United States: How Employers Can Root Out The Influence Of Unconscious Bias In Compensation Decisions

Last Updated: January 6 2017
Article by Michael D. Thomas

Around this time of the year, many employers determine and distribute year-end bonuses. While evaluating and rewarding employees based on merit may seem fair, merit-based practices may actually decrease workplace equity if unconscious bias is a factor in bonus decisions.   

While research indicates that most people harbor at least some unconscious biases and that these biases are not always bad, a problem occurs when our unconscious biases lead us to favor one group in the workplace over another based on a protected category. State and federal laws expressly prohibit employers from giving a bonus to one employee over another because of that employee's race or gender.  Nevertheless, studies show that unconscious bias, if not acknowledged, can result in unlawful bonus decisions. 

Research on the Effects of Unconscious Bias

Emilio J. Castilla, Professor of Management at the Massachusetts Institute of Technology Sloan School of Management, examined the gender and race implications of ostensibly impartial, merit-based employer bonus systems. Professor Castilla concluded that, despite the intent behind them, there is a persistent problem with strictly merit-based compensation practices. Women and minority men in the same organization, in the same job, and with the same supervisor, according to his research, receive lower salary increases than white men—even with the same performance evaluation scores.     

In one study, participants were asked to assume managerial roles, review profiles of employees (male and female), and make decisions regarding employee bonuses.  When merit was emphasized in the instruction to distribute a bonus, participants provided, on average, higher rewards to male employees over equally qualified female employees (i.e., those in the same job, with the same supervisor, and with equivalent performance evaluations). 

Professor Castilla's study concluded that by adopting a purely merit-based bonus or compensation policy in which race, gender, and social biases are not acknowledged, biases and stereotypes are likely to influence outcomes.

Castilla's research also concluded that when compensation systems are strictly merit-based, employees are inclined to believe they are being more objective than they really are. When individuals think their actions are unbiased, fair, or objective, they are inclined to believe it is unnecessary to acknowledge or address unconscious biases.  It is therefore no surprise that inan environment where management persuades employees that performance is evaluated based strictly on merit, a supervisor's own unconscious biases are likely to influence the decision-making process.

Employer Takeaways

The conclusions indicated by this research do not mean companies should give up meritocratic values. Instead, companies may take steps to increase awareness of bias and make the process by which raises and bonuses are awarded more transparent.

If unconscious bias can produce discriminatory outcomes, the logical question to ask ourselves is, how can we reduce or eliminate these patterns? To address unconscious bias—and other evaluation missteps—in year-end bonus decisions, employers may want to consider the following practices:

  • Ensure that pay and bonus policies are legitimately related to performance and are nondiscriminatory in their application.
  • Train all supervisors and managers to avoid wage discrimination and to identify unconscious bias.
  • To the extent possible, increase transparency in salary guidelines and requirements for bonuses. Employers may want to clearly convey these guidelines and requirements to employees so that they understand the employer's expectations, which must be met to obtain a raise or bonus.
  • Educate the members of your team—before beginning the evaluation process—on using a consistent rubric to evaluate the employees they supervise and adopt consistent terminology across the board in writing performance reviews. Define the evaluation criteria and discuss it with your decision-making team so that the evaluators are defining terms similarly and biases can be identified and discussed. Avoid the use of subjective criteria in evaluating candidates.
  • Use a diverse team of reviewers to determine bonuses.  The more diversity there is in the decision-making process, the more likely you are to identify and correct bias before it becomes a discriminatory practice.
  • Pay attention to the possibility that you are imposing additional requirements on some employees. Are you requiring some employees to show more to meet a standard and giving a pass to others? Take note if you recognize patterns in the types of employees that fall into these categories.
  • Eliminate the use of subjective criteria, such as an employee's personality traits, and instead focus on skills or performance, in all evaluations.  For example, reviewers will want to avoid terms or phrases like "good employee," "bad employee," or "lazy person."
  • Examine your evaluation criteria to ensure that employees of protected categories are not judged on the basis of stereotypes. For example, language that suggests women will be promoted if they are liked while men will be promoted if they achieve results, and language that suggests that an African American employee will be rewarded for being articulate or an Asian American employee will be rewarded for being outspoken, is potentially problematic.  One way for reviewers to discover an unconscious bias is to ask themselves if they would have made the same comment if the employee was of a different race, gender, ethnicity, etc.
  • Ensure that employees are given equal opportunities to succeed, and make sure to track which employees are invited to marketing, networking, and training events to ensure that all are given a realistic opportunity to develop business and their skills. This also helps you to evaluate if your marketing, networking, and training events favor some protected groups over others (such as favoring men over women).
  • Document decisions regarding pay, bonuses, and commissions, and monitor them for patterns based on protected categories as defined by applicable state and federal pay equity laws.
  • Be humble. Developing a little humility about how little we know about people and groups can be a good step toward real impartiality.
  • If you are concerned that unconscious bias may be affecting your pay practices, you may want to conduct a pay equity audit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.