Pay Equity Matters: Continuing the Conversation on Wage Disparities for SMBs

More than half a century after the enactment of the Equal Pay Act of 1963, the principle of equal pay for equal work, regardless of sex, is ostensibly embedded in U.S. law. In theory, these legal protections should have closed unjustified wage gaps long ago. In practice, however, disparities in earnings persist across industries and job levels.  Further, the impacts of the wage gap don’t only affect female workers while they are working, but they can continue once retired as well. It is estimated that the gender gap in retirement, which includes pensions, retirement accounts, and social security income, is at 32.6%, which is larger than the wage gap that is estimated to be 17%. This can mean that a woman may accumulate $1 million less for retirement than her male counterpart.

Lost Earnings During Career and Retirement

Generally, people try to save part of their income while they are working so that they can finance their retirement. So it makes sense that if women tend to have lower earnings than men throughout their career, it would be more difficult for them to save for retirement at the same rate. When saving for retirement many people set aside a percentage of their income, like 4% towards their employer-sponsored 401(k), or 5% into savings, so if you make less, less gets put into these retirement accounts. Not only is the contribution amount lower, but because of compound growth, missing out on these amounts in your career at 32 can set you back exponentially when you retire at 65.

There may be a number of reasons why women tend to earn less than men and likely have less savings. For example, women are more likely to engage in unpaid caregiving activities, which can result in reduced hours, part-time status, unpaid leaves, or engaging in lower paid occupations that offer more flexibility. Additionally, these unpaid caregiving activities also frequently occur during critical periods of women’s careers. Childcare tends to be the most burdensome in the first half of people’s careers and can create career-long earning losses since this is the time many workers are building their resumes and setting up their career trajectories. One study tried to quantify this loss and found that a woman with one child earns 28 percent less on average over her career than a woman without children, and each additional child will reduce a woman’s earnings by another 3 percent. 

Earnings Impact on Social Security

Many Americans also rely on Social Security for retirement income. The average annual Social Security benefit for women was approximately $1,808 a month, whereas their male counterparts brought in $2,204. Social Security benefits are calculated based on a person’s 35 highest earning years, and years with zero earnings are factored in. As such, people who don’t have 35 years of earnings due to interruptions or taking a lower paying, more flexible job to accommodate other caregiving responsibilities will likely have reduced Social Security benefits. It is estimated that having a child on average reduces a woman’s Social Security benefits by 16%, and women who leave the workforce to care for elderly family members lose an average of $131,000 in lifetime Social Security benefits.

Social Security disparity is particularly impactful to women since they tend to rely solely on Social Security benefits in retirement more frequently than men. For a retired woman who is married to a man, perhaps the gap in Social Security benefits is not as impactful, but many elderly women are single or widowed and they tend to outlive men by about five years. Meaning not only are retired women living off of less retirement income and savings but usually have to do it for longer.

Reduced Employment and Access to Employer-Sponsored Retirement Plans

Even for those that don’t solely rely on Social Security benefits, there are disparities in retirement savings as well.  As previously mentioned, lower earnings usually tends to mean lower savings and this disparity also appears in both types of employer-sponsored retirement plans – defined benefit and defined contribution. Defined benefit plans (often called a pension) are an employer-sponsored retirement plan that guarantees a set monthly income upon retirement (for example $1,000 from age 65 until death), based on a formula considering salary and years of service.  Defined benefit plans used to be standard but are less common now. However, they also reward workers who have higher wages and long, uninterrupted careers, which women are less likely to have. As such, women’s defined benefits tend to average two-thirds that of an average man. Even though defined benefit plans are rarer now, they do tend to provide more retirement security than defined contribution retirement plans (described below) because the employer has to guarantee payments to employees even in retirement.  Pensions, however, are still prevalent in some industries, but many of these industries are male dominated such as protective services like police officers and firefighters, where men comprise about 75% of the workforce, and construction, where men comprise about 90% of the workforce.

The other common employer-sponsored retirement plan is a defined contribution plan such as a 401(k). In general, if women are less consistently in the workforce, they may not have as consistent access to employer-sponsored 401(k) plans. Not only will they not be able to contribute to a 401(k) when they aren’t employed, if they change employers due to extended leaves, they may be subject to waiting periods of up to a year or if they work part-time and it may take longer for them to become eligible, if they ever do. Thereby reducing their potential to contribute to a 401(k)or receive employer contributions like employer match. With regard to 401(k) plans, a study found that women and men tend to have equal participation rates when their employer sponsors a 401(k), but women’s average account balances still tend to be two-thirds the average for men. While there could be a number of reasons to account for this disparity, it could be that lower earnings and different savings behaviors both contribute.

With 401(k) plans, typically the account holder has to manage the investments and they can take the amount they are able to accumulate during their careers into retirement. Based on surveys it does appear that women have different approaches to investment than men. Women tend to be less confident regarding their investment choices, even though they are generally confident when it comes to budgeting and managing bills. This results in more conservative investments, which typically mean less returns, compounded over a 40 year career.

What Can Employers Do?

While this all may seem bleak and complicated, there are some things employers can do to support women in their workforce. Of course it is helpful to review leave policies, but employers can also consider offering access to a 401(k) focusing on plan design features that can help address the wage gap in retirement. For example, offering matching contributions can help increase retirement savings, but someone can only receive matching contributions if they are eligible to participate in the plan and are contributing to the plan. The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act did recently attempt to address this in part by requiring employers to allow employees who work at least 500 hours for two years participate in their plan. However, even if it is an improvement, waiting years to be able to participate in a 401(k), especially if you leave and re-enter the workforce more frequently, which is more common with women, you still will likely not have as much access to a 401(k). As such, an employer could consider letting part-time employees be eligible sooner than legally required and have shorter waiting periods, like a month as opposed to one year so employees can begin to participate sooner.  Additionally, employers could include automatic enrollment and automatic escalation features so people may be more likely contribute and have access to matching contributions.  

An employer could also consider that women, generally, tend to be less confident when it comes to investments and try to assist there. For example, the employer can choose default investments for their 401(k) with a reasonable amount of risk for someone’s given age so that if an employee is not sure what to choose, at least their account will be invested in something that can provide for compound growth.  An employer also could choose a recordkeeper that has a deep library of materials promoting financial education.

However, sponsoring a retirement plan, making design decisions and selecting a 401(k) provider may be a daunting task for an employer, who may not be able to dedicate personnel to these tasks. In those instances, it may make sense for a small or medium-sized business to work with a professional employer organization (PEO) that offers access to a plan.  A PEO may have dedicated staff who can discuss which plan designs may be best for an employer’s workforce.

All of these things, like sponsoring a 401(k) or working with a service provider who can sponsor one, are not without cost but there are other things employers may be able to do like creating a workplace culture that acknowledges employees’ financial concerns. This type of culture may help with retention and also may help the 61% of women that say they would rather discuss details about their own death than talk about their money. By creating a workplace that encourages people to bring their whole selves to work, including financial challenges or concerns about taking an extended leave, could help to normalize conversations about money.

Additionally, TriNet developed a program to assist our SMB ecosystems led by historically underrepresented populations in the business community (HUBs), including persons of color, women, the differently abled, veterans, the LGBTQ+ and those organizations with a stated mission of funding, coaching, educating or working with such businesses. Visit TriNet's HUB page to learn about available resources. For more information about how TriNet supports its customers, colleagues, and the communities it serves, check out the Stakeholder Impact page.

© 2026 TriNet Group, Inc. All rights reserved. This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance. TriNet is the single-employer sponsor of all its benefit plans, which does not include voluntary benefits that are not ERISA-covered group health insurance plans and enrollment is voluntary. Official plan documents always control and TriNet reserves the right to amend the benefit plans or change the offerings and deadlines.

This post may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.es not necessarily imply any endorsement of the material on such websites or association with their operators.