How startups can tackle the tech industry’s pay gap

By Mehul Patel, CEO, Hired

A great team is the foundation of any successful company, and research overwhelmingly shows that diverse teams tend to outperform non-diverse teams.

Despite this, the tech industry has a diversity problem. Sadly, this probably isn’t surprising to hear, but what might shock you is just how big this problem is. Our recent 2019 Wage Inequality Report revealed that well over half (65%) of women in tech feel discriminated against because of their gender. 

Discrimination can start before someone even takes a job at a technology company.; our feel discriminated against because of their gender. Our report found that 41% of the time, companies are only interviewing men for a given role. This disparity also carries over into salaries. While tech’s gender pay gap is gradually improving, the average woman is still paid 3% less than a man in an equivalent role (down from 4% last year). Although it is positive that the pay gap is (very) gradually shrinking, 61% of women surveyed discovered they were being paid less than men for the same role at their company. For 16% of these women, the difference was at least $20k. 

Things are changing, albeit slowly. Over the last year we’ve seen a 4% increase in female candidates in tech roles, but these promising candidates are still finding themselves held back from climbing the corporate ladder. As uncomfortable as it might be to admit, we all hold unconscious biases.

We tend to be drawn to people we relate to, and more often than not, that means people that look and act like us. It’s not surprising then that when hiring groups are not diverse, those same unconscious biases will bleed into the recruiting process hindering a company’s ability to hire candidates with more diverse backgrounds. 

The mass of startups currently flooding the landscape are in a great position to flip all of the above on its head. They have the power to start their HR efforts as a blank page that aims to challenge societal norms to more effectively welcome a diverse, successful workforce. 

Why diversity needs to be more than just a buzzword

Great people are the foundation of every successful business. Only through strong recruiting can you build a great product and a thriving company.

Hiring a diverse team isn’t just the right thing to do ethically – it’s also good for business. In fact, according to McKinsey, companies in the top quartile for gender diversity outperform their competitors by 15% and those in the top quartile for ethnic diversity outperform their competitors by 35%. Diverse teams on the whole are proven to be more creative, innovative, and, ultimately, they generate more profit.

Startups are in a great position to champion diversity because they’re coming at it from a fresh start, and can build in processes to encourage diverse hiring practices right from the company’s inception. This established businesses are off the hook.

While larger businesses might not be as nimble as startups  they are more likely to have capital available to invest in creating a diverse workforce. Tech businesses of all sizes have an important role to play in ensuring that the tech sector of tomorrow, is less white and male than it is today.

So what can forward-thinking startups do to close the diversity gap and ensure that they have the best teams in place to create the most successful products and solutions?

Embrace Radical Transparency

Blind recruitment may increase the number of diverse candidates getting their foot in the door, but it does little to tackle disparity in salaries. Our data suggests that women are being paid less because they are asking for less: with women asking for 4% less than men (a 2% improvement since 2018) for equivalent roles.

In 2018, women were asking for less than men 66% of the time and this has now dropped to 61% this year. This is still a concerningly high proportion, but it is encouraging to see an improvement. 

We’ve always been told that sharing our salaries is impolite, but this taboo is masking a massive wage disparity issue. As the old adage goes, knowledge is power.

If businesses embrace salary transparency, they can give employees the tools to understand and ask for what their market worth. Making this information available empowers women and underrepresented groups to gain an objective understanding of what they should be paid for a role.

If forward thinking tech businesses, from snappy startups to industry giants, begin embracing salary transparency,It will then become harder to justify any gender or race related pay discrepancies elsewhere in the  industry.

Embracing pay transparency also levels the playing field for pay negotiations. Far from the old stereotype of women asking for a lower salary when offered a role than their male counterparts when, our data shows that women today are almost as comfortable as men asking for increases from an initial salary offer (69% for women and 71% for men).

Unfortunately, a gap remains in how often men and women receive those raises: 7% more men than women reported successfully negotiating higher wages. If businesses are transparent about how much a role is worth, it becomes much harder to justify withholding that higher paycheck.

Ask for salary expectations rather than their current compensation 

While a company might feel that knowing a candidate’s previous salary can help them make an appropriate offer, this can actually perpetuate the wage gap for those who are not fairly compensated. We know that women are often paid a lower salary than men for the same role, so making decisions based on previous salaries is likely to further perpetuate this cycle. 

During the interview process, companies  should ask what the candidate what their salary expectations are based on the role they are interviewing for. Candidates should be empowered with data to ask for their market worth, while companies have a responsibility to ensure their workforce is being paid fairly. 

Hold yourself accountable

Tackling the tech industry’s diversity pay gap might feel like a challenge of Everest proportions at times, but the power of change is in the hands of the “little guys and gals” running startups and will pay dividends if conquered. As we’ve seen, small alterations in hiring processes can make a huge impact. The most important question for startups is not whether they should embrace diverse hiring tactics, but rather, evaluating if they can really afford not to.