04/23/18

Mind the Gender Pay Gap: Small Business Pays Women 34 Percent Less

New research shows that small and midsize businesses pay women 34% less than men. This also represents 18% less than the nationwide average for women – $.66 versus the $.80 U.S. average for every dollar paid to men – according to the recent SMB Fair Pay Report from Zenefits.

What’s going on? Small business owners don’t realize how unfair their pay practices are. In fact, SMB Fair Pay Report found that 92% of employers gave themselves high marks for pay equity.

“This survey revealed interesting blind spots related to what employers are investing in and intending to deliver, and how employees experience the results,” said Jay Fulcher, Zenefits chairman and CEO. “Small and midsize businesses have extraordinary economic influence and the potential to make a real difference in changing the world of work: creating more fair workplaces, more engaged employees, and better-performing businesses.”

The dreaded interview question about salary history plays a significant factor in women and minorities getting paid less. As a business owner, asking what someone is currently making may seem fair, but unfortunately it perpetuates pay inequities and even widens the effect over time.

“If you start out behind in pay, and future salaries are based on previous salaries that have nothing to do with your new job, it compounds over a lifetime,” explained Kate Nielson, state policy manager for the American Association of University Women. “It affects current salaries, future salaries, and retirement.”

Worse-case scenario is that asking a candidate’s previous salary breaks the law. Currently, nine cities and states including New York City, California, Delaware, and Massachusetts have made the question illegal. Across the country, local and state governments are weighing similar laws.

Often, experts point to women not negotiating during the hiring process as part of the reason for the gender wage gap. Regardless of gender, the SMB Fair Pay Report found that employees who negotiate earn 43% more than those who do not.

“Self-advocacy and negotiation are two major factors in perpetuating the gender pay gap,” said Beth Steinberg, Zenefits chief people officer. “Teaching people to negotiate better is a flawed solution to the issue.”

Peter Riccio, founder of Atlas Search, an executive recruiting firm in New York City, pointed out, “Women in the workforce are coming into salary negotiations behind. Offers are calculated largely … based off of what that candidate is currently earning.”

If you’re not sure what fair pay is for a role, you can research the wage range based on skills, experience, and location. Industry organizations can be an excellent resource. If you know any local recruiters, reach out to them for assistance. Salary guides are easier than ever to find for employers — and your employees and potential new hires.

Skipping the salary question puts you ahead of the trend and on the path toward pay equity. Even better, it can help you recruit and retain employees. New research shows that 80% of women would take a new job opportunity with an employer who seemed to have greater gender equality.

Get more small business tips from Lendio.

About the author

Andrea Mather
Andrea Mather
Andrea Mather is a writer and coach whose first business lessons were watching her parents start an engineering firm. She loves helping people take small steps and big leaps toward enjoying healthier, more fulfilled lives. Andrea has a B.J. in Journalism from the University of Missouri, Columbia.

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