Pay by gender, race and ethnicity under the spotlight in California

California state law now requires companies employing 100 or more people to provide information about pay by gender, race and ethnicity

DiversityQ spoke with E J Marin, Head of Global HR Solutions Engineering at Nakisa, about the impact of a new law requiring companies to provide information about pay by gender, race and ethnicity, and the importance of data and analytics driving transparency and fairness in the workplace.

People in California who feel they are not treated equally by their employers can now file complaints more easily and without fear of retaliation, thanks to a new legal requirement.

From March 31 this year, all companies that have 100 or more employees must submit information on pay by gender, race and ethnicity annually to the state’s Department of Fair Employment and Housing.

However, the jury’s out on whether this could derail progress on diversity, equity and inclusion (DEI) and lead to employers becoming reluctant to recruit women and those from diverse backgrounds because they may have to pay more.

“It could be an unintended consequence,” agrees E J Marin. “But, at the same time, it also means that employers will have to invest more in training and data transparency.

“There may be instances where ‘unfairness’ may be a matter of perception, and a particular case might be difficult to explain. But it should be part of a company’s culture to nurture employees and be fair.”

Better records for tracking equity

Marin explains that the new legislation is an amendment to existing law, making it easier for employees to file complaints and harder for the employer to retaliate. The amendment means that: “everybody will have to up their game with better documentation and records systems for tracking employees’ experience regarding equity.”

While the law allows some pay disparity, paying less in some parts of the state where the standard of living is lower, or linking salary to experience, it now requires more formal and robust record-keeping.

With over 20 years of HR experience, Marin knows how important it is to keep proper records and maintain quality data. He is Head of Global HR Solutions Engineering at Nakisa, a world leader in enterprise business solutions.

He says that those companies that already have HR systems will still need to review their processes. Take wages, for example; some systems don’t tell the complete story of what someone was being paid and when.

“Then you end up having two versions of the truth, with conflicting visions of what happens,” he argues.

“What happens typically is that processes are configured to cover 60-70% of employee cases, thus in the absence of atypical data points to support a story, it becomes hard to keep up with every single scenario.

“Where I also see HR practitioners falling behind is analytics. In my experience, it is impossible to configure a system to cover 100% of HR cases that you might find, especially if you’re opening in a new location where there are different laws and requirements. The analytics will give a systemic overview of what’s going on and identify things before they become a problem.”

Diversity, not just a nice to have

He advises companies to have a records system that the employee and their manager can easily update to ensure everything is documented at the right time.

On DEI, Marin believes that companies have learned that having a diverse workforce is not just ‘a nice to have’ but makes a significant contribution to performance and productivity. Now their focus is increasingly turning to soft skills, such as neurodiversity, empathy and emotional intelligence.

He says: “Emotional intelligence is one of the skills in which we invest the least but need the most. It’s how you create a company culture that encourages and incorporates different points of view.”

Fair culture

Why California is leading the way in the US with the law reform is unclear. But Marin suspects it could be due to a steady increase in complaints from employees and retaliation from employers. However, he points out that the data to back this up is not currently available. 

It’s likely that some other states will follow suit. Says Marin: “At the end of the day, people will embrace what works and reject what doesn’t work. We don’t know the unintended consequences of this law yet; it will have to run for a couple of years to see what happens. We are starting to see similar laws in other countries, such as the French Equality Index and the Pay Equity Act in Canada.”

He urges companies in California to investigate and invest in their analytical capabilities; think about their workforce, and make sure as a company it is perceived as fair. Creating better HR policies would also help save them from complaints and lead to a better company culture.

Summing up, Marin says: “No system will present you with the right culture and the right people making the right decisions at the right time. Having the data points under control is one part of the equation. The second part is to have a fair culture to defuse situations or potential problems in the future proactively.”

E J Marin, Head of Global HR Solutions Engineering at Nakisa.
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