Dive Brief:
- Incentive pay like bonuses widens the pay gap between women and men by an average of $3,500, an ADP Research Institute study revealed. Women in the study were paid $15,000 less in base pay than men, but this disparity became $18,500 when researchers accounted for incentive pay. ADP tracked the career paths of exempt new hires over a six-year period.
- As new hires, women age 20 to 30 in the study with a low starting base pay matched their male counterparts in earnings; but after six years on the job, the women in the study earned less. And when bonuses were factored in, women's bonus-to-base ratio was 21% of that of the men's. For new hires in the 40 to 50 age range, the base salary pay gap closed but women in this grouped earned average bonus amounts of 8.5%, while men averaged payments of 11.4%.
- ADP noted variations by industry: women in the information sector had a higher bonus-to-base ratio than men, at 7%. But women in the finance and real estate industries, which ADP said had the highest pay gap both with and without incentive pay, had a 21% lower bonus-to-base ratio than men.
Dive Insight:
Just as some employers and industries make gains in closing base-pay gaps, disparities in incentive pay threaten to erase those efforts. Even for positions such as CIOs, where women have either surpassed or are on par with men in terms of pay raises, fewer women are selected to receive bonuses.
Some cite women's frequent roles as caregivers and time out of the workforce as one reason for the disparity in pay. But the ADP study found little evidence that women were more likely to quit their jobs than men. In those incidences where women need to be caregivers but don't want to drop out of the workforce, employers can be supportive by providing both women and men paid family leave.
In a recent interview, Beth Steinberg, chief people officer at Zenefits, told HR Dive that executive leadership's buy-in is necessary to eliminate pay disparities. Correcting the problem might require action by those in the C-suite. HR practitioners can help to solve pays gaps by reviewing their organizations' pay practices, working with managers to flag disparities and conducting periodic audits.
