The SMB gender pay gap is 18 percent less than the broader nationwide gap of women earning 80 cents for every dollar men earn, per Labor Department data. (Photo: Shutterstock)
The gender pay gap is wider for small and mid-size businesses than their larger brethren – but women who negotiate their salaries stand a better chance narrowing that gap, according to the SMB Fair Pay Report sponsored by Zenefits.
On average, female SMB employees make 66 cents for every dollar paid to men, according to Zenefits' survey of 1,002 full-time employees of small businesses and 401 small business owners and HR decision makers, conducted by A.D. Laskey Consulting. The SMB gender pay gap is 18 percent less than the broader nationwide gap of women earning 80 cents for every dollar men earn, per Labor Department data. Zenefits released the survey ahead of National Equal Pay Day on Tuesday.
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"Perhaps even more alarming, however, is the extreme discrepancy in perception between what the owners and HR leaders of SMBs feel they are providing (in terms of compensation and workplace experience) versus what employees feel they are getting," the authors write.
For example, 91 percent of employers in the Midwest say they are paying fairly, but the Midwest also has the widest SMB pay gap in the nation for women: 43 percent less than men. There is also a rift in communication, with 92 percent of employers saying their employees are satisfied with communications and policies around compensation practices, yet nearly half of their employees—45 percent—feel neutral or disagree (49 percent of women and 36 percent of men).
SMBs often lack access to the necessary data and tools to know that they are perpetuating the wage gap, according to the survey. Nearly all (92 percent) of the respondents who are small business owners report that they are paying fairly — but they also reported a wide and inconsistent range of sources for determining salaries. Almost a quarter of the participating companies use third-party benchmark data on pay based on role and region, but a third ask candidates for their most recent pay.
"Though this has been a long-standing practice, it only perpetuates the current wage gap," the authors write. "Furthermore, as of 2018, asking an applicant his or her current salary is actually illegal in some states and cities across the U.S."
Regardless of gender, SMB employees who negotiate earn 43 percent more than those who do not. Even though very few have had formal negotiation training (21 percent of men and 12 percent of women), comfort levels around negotiating and self-advocacy are widening the gap.
The majority of employees, 78 percent of men and 67 percent of women, discuss their salary expectations at the beginning of a job interview, yet when an offer is made, 55 percent of men vs. only 36 percent of women indicated they negotiated their actual offer.
The gap widens when it comes to asking for a raise, 62 percent of men vs. 41 percent of women felt comfortable asking. Furthermore, twice as many men will counter raises they are offered vs. women (17 percent of men vs. 8 percent for women).
Only 13 percent of small businesses are transparent with their employees about pay policies and rates. Because this minimizes the need for people to negotiate, employees at transparent companies are 22 percent more likely to feel equitably paid.
"Support your employees and they will support you! After all, your people are the backbone of your business," the authors write. "The bottom line is to listen to their concerns, do your research, and limit any subjective decisions as much as possible."
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Katie Kuehner-Hebert
Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.
