To ensure it was paying women the same as men, software giant SAP’s North American division did something simple in theory but harder in practice: It checked.
Earlier this year, SAP hired a law firm to examine the pay of all 20,000 North American employees. According to division president Jennifer Morgan, the firm discovered 1% of its employees were underpaid and about 70% of those, or 140, were women. The cost to adjust their salaries will be about $1 million annually, she said, meaning the average increase was about $5,000. (The company’s 2015 revenue in the Americas was $8.4 billion).
In a follow-up email, SAP spokesman Atle Erlingsson said the affected employees came from across the company and a range of experience and roles, and that the raises were not in response to the threat of litigation. Morgan, who has headed the German company’s North American operations since 2014, said the initiative was part of a larger process to make the company more equitable and inclusive, and where women could envision a long career. Only 34% of SAP’s American workforce, and 30% of leadership, is female, she said.
“I wanted to create a culture of trust and transparency,’ she said. “It’s about putting the focus on performance and good work, and not the politics of the place.”
An increasing number of companies have committed to paying women the same as men, as pressure has mounted from politicians, employees, and the threat of litigation. Farmers Group, an insurance company, agreed in April to pay $4 million to approximately 300 female attorneys to settle a gender pay lawsuit, the Wall Street Journal reported.
In June, 28 companies including Amazon, PepsiCo and Johnson & Johnson signed a White House equal pay pledge. Next year, employers will be required by the US Equal Employment Opportunity Commission to submit pay data broken down by job category and sorted by race, sex, and ethnicity to the federal government, another effort to prod companies into pay equity. State legislatures have also become interested in the issue, and Massachusetts now mandates employers pay equal wages. A federal Paycheck Fairness Act bill was introduced in 2014.
Some companies are taking a second look at their annual raises, promotions, and bonuses to ensure they’re distributed fairly. At Ancestry.com, CEO Tim Sullivan said the company noticed “a small discrepancy in the size of our raises, and we corrected it.”
But ensuring fairness going forward is easier than correcting for past injustices, in part because companies are loathe to admit they’re in the wrong. Jonathan Segal, an employment attorney with Duane Morris LLP in Philadelphia, advises companies to be careful about how they address the issue if they choose to do a review and make corrections.
“I wouldn’t recommend a client say that ‘Oh, you’ve been victim of discrimination,'” said Segal, who was speaking generally and not about specific clients. “They can say ‘We’re not sure why you’re not paid enough, but we want to fix it.'”
Companies may be sued for back wages once the pay gap has been disclosed, he said. Employers might ask workers to sign a waiver, forfeiting the right to sue in return for a raise, but that could backfire if they refuse, Segal said.
SAP didn’t ask employees to sign a waiver, nor did it offer back pay, Erlingsson said.
While there’s a risk in addressing the issue, there’s also a risk in doing nothing and letting the problem fester, Segal said. More companies like SAP are proactively looking at their payroll, and many won’t like what they find.
“Don’t go down this exercise and expect that you’re going to say everything is fine and we don’t have to do anything,” Segal warned.