Tackling pay equity: Key considerations for leaders
By implementing data collection, automation and transparency, it can prove to be a critical tool to attract and retain today’s workers.
Business leaders recognize the detriments of potential pay gaps, as the Harvard Business Review’s recent pay equity survey finds that 3 in 4 executives consider pay equity a strategic priority. However, half of the employers surveyed admitted their organization has yet to establish a pay equity initiative, and 24% of employee respondents were unaware if their organization had a plan in place to curb compensation inequities. Longstanding inequities are impossible to tackle overnight, and establishing an effective pay equity initiative comes with striking the right balance between striving for significant change and setting attainable goals. In this article, we’ll explore key considerations and best practices for leaders to establish a comprehensive pay equity program that can create real change.
Use data to identify the problems
Establishing a pay equity program can be a daunting task, with a risk that the initiative is either not ambitious enough or overpromises benchmarks that are unattainable (especially in a tough economy). Additionally, many organizations have longstanding pay gaps that stretch back generations, and it can be difficult to identify how to make up for the past. The best way to gain that understanding is to conduct a comprehensive analysis of an organization’s compensation data.
For large organizations particularly, collecting this data can be a major undertaking if the technology to keep track of compensation is not already in place. However, it’s a critical step in understanding both where there are pay inequities and often even more importantly, why there are pay inequities. A truly comprehensive data analysis will look beyond just pay gaps between gender and race, within employee peer groups or workers of similar roles, and will include additional analysis, such as:
- Median pay across the organization, and how representational gaps in senior roles impacts the organization’s overall pay disparities
- Stark differences in compensation in specific departments or roles
- Breakdowns of different aspects of pay (e.g., salaries, bonuses, equity, etc.) in comparison to factors like tenure and performance, to understand where bias may come into play
- How compensation is distributed for new hires versus current employees
Armed with the data above, leadership will better understand where to direct the brunt of their efforts and can develop the strategy needed to begin closing gaps.
Address inequities through automation
Once the problem areas are identified through data, it’s time for leadership to put a plan in place, using the right tools, to begin chipping away at inequities. Employers should ensure they have the technology necessary to not only collect and analyze data but also effectively measure their progress in real time. Additionally, implementing a degree of automation into how compensation is determined standardizes the process and decreases the effects of human discretion and possible biases, better leveling the playing field.
Beyond reducing the role of unconscious racial, gender, sexual orientation and other social biases in determining compensation, automation can provide an accurate picture of employee tenure, performance, skill set and education, illustrating an employee’s overall value to the team. For example, when management meets to determine raises, promotions and bonuses based on their observations alone, regency bias can favor one employee receiving an increase over another. Technology can take out the bias from the decision-making process, instead utilizing factors such as employee performance, skills, tenure, etc., to make fair decisions on how pay increases or bonuses should be distributed.
Creating an open culture of transparency
On the employee side, a major pain point in regard to pay equity stems from the employer not addressing or acknowledging the pay gaps with their workers. Specifically, Harvard’s research finds “corporate silence” to be a significant barrier to advancing equal pay. If leadership remains weary of talking about these issues, it places the onus on the employee to raise them, and workers of color, who are statistically already paid less, report feeling less free to speak out about inequities. In fact, Black, Hispanic and Latinx workers are twice as likely to not raise concerns about compensation than their white counterparts. Once the pay gaps are measured and identified, acknowledging them with employees is an important way to build trust.
Without some level of pay transparency within an organization, employee suspicion is likely to brew about whether pay is fair. For example, our research finds that 1 in 10 employees believe their organization doesn’t pay fairly because leadership provides no insight into how their salary was determined. An opaque culture around pay, and compensation in general, can actually exacerbate negative sentiment amongst employees, as they may be led to believe their employer is being intentionally secretive to safeguard significant inequities. A well-established, transparent and well-communicated pay equity program demonstrates an ethical commitment to both current and prospective employees, helping retain and attract talent.
Related: How employers can use pay transparency laws to their advantage
Workers in 2022 want to know they’re being paid fairly, with our research finding that 60% of employees would consider switching to an organization with more salary transparency than their current one. It’s more important than ever for companies to look inward, and put a plan in place to demonstrate a marked but attainable commitment to advancing pay equity. A comprehensive pay equity initiative takes time, and involves uncomfortable conversations, but by implementing data collection, automation and transparency, it can prove to be a critical tool to attract and retain today’s workers.
Tanya Jansen, Co-Founder, beqom