How Small-Business Owners Can Help Close the Pay Gap

Small businesses employ nearly half of all private sector employees, according to the 2019 Statistics of U.S. Businesses, released by the Census Bureau in 2022. That means small-business owners like us play a significant role in closing the pay gap between women and men, which has barely increased over the past two decades. 

Pew Research notes that in 2002, women made 80% of what men did. By 2022, women’s earnings compared to men had inched up only 2%. For women of color, the pay gap is even more significant, with Black women making 70% as much and Hispanic women making 65% as much as white men in 2022. (The study is based on the analysis of monthly Current Population Survey (CPS) data from January 1982 to December 2022.)

At my Women+ insights studio, Tote + Pears, we ensure everyone is paid what they deserve. Here's how other small-business owners can follow suit.

Do Your Research

When you’re ready to hire a new team member, consider researching the role you’re creating to ensure the salary you want to offer is at or above market rates.

You can use the U.S. Bureau of Labor Statistics and salary benchmark sites to evaluate current industry rates. Be sure to consider factors like a candidate’s experience, location, and the role's responsibilities.

Women are known to undercharge for their time and may be less likely to negotiate their pay than men, with Pew Research finding in a February 2023 survey of 5,775 U.S. adults that only 28% of women asked to negotiate a higher salary when last hired for a job. Knowing what you should be paying ensures your new hire starts out at market rate, even if they don't feel comfortable negotiating for more.

Create a Recruiting Plan 

After you’ve done your research on fair market rates, consider creating a recruiting plan to find the best and brightest talent.

This starts with making a budget for the position and doing your best to stick to it. In many cases, small businesses have a salary range in mind when hiring a new team member, leaving room to account for factors like experience, necessary training, and candidate negotiation. You may be tempted to take less qualified candidates at the lower end of your range, but retaining talent that can afford to stick around while your business grows may be worth a higher cost upfront. 

Women tend to undercharge for their time and may be less likely to negotiate pay. As a small business, knowing what you should be paying ensures your new hire starts out at market rate, even if they don't feel comfortable negotiating for more.

Once you have a budget, consider developing an outreach strategy so top talent can find your job listings. You can create a hiring rubric that makes it easy to determine how much you can afford to pay candidates based on their experience and soft skills. This can help you offer competitive rates that align with your business needs and honor the candidate's value.

A rubric can help your team be more objective when reviewing candidate applications. Since unconscious bias can impact anyone, implementing safeguards can be key to closing the pay gap.

Try a Test Run

At Tote + Pears, we take every candidate through a trial project before making a final offer. It helps us feel more confident in a candidate's abilities and gives them a chance to better understand our work and process. It can hopefully provide quick wins to boost the candidate's confidence and get them more excited for the role.

If we find a candidate is overqualified during the test period, we’ll bump up their rate. If there are areas that need work, we’ll create a plan to help them improve over time to reach their desired rate.

I’ve hired thousands of people, and my experiences align with the data indicating women are statistically less likely to ask for what they’re worth. At Tote + Pears, we account for this after successful candidate test runs in order to make hiring as fair as possible.

If a candidate lowballs themselves, we provide them with our findings about the market rate and our belief in what their skills are worth. Then we let them 'sleep on it' and conduct more research before resuming negotiations. This builds trust and loyalty. It also helps us to contribute to closing the pay gap.

Adjust and Adapt

Even after a candidate is hired, your work isn’t done. Adjusting your employees’ salaries as their value to your business increases can help you retain top talent and ensure you’re proactively paying every team member what they’re worth.

Consider keeping an eye on market rates and inflation, and review and adjust your salary budget during planning sessions. Money isn’t the only factor that can contribute to closing the pay gap. Flexible time off, remote work options, professional training, and promotion opportunities can be attractive, especially for working mothers and caregivers who may be juggling multiple responsibilities.

Investing in employees is important for small businesses. By having a plan during the hiring process and continuing to create equal opportunities after candidates join the team, we can be sure we’re doing our part to close the pay gap.