing and things, but in some cases attorneys. Oftentimes we'll see that obviously billable hours impacts the some of the bonus structures that they have. And it's really pretty formulaic in those cases where if you hit certain targets, you get the incentives of course. Yeah. But those need to be factored in when you're looking at some of those non base pay.

Incentives and commissions and bonuses. Yeah I know. I have a friend who is an apprentice electrician and he is almost ready to become a journeyman electrician. And obviously they have structures that are based around merit, which is really associated with the steps that you increased through your education, the amount of years that you put into each program. And there's really a natural cadence from apprentice to journeyman to supervisor, those kinds of things.

Is that a realm that you prefer to operate in? Is it, are things more clean there? Or do you even need to do compensation analysis in a realm like that? Or, do you prefer to do it in some of the areas that are more subjective? Or do you think it's more necessary in those areas? Brian Marentette, PhD: Great question. And yes, most of the compensation pay equity work is done in environments that are not so structured. It's particularly like unionized roles.

We have organizations with unionized workforces. We oftentimes don't even analyze the union employees because they are tied to that rigid structure. And there's actually very little you can do about it. And when you see disparities they're often, at a job title level, as soon as we control for the grade that they're in or that step that they're in, it wipes it out because that usually explains almost all the variability in somebody's pay.

It's tied to these steps and levels that they're on so it is the subjective pay decisions that are most prone to bias potentially or just general, poor practices that produce unintended consequences that might appear as bias that are caused by other factors. It's pretty deep into it but yeah, So is it an effect of the way that those unionized environments are organized. It's pretty clear that there is very little inequity that exists because it's happens to be very much structured.

And so people don't tend to have to look at that? Or is there some other nuance that directs you in terms of, you know what what you might need to do or for whom you do the service? Brian Marentette, PhD: Right. There's very little opportunity for their, for inequity to exist when you have such a rigid step type of system And if you're finding any differences, it's going to reflect people that are deviating from whatever has been.

So there shouldn't be any opportunities for inequity because it's so structured like that. And that's why we will leave it alone.

I will say from a different perspective there's kind of two lenses you can look at pay equity through. One is a legal lens. Are they violating any federal or state or local laws that might prohibit disparities or, apparent bias in pay? But the other is more of a D,E, & I lens or a more of a diversity lens where let's say we look at that job of electricians and we're not controlling for those different steps and we see a huge disparity in pay between, men and women. Now what does that mean?

Does it mean we have pay bias against women or does it mean that we have only, got our female employees stuck down in these lower steps? They haven't moved out of those lower grades and steps to get up to higher levels. Sure. We can explain away the difference. We can statistically tell you, ah, it's not an issue.

Once you factor in those steps, but then you then have to self reflect as an organization and say why do we have, all of our females are all of our Hispanic or black minority employees stuck in these lower levels. And then it becomes a separate issue. It's not really a pay equity issue. It's more of that career progression, glass ceiling type of a problem, which is a, another benefit of doing pay equity work is that it can spotlight some of those issues. Another associated problem.

So there's two things I want to ask. I'm going to throw this out here because I don't want to forget the comment that you just made about, identifying some of these issues that could really potentially point toward a systemic issue, right? If you find that something's happening over here on the compensation side you should probably look elsewhere within your organization. And the second part, I'm just going to throw this out. So I don't, I'll go ahead and answer that. No I'll type myself enough.

Go ahead. Brian Marentette, PhD: Yes, no, you're spot on. It ties into a tangentially related concept, which is the pay gap problem. Okay. Which is. And I can define that before Jenny has to ask me, which is really just looking at like an unadjusted sort of like ratio of, let's say male to female compensation. We're not factoring in any of these relevant pieces of information that might come into play performance, education, whatever it might be.

You'll hear about the pay gap statistic in the United States. It's published by the Census Bureau when they run their census every so often. And the most recent figure is like 83 cents on the dollar, right? Females earn 83 cents on the dollar compared to their male counterparts. And that leads a lot of people to think, Oh, we have a huge pay equity problem in the United States. And it's not necessarily true. It's not really a pay equity problem.

It's more of a labor market availability or a talent acquisition problem. You've got your highest paying jobs. And we know from census data that there are more male employees available out there in the labor market for these higher paying roles. And the females are much more available out there in the lower paying bands and things. When you just look at an organization, and say, what's the average male versus female pay? Of course you're gonna see this 83% or 17% gap, right?

Females making 83% of the male counterparts. And so through a pay equity analysis, you get a look at your like, job title level. Are we paying people the same for, equal pay for equal work after we consider these relevant factors? But then you can also look at that broader sense and see. Okay. Do we have more of a talent acquisition problem? Because we've got these pockets where if we take job title out and we look at average pay, there's a huge gap over in this one business unit.

We're not bringing in any female or minority employees into any of the high (level positions).. And that conversation changes to again, the TA team. It's not a comp issue. It's not a dollar problem. It's are we getting people in the door? Are we not getting enough applicants? Are we not recruiting appropriately? So there's a lot of questions that get opened by these pay equity analysis. So if it's a an availability issue, then does that enter the narrative in your report?

I think that would be a really important aspect, especially use that basic example of national equity between males and females and a gap of 17 cents, and you're explaining it based upon, of an availability issue, is that something that you folks ferret out? Or do you leave that to the employer to really try to help to present that in terms of taking action moving forward. Brian Marentette, PhD: Yeah great question.

And that would be an kind of an add on to a pay equity analysis, because with pay equity data, we don't, we're not necessarily looking for market availability. We don't typically include that in a pay equity study. It is something we might do as a follow up or other clients would say that's great to know. We'll go and drill down on that. We'll take it from here.

The other point that I was going to ask you about was something that you mentioned a little bit earlier was regarding, sometimes it's an issue of legality and sometimes it's an issue of DE& I. And so there are certain classes of employers who are under the auspices of certain federal agencies for certain reasons. And then there's other ones who maybe aren't under the auspices of those oversight agencies, but they are wanting to be very transparent and they're wanting to do the right thing.

And therefore, they're spending time, energy and money on having these studies done so that they can be equitable. I think that probably a lot of people. In our space and maybe even protect, particularly on the talent acquisition side, our side of HR, they don't really understand what that is or what that means. But that's, you grew up in that space, the consulting and the affirmative action and the EEO and the pay equity analysis. That all really has everything to do with those two spaces.

Can you spend a couple of minutes and define those two arenas for us? Brian Marentette, PhD: Sure. So within the, I'll call it the EEO compliance realm, because even if you're not a, like a government contractor, for example, just about every employer is subject to Title VII laws, right? From the Civil Rights Act that prohibits discrimination based on protected characteristics, age, race, religion, age isn't necessarily part of that, it's the Age Discrimination Act.

Age, race, religion, gender disability, veteran status. So these are all protected characteristics, right? If there's any differences in pay that are large enough to flag as being significant and they fall along any of those lines. Yes. Employers are liable really for a potential pay discrimination suit for those employers that are focused really just on legal compliance, there's that pay equity answers those questions as well.

It's the same analysis that you would do for legal compliance versus a proactive look where people just want to know, Hey, do we have any pay potential pay problems that are out there? The difference on the proactive approach is that, a a legal standard is going to be very specific. We're looking at employees that are really doing they're called similarly situated technical term in the field, meaning, basically they're doing the same job. You can look beyond that though.

You can see for, Employees that are doing similar work, are we paying differently for employees doing similar work and do those jobs predominantly, employ female versus male. And, there's a case study out there. That's a good example where an organization had a daycare on site. It was run predominantly by female employees, right? And they had a parking garage and a valet service with parking car attendants, predominantly male occupant that role. And guess what?

The parking car attendants, their base salary was like 5 more than the female. Daycare caregivers. And, you got to ask yourself as an organization, okay, you're paying fairly within these two jobs. There's no discrimination going on. We're not paying unequally. But then what's the value that we place on those two jobs that. Arguably, the daycare providers are even doing more complex work, more higher risk. They've got the lives of children there. But certainly more hazardous, right?

Brian Marentette, PhD: Hazardous, more stressful. I have three young kids. I know that. I've done both jobs. Actually, I was a valet and I did caregiving for my kids. And I would say this is a much harder job being a daycare provider. But looking at it from a legal lens, Find any problems because within these jobs they're paying equally.

But when you look at then across similar types of jobs, so like that band of jobs, that's, just support work throughout the organization you're placing more value on these male dominated roles, and that's where some of those subtle biases that maybe existed decades ago. Have just become the norm. And of course we pay our parking lot attendance, 25 an hour. And our daycare providers, 20 an hour. So we've always paid them and it's never been a problem.

You don't know that until you run something, like a proactive pay equity analysis that goes beyond the legal standard to really root out those areas where as an organization, have you made sort of biased decisions in the past that are no longer even a thought until they're surfaced in one of these analyses.

At what point do I consider having a consultant like yourself come in and conduct an analysis of our pay structure? Brian Marentette, PhD: What would be a trigger you mean to? Perhaps maybe talk about proactive versus reactive. Brian Marentette, PhD: Yeah. Okay. Sure

Brian Marentette, PhD: Yeah. Yeah. Okay. Might trigger a legal review would be, you can still do proactive, legally oriented pay equity analyses, but that really is going to be coming from your council that might think Hey, since that there's some up there and, there's been complaints, but maybe California has some fair pay activity here. Any individual employee can kind of. file a claim and say, Hey, I think I'm being discriminated against based on gender.

And so from a legal sense, yeah, that there's no necessarily like a trigger for that. If you get a claim, you have to respond to that with a reactive analysis to support your legal counsel and rooting out what the real story is. And is there an issue here? And do we need to settle and how much should we settle for? And what's the back pay and That's a whole nother world, right? That gets activated when there's a lawsuit that's filed.

But as an HR vp these days, I think almost every organization needs to be doing at least annual pay equity analysis for a number of reasons. First if they haven't been doing them, they've probably got some pay disparities that they're just not aware of. And until you resolve those you're just. You're not treating your employees fairly.

But the other thing with the transparency era, now the state by state seems like almost every month, another state is coming out with more, regulations coming out all over the place. There's going to be more questions about pay and what I'm making. And, even if it's not within the same job, like my comparison earlier with the daycare and parking car tenants somebody can easily point to another employee. That's doing similar work.

And if you don't understand how your pay practice is operating, you have guidelines that. Your team uses in making offers and your managers when they're making promotions should be following these guidelines. But it's, it can be a lot of little small decisions that lean in one direction against one group that over time start to compound and can produce these disparities that again, like typical adverse impact theory, it's, facially neutral practice that results outcome.

And even if it's not a legal claim that you're responding to, just as an organization, you need to understand these metrics, you need to know what your pay practice is producing, for your employees.

And this actually might be a good time to differentiate two critical types of pay equity.

One is going to be your internal pay equity, internal equity, comparing employees within your organization, maybe with, within the job title, one against another or like I said, maybe you're looking at broader groups in your looking at substantially similar work still all within your organization that's internal pay equity, often confused with external equity, which is how you pay relative to what the market might demand. All right.

And there are a lot of organizations that will say, yeah, we do pay equity work. We've been doing it for years. We use XYZ company. They give us the survey data. They tell us what all of our positions are. You know what the average should be and we stick to that pretty closely And that's when we know like red flag. They haven't looked internally. Yeah, and the internal piece is where the focus Usually lies with differences that fall on race gender age, etc you know the external

. Mike Callen: The real problem areas, right? because the market tends to take play take the market tends to fix those external problems on its own, because if organization A isn't paying enough and B is paying twice as much, people will start get up and they'll start flocking over to a different. Organization, right? Brian Marentette, PhD: And it's incumbent on the organization to create their own philosophy there. How do they want to pay compared to the market?

Some nonprofits say, you know what, we're not looking for the best and the brightest, we're not going to pay in the 75th percentile we want people that are just going to do this work in an altruistic way, and we're willing to pay at the 40th percentile. So they're going to pay below the market rate for that job, knowing That's where they're going to pay. So externally, they're not very equitable to what other employers might be paying for the same work, but they don't care.

As long as they're paying everybody at about the 40th percentile relative for their standing, then it's fair. So Brian, how often should a pay equity analysis be conducted by an organization? Brian Marentette, PhD: Yeah, there is a lot of factors that, influence that answer, but really an annual analysis will do, usually. Most companies are not changing pay more than, once a year. So they have an annual merit cycle.

They look at their, annual increases and adjustments they make them, and then it sits for another year and they review it again. And their pay planning. It makes sense to do it at some point before or after that decision, ideally before. So you can look to see if we're, where are we at? Are there any gaps that need to be addressed? And you can do that through that cycle. And if not, you look at it at some other point in the year, knowing that you've got several months to remedy any issues.

The one Other factor there that would come into play as the flux of your workforce. So if you have a lot of turnover, a lot of hiring, a lot of acquisitions going on divestitures, you need to look at that much more frequently. So we do have a couple of clients that look at it every six months. Other ones that will, tap us every.

A couple of times a year, three times a year, if they have several acquisitions going on and they need to see how do we look now that we've reshuffled and integrated some new employees in here. So we are getting close to our 30 minutes length for our first episode, but would you mind if I asked you a couple more questions? Brian Marentette, PhD: Of course. Of course. I don't mind. Thank you for clarifying that.

So I heard you say pay transparency. Brian Marentette, PhD: Yeah. And I think that's more of a technical term than I think that it is. Can you speak to that? Brian Marentette, PhD: Sure. So yeah, and pay transparency often gets lumped in with pay equity. But transparency is really more just that employers having to share more information about their pay practice, how they make pay decisions, even what they are paying employees. So there's certain states you have to share if an employee asks.

A lot of states, you have to share the range. First of all, the range for the position that's being applied, it has to even be shared in the job posting. And so like states like Colorado, that has to be within your job posting. What is the salary range for this position? Other states and organizations, you have to provide the average within your job so that any employee can say what's the average pay within My job here. And am I below or above that average?

And so the transparency era is that's really what everybody's referring to is just being more public with how decisions are made. What are the factors that, that go into, salary increases when it comes time for raises and things like that. But then also what are the data points. relative for the position that somebody might hold. Great. Thank you. Mike, it looks like you have a question.

And so that certainly is identifying an issue, whether or not it's a legal issue, it might just be a moral ethical issue, but. Is that something you want to talk about now or do you want to cover that in the next next session? Brian Marentette, PhD: I can briefly hit that. And it is a phenomenon that we see. We refer to that as pay compression, where in general, some of your newer employees are going to be making more than your more tenured employees.

And typically when we're running these pay equity analyses, we try to account for the fact that. Employees that have been there longer should be making more. And so when you put that into the equation, you actually see the inverse and it's not a legal factor or a legal concern. These can pay however they want. However, if all of your recent hires that are making more fall into one particular group, that could be creating an equity issue along.

One of the other demographic protected group so companies need to be mindful of that. Again, it's not going to be a race, gender equity issue. It's going to be. Probably just more of a, are our older, more tenured employees valued. Okay. Maybe we need to bring them up closer, start closing that spread between that group that we've just hired recently with a much higher rate. It's bad water cooler talk, bad optics, right? This is what it creates is, it is.

Brian Marentette, PhD: And that's the downside of some of the transparency work that's, that people are pushing is that now that those ranges are out there and Incoming applicants can see they ask for the moon and they have more leverage to push their salaries higher. But at the same time, existing employees have that. it as well. Now it's harder once you're in to negotiate your salary upward than it is at that offer stage. So I wonder if that's why people use hiring bonuses.

So maybe it doesn't get, Brian Marentette, PhD: that's a question. Yeah. Let's factor it in. The part two question. Brian Marentette, PhD: Part two question for sure. Yeah. Brian Marentette, PhD: How to manage your equity. Yeah. Well, there's a cliffhanger for session two. If you're dying to understand the answer to that question, then be sure and join us on the next Next episode of this conversation with Brian.

So cool.

But I'm drawn to that type of work for whatever reason. And then on the technical side of all the schooling that I went through, We learn quite a bit about statistics and analyses and how to quantify and use data to inform decisions. And I'm also drawn to that. I think the best decisions are made with data.

So then taking those two things together and then looking at, a career that can be fulfilling and do some good in the world, preventing and correcting discrimination along race and gender, any line really, it's rewarding. Makes you feel like maybe you're doing something.

Brian Marentette, PhD: I always say it's tough to transition from work Brian to a dad within a matter of seconds as a work from home employee and the rigidity and the regimen that you must follow with pay equity work and data analysis to them, the chaos of trying to wrangle kids are starkly different and I enjoy both of them, but it takes a little bit of a re reconfiguration hat shifting. Brian Marentette, PhD: Absolutely.

Yeah. Yeah. I'll bet you around the dinner table when you hear that's not fair, the answer from you is really original and special. Brian Marentette, PhD: So have you considers how old you are? You are and he is nine. He's had a lot more on experience. He's been on this job for much longer than you. So so much, Brian. It's always a pleasure to to chat with you. And this is a really great time spending time on the podcast with you.

And we want to thank you very much for taking time out of your day, to come and share with Jenny and I, and. And as well, anybody else who happens to listen to this, it's been incredibly informative and I am looking forward to part two as well. So thank you very much for that. Brian Marentette, PhD: Thank you both.

Thank you to our listeners and to our viewers as well for joining us today and make sure you tune in next time for part two with our conversation with Brian. Thank you very much.